A & B Office Income Tax Training School Federal & CA Pre-Season Update For Tax Preparers & 2015 Highlights: 2015 New Tax Law Recap Affordable Care Act (ACA) tax treatment (New in ) Affordable Care Act s frequently asked questions New tax forms in New lines items on Form 1040 New Credits in 2015 (increased for inflation) /2015 Key Tax Numbers and new determining ACA questionnaire California update Release on: January 6th, 2015
Federal Tax Law Update & 2015 Tax Year Highlights Impact Of The Affordable Care Act (ACA) On Tax Year Filling out a tax return will be more complex for millions of people, thanks to the health reform law. This will affect taxpayers and tax prepares alike. Due to the complexity of this topic, the tax preparer must be updated with latest source documents needed to complete the individual tax return for and clearly understand the penalty computation. Note that at the time of this printing, the IRS hasn t posted all the instructions; the associated regulations, IRS.gov and healthcare.gov provide a lot of good information about the rules in place for tax year. Beginning in, individuals must have health care coverage, have an exemption, or make a share responsibility payment (penalty) with their income tax return. The following source documents will be used to support ACA computations (only Form 1095-A is mandatory for tax year ). Form 1095-A, Health Insurance Marketplace Statement, provides information necessary to complete Form 8962, Premium Tax Credit (PTC). Form 1095-A is sent to anyone who enrolls in a health plan through the Marketplace. This information is also reported by the Marketplace to the IRS. Form 1095-A Health Insurance Marketplace Statement Information about Form 1095-A and its separate instructions is at www.irs.gov/form1095a. CORRECTED OMB No. 1545-2232 Part I Recipient Information 1 Marketplace identifier 2 Marketplace-assigned policy number 3 Policy issuer's name 4 Recipient's name 5 Recipient's SSN 6 Recipient's date of birth 7 Recipient's spouse's name 8 Recipient's spouse's SSN 9 Recipient's spouse's date of birth 10 Policy start date 11 Policy termination date 12 Street address (including apartment no.) 13 City or town 14 State or province 15 Country and ZIP or foreign postal code Part II Coverage Household A. Covered Individual Name B. Covered Individual SSN C. Covered Individual Date of Birth D. Covered Individual Start Date E. Covered Individual Termination Date 16 Form 1095-B, Health Coverage, provides information about whether the taxpayer, spouse and dependents had qualifying health coverage ( minimum essential coverage ) by a government-sponsored program, eligible employersponsored plan, individual market plan or miscellaneous coverage for some or all months during the year. Individuals with minimum essential coverage are not subject to the individual shared responsibility payment (penalty). This year is a transition period for Forms 1095-B and 1095-C, so these forms are not a requirement for tax year. DRAFT AS OF 560115 VOID OMB No. 1545-2252 Form 1095-B Health Coverage CORRECTED Form 1095-A Form 8962 Form 1040 Information about Form 1095-B and its separate instructions is at www.irs.gov/form1095b. October 15, Part I Responsible Individual (Policy Holder) 1 Name of responsible individual 2 Social security number (SSN) 3 Date of birth (If SSN is not available) 4 Street address (including apartment no.) 5 City or town 6 State or province 7 Country and ZIP or foreign postal code 1 Copyright A & B Office, Income Tax School - 2015 All Rights Reserved
Form 8965, Health Coverage Exemptions. If you meet certain criteria, you will be exempt from the individual shared responsibility provision (penalty) and will not have to obtain coverage. You obtain exemptions from the Marketplace or IRS depending on the type and all exemptions are reported on the tax return. Some coverage exemptions are available only from the Marketplace, others are available only by claiming them on your tax return. Types of Coverage Exemptions: Coverage is considered unaffordable, household income below the filing threshold, members of health care sharing ministry, incarceration, TRICARE programs, hardships, citizens living abroad and certain noncitizens. The easiest way to qualify for an exemption is to go to HealthCare.Gov and sign up for a marketplace account. When you sign up, you automatically find out if you qualify for some exemptions and might even find if you qualify for lower costs on coverage. Form 8965 Name as shown on return Health Coverage Exemptions Attach to Form 1040, Form 1040A, or Form 1040EZ. Information about Form 8965 and its separate instructions is at www.irs.gov/form8965. Your social security number OMB No. 1545-0074 Attachment Sequence No. 75 DRAFT AS OF July 24, Complete this form if you have a Marketplace-granted coverage exemption or you are claiming a coverage exemption on your return. Part I 1 Marketplace-Granted Coverage Exemptions for Individuals: If you and/or a member of your tax household have an exemption granted by the Marketplace, complete Part I. a Name of Individual b SSN c Exemption Certificate Number 2 3 DO NOT FILE Individual Shared Responsibility Provision (ISRP). The Individual Shared Responsibility Provision (penalty) will be reported on a worksheet for Form 1040. The individual shared responsibility provision requires you and each member of your family to have qualifying health insurance ( minimum essential coverage - MEC), have an exemption or make a shared responsibility payment when filing a federal income tax return. The vast majority of taxpayers will have health coverage from one source or another, and consequently, will only need to check a box on the tax return. For, the annual shared responsibility payment amount is the greater of: 1 percent of your household income that is above your tax return filing threshold, or, Your family s flat dollar amount, which is $95 per adult and $47.50 per child, limited to a family maximum of $285 for. The maximum penalty is limited to the cost of the national average premium for a bronze level health plan. The percentages and flat dollar amounts increase over the first three years. In 2015, the income percentage increases to 2 percent of household income and the flat dollar amount increases to $325 per adult ($162.50 per child under 18). In 2016, these figures increase to 2.5 percent of household income and $695 per adult ($347.50 per child under 18). After 2016, these figures increase with inflation. Three-Month Rule. No penalty is assessed for individuals who do not maintain health insurance for a period of three months or less during the taxable year. Exemption. You may be exempt from the requirement to maintain minimum essential coverage if you re a 3 Copyright A & B Office, Income Tax School - 2015 All Rights Reserved
