Navigating Federal Taxes: Considerations for ADAPs. Amy Killelea, NASTAD

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1 Navigating Federal Taxes: Considerations for ADAPs Amy Killelea, NASTAD

2 Presentation Outline Premium Tax Credit Reconciliation o Considerations for ADAPs and clients o Case studies Individual mandate shared responsibility payment and exemptions 2

3 Advance Premium Tax Credit (APTC) Life Cycle Step One: Marketplace Application Demonstrate financial eligibility for APTC in application to Marketplace Individuals may apply for advance premium tax credit based on projected annual income Dates: November 1 January 31 Step Two: Report Income Changes Report changes in income to Marketplace that will impact APTC amount Report changes in tax household size that will impact APTC amount Dates: January 1 December 31 (tax year) Step Three: File Your Federal Taxes! Individuals receiving APTC MUST file federal taxes for year in which they received the tax credit IRS will determine if individual received the right amount APTC throughout year Dates: By April 15 3

4 Tax Forms Relevant to ADAPs Tax Form Form 1095-A Form 1095-B Form 1095-C Form 8962 Form 8965 Description Form generated by the Marketplace and sent to anyone receiving APTC Form sent by the insurer to the insured verifying individual had coverage Form sent by employer to the employee verifying whether the individual had coverage Addendum to tax return documenting APTC reconciliation Addendum to tax return documenting any exception to the requirement to have minimum essential coverage 4

5 Putting it Together: Determining if There was an APTC Under or Overpayment The 1095-A: Tells you how much the individual actually received in APTCs throughout the year (by month) 5

6 Putting it Together: Determining if There was an APTC Under or Overpayment The Form 8962: Tells you how much the individual should have received in APTCs according to MAGI-based income on tax return and allows for calculation of any overpayment or underpayment REFUND OWED TO INDIVIDUAL LIABILITY OWED TO IRS 6

7 Putting it Together: The 1040 Line 46 on IRS Form 1040 indicates excess premium tax credits a person owes to the IRS Line 69 on IRS Form 1040 indicates net premium tax credit (i.e., amount owed to the taxpayer as refund) 7

8 Repayment Amounts Are Capped Income Single filers All other filers < 200% FPL $300 $600 At least 200% FPL and < 300% PFL $750 $1,500 At least 300% FPL and < 400% FPL $1,275 $2, % FPL and greater N/A N/A 8

9 In the event of APTC tax refund to the client Grantees must vigorously pursue any excess premium tax credit a client receives from the IRS upon submission of federal tax return Recovered premium tax credit refunds are not considered program income; grantees must use recovered refunds in the Health Insurance Premium and Cost-sharing Assistance service category in the grant year when it s received HRSA/HAB Guidance HRSA/HAB PCN In the event of APTC liability owed to the IRS by the client Grantees may cover client tax liabilities associated with an overpayment of the premium tax credit. The payment to the IRS must be made from funds available in the year when the tax liability is due Helpful Tip: include the client s name, SSN, tax year, and portion of tax liability to which the Ryan White/ADAP payment should be designated Grantees must develop processes to coordinate payments directly to IRS (payments to clients are prohibited) and may only pay the amount directly attributed to the reconciliation of the premium tax credits 9

10 Premium Tax Credit Reconciliation Case Studies 10

11 Case Study One: Ann When Ann applied for 2016 Marketplace coverage with advance premium tax credits (APTC) in December of 2015, her annual income was $27,000 (230% FPL) o Ann gets $2,136 in APTC/annually BUT, Ann changed her job mid-way through the year with a reduction in salary and failed to report this to the Marketplace o When Ann files her taxes, her annual income ends up being $11,000 (95% FPL) Note: Ann lives in a non-medicaid expansion state o Special rule: because Ann was eligible for APTCs when she applied, she is actually owed a refund (her expected contribution is 2% of her annual income) o Ann is entitled to APTC of $3,191/annually Ann will get a refund from the IRS in the amount of $1,055

12 Determining Refund Amount IRS Form 8962 $1,055

13 Case Study Two: Carlos (and Sam) Carlos is an ADAP client. He is married to Sam, who is not living with HIV and, therefore, is not an ADAP client. Carlos and Sam s annual household income when they applied for 2016 coverage was ~$37,000 (230% FPL). o Carlos and Sam s tax household (of two) gets $5,511 in APTC/annually ADAP assists Carlos with an individual QHP and Sam is able to purchase a separate QHP that just covers him with his allocation of APTC (see CMS presentation on spouses enrolling in separate plans) At tax time, Carlos and Sam get two separate 1095-As, but they must file their taxes as married filing jointly. ADAP must determine the APTC reconciliation allocation just for Carlos.

14 1095-As for Separate Plans for Members of Same Tax Household Carlos and Sam will get separate 1095-As with their monthly APTC amounts Carlos 1095-A Sam s 1095-A

15 Married Filing Jointly for Reconciliation Putting it together on household 8962 Form Total for household: $7,000 Total for household: $5,551 Total for household: $1,449 ADAP determines client s allocation of refund. In this case, half of $1,449 15

16 Case Study Three: Sean When Sean applied for 2016 Marketplace coverage with advance premium tax credits (APTC) in December of 2015, his annual income was $27,000 (230% FPL) o Sean gets $1,995 in APTC/annually Sean refuses to file his 2016 taxes A person is not eligible for APTC if HHS notifies the Marketplace that an individual did not file taxes. Sean does not immediately lose his APTCs (and he never loses his Marketplace eligibility); with filing extensions, Sean actually has until October 2017 to file his 2016 taxes. o If he does not file his federal taxes, Sean will be ineligible for APTCs when he goes to re-enroll in a 2018 plan

17 Things to Keep in Mind for OE5 Make sure to send reminders to clients to file their taxes (It s not too late! Clients can file federal taxes for 2016 with an extension to be eligible for APTCs for 2018 plan year) Provide education about the importance of filing federal taxes and reporting income changes throughout the year at the point of enrollment and throughout the benefit year Develop policies and procedures for how ADAP will approach potential APTC overpayments and underpayments 17

18 Individual Mandate and Exemptions 18

19 Individual Mandate and Shared Responsibility Payments Individuals are required to have minimum essential coverage Individuals indicate if they had minimum essential coverage throughout the year on line 61 of their federal tax return If a person did not have coverage, he/she may have to pay a penalty when they file their taxes o For 2016 coverage year, the penalty is $695 or 2.5% of income over the tax filing threshold, whichever is higher 19

20 Common Exemptions from the Individual Mandate Exemption Under the tax filing threshold Living in a non-medicaid expansion state Uninsured for less than 3 months Plan affordability Incarceration Certain non-citizens Hardships How Granted IRS/tax filing IRS/tax filing IRS/tax filing IRS/tax filing or Marketplace application IRS/tax filing IRS/tax filing Marketplace application 20

21 Putting it Together at Tax Time Form

22 Resources National Alliance of State & Territorial AIDS Directors (NASTAD), o Amy Killelea, akillelea@nastad.org JSI ACE TA Center, HRSA/HAB Ryan White HIV/AIDS Program Guidance IRS The Health Insurance Premium Tax, Center on Budget and Policy Priorities, Beyond the Basics, 22