member of certain religious sects, a federally recognized Indian tribe, or a health care sharing ministry. You may also be eligible if you are suffering a hardship, meet certain income criteria, or are uninsured for less than three consecutive months of the year. Individuals will also be able to claim certain exemptions for when they file their federal income tax returns in 2015. Individuals who are not required to file a federal income tax return because their gross income falls below the return filing threshold do not need to take any further action to secure an exemption. Reporting Coverage or Exemptions or Making Payments. The individual shared responsibility provision went into effect for. You will not have to account for coverage or exemptions or to make any payments until you file your federal income tax return in 2015. Information will be made available later about how the income tax return will take account of coverage and exemptions. Insurers will be required to provide everyone that they cover each year with information that will help them demonstrate they had coverage beginning with the 2015 tax year (Prepares: look for Form 1095-A). The IRS routinely works with taxpayers who owe amounts they cannot afford to pay. The law prohibits the IRS from using liens or levies to collect any individual shared responsibility payment. However, if you owe a shared responsibility payment, the IRS may offset that liability against any tax refund that may be due to you. Taxpayers will report their health coverage exceptions on Form 8965. Form 8965, Health Coverage Exemptions. Most exceptions can be claimed on this form when filing the tax return. Many will use the worksheet on the instructions of this form to figure the tax that they owe for each month they and their dependents are uninsured and not eligible for an exception. They will then transfer the amount to a separate line on the 1040. This worksheet is very complex and will be confusing to fill out. A good tax program is recommended. Reporting DRAFT the ISRP on Form 1040. According to AS the IRS draft of Form OF 1040, the Individual responsibility will flow to Form 1040, line 61. Either the box will be checked Full-year coverage or an amount will display on the line if a payment is due. Line 61 of Form 1040 57 Self-employment tax. Attach Schedule SE............... 57 Other August 28, 58 Unreported social security and Medicare tax from Form: a 4137 b 8919.. 58 59 Additional tax on IRAs, other qualified retirement plans, etc. Attach Form 5329 if required.. 59 Taxes 60 a Household employment taxes from Schedule H.............. 60a b First-time homebuyer credit repayment. Attach Form 5405 if required........ 60b 61 Health care: individual responsibility (see instructions) Full-year coverage..... 61 DO 62 Taxes from: a NOT Form 8959 b Form 8960 c Instructions; FILE enter code(s) 62 63 Add lines 56 through 62. This is your total tax............. 63 Example of Payment Calculation. The individual shared responsibility payment (penalty) is also capped at the cost of the national average premium for bronze level health plans available through the Marketplace that would cover everyone in your family who does not have minimum essential coverage and does not qualify for an exemption for example, $12,240 for a family of five. However this maximum fee will only impact the small number of high-income taxpayers who choose to go without health insurance. The payment amount is based on each individual s personal circumstances, and information about figuring the payment can be found on our Calculating the Payment page on IRS. gov/aca. Example. Eduardo and Julia are married and have two children under age 18. No family member has minimum essential coverage for any month during, and no family member qualifies for an exemption. For, their household income is $70,000 and their tax return filing threshold amount is $20,300. Using the household income formula: Subtract the tax return filing threshold amount for from the household income, then multiply the answer by one percent (0.01). $70,000 - $20,300 = $49,700. One percent of $49,700 equals $497.00. Using the flat dollar amount formula: Add $95 for Eduardo and $95 for Julia and $47.50 per child: $95.00 + $95.00 + $47.50 + $47.50 = $285.00 Eduardo and Julia s shared responsibility payment for the year for is $497. That s because the household income formula amount of $497 is greater than flat dollar formula amount of $285, and it is less than the $9,792 annual national average premium for bronze level coverage for a family of four in. 4 Copyright A & B Office, Income Tax School - 2015 All Rights Reserved
Key Tax Numbers 2013 Exemptions (Phaseout applies): $3,950 $3,900 Standard Deduction: Joint return/qualifying widow(er) $12,400 $12,200 Head of Household $9,100 $8,950 Single $6,200 $6,100 Married filing separately $6,200 $6,100 Dependents-minimum deduction (threshold applies) $1,200 $1,000 Earned Income Credit (Phaseout applies): Maximum for No children $ 496 $ 487 Maximum for one child $3,304 $3,250 Maximum for two children $5,460 $5,372 Maximum for three children $6,143 $6,044 Child Tax Credit (Phaseout applies): Maximum for each child under 17 $1,000 $1,000 A portion may be refundable Yes Yes Social Security (Base amount): Single, HH, QW, MFS $25,000 $25,000 MFJ $32,000 $32,000 MFS, living with spouse $ 0 $ 0 Payroll Rates And Bases: Employee SS and Medicare 6.20% / 1.45% 6.20% / 1.45% Employer SS Medicare 6.20% / 1.45% 6.20% / 1.45% Social Security wage limit $117,000 $113,700 Medicare wage limit Unlimited Unlimited FUTA- taxable wage base $7,000 $7,000 Standard Mileage: Business 56.0 56.5 Medical 23.5 24 Charity 14 14 IRA Contributions (Phaseout applies): Traditional contributions if age 50 or older $5,500 $5,500 Additional contributions if age 50 or older $1,000 $1,000 Roth IRA contributions limit $5,500 $5,500 20 Copyright A & B Office, Income Tax School - 2015 All Rights Reserved