STARTING STRONG FOR COMMUNITY HEALTH! WEBINAR The ACA and Taxes: Tips for Enrollment Assisters February 26, 2016
Today s Presenters: Alicia Siani, Policy Analyst, EverThrive IL asiani@everthriveil.org Stephani Becker, Senior Policy Specialist, Sargent Shriver National Center on Poverty Law Stephanibecker@povertylaw.org
Up Check out HelpHub ü Check HelpHub announcements for latest enrollment and policy information, particularly related to Special Enrollment Periods. http://helphub.povertylaw.org/
QUESTIONS? ASK QUESTIONS USING THE CHAT BOX FEATURE v We will answer as many questions during the webinar as possible. v A recorded copy of the webinar will be posted on EverThrive IL s website in the coming days: http://everthriveil.org/resources/starting-strongwebinars For questions related to this and other Starting Strong webinars: asiani@everthriveil.org
Affordable Care Act Tax Provisions for Individuals and Families Stephani Becker, Senior Policy Specialist Sargent Shriver National Center on Poverty law stephanibecker@povertylaw.org
Agenda Overview: Health Coverage Now Part of Tax Return Reporting Minimum Essential Coverage Claiming Exemptions Calculating the Individual Shared Responsibility Penalty Premium Tax Credit Reconciliation Questions/Resources
Health Coverage is Now Part of the Federal Income Tax Return For the first time in 2015, tax filers were to report health care coverage for the 2014 tax year resulting in new questions or tax forms being required to be completed. Same is true for 2016 for the 2015 tax year. Individuals who purchased health coverage from the Health Insurance Marketplace or a non-marketplace source (e.g., Medicaid or large employer) will receive a pre-populated tax statement (like a W-2) to help them file. If individuals received premium tax credits in the Marketplace, they MUST file taxes and their tax form will be used for reconciliation.
For each month in the year, everyone must:
Key Tax Form New Consumer Tax Forms Related to the ACA Purpose Accessible Through Relevant Dates 1095-A To track minimum essential coverage by Marketplace and to track advance payments of the premium tax credit 1095-B To track minimum essential coverage provided by non- Marketplace plans (e.g., small employer plans, Medicaid, Medicare) 1095-C To track coverage provided by larger employers (50+ FTEs) and self insured plans. HealthCare.gov account Health care providers/ employers will send forms to consumers. Employers will send forms to employees. Marketplace must send/post no later than Jan. 31. Must send out by March 31, 2016 though Illinois HFS (Medicaid agency) has sent them out already. Must send out by March 31, 2016. 9 8962 To determine final eligibility for the premium tax credit (based on actual income) 8965 To claim an exemption from the fine Blank form included in federal income tax return packet, available online (can be completed with help from tax prep organization) Must be completed as part of the federal income tax return by April 18 (or later if filing an extension). Cannot keep receiving tax credit unless form is completed. Must be completed as part of the federal income tax return by April 18 (or later if filing an extension).
Source: Renewals, Reconciliation and Exemptions, CBPP, October 2014. 10
Step 1: Reporting Minimum Essential Coverage on Form 1040/1040A/1040EZ
Remember: Health Plans that Qualify as Minimum Essential Coverage Any job-based plan, including retiree plans and COBRA coverage Medicare Part A or Part C (Medicare Advantage) Most Medicaid coverage The Children s Health Insurance Program (CHIP) called All Kids in Illinois If under 26, coverage under a parent s plan Certain types of veterans health coverage For a detailed list of types of plans that do and don t count as minimum essential coverage: http://www.irs.gov/affordable-care-act/individuals-and-families/aca-individual- Shared-Responsibility-Provision-Minimum-Essential-Coverage
Does Illinois Medicaid Count as MEC? Almost all Illinois Medicaid and All Kids programs meet the minimum essential coverage requirements of the Affordable Care Act, but some do not. Coverage through some partial-coverage programs such as Veterans Care or unmet spenddown do not qualify as minimum essential coverage according to the IRS. Also, the Medicare Savings Program (SLIB & QI-1) does not qualify as minimum essential coverage, but Medicare does and you should be getting a different 1095-B tax form from Medicare. If a client received Medicaid for at least one month of the year through spenddown, they may be able to apply for a hardship exemption from the penalty (more on this in a few slides )
New Health Forms Show Health Care Coverage Each Month There are new tax forms to show health care coverage for each month of the year: Form 1095-A ( Health Insurance Marketplace Statement ) will be sent to individuals enrolled in health insurance coverage through the Marketplace. Form 1095-B ( Health Coverage ) will be sent to individuals who had coverage directly from a health insurance company, employer-sponsored health plan, SHOP and/or and a government sponsored health program (e.g., Medicaid). Form 1095-C ( Employer-Provided Health Insurance Offer and Coverage ) will be sent to employees of large employers (w/50+ FTEs) who are subject to employer mandate.
Special Note on 1095-B Forms for Illinois Medicaid Clients All Illinois Medicaid clients should have received a form 1095-B between December 2015 and February 1, 2016. Where applicable, the 1095-B form was mailed in the same envelope as the Earned Income Tax Credit (EITC) notice. If clients did not receive a form, they will need to ask for a replacement form, unless they know their dates of coverage from some other source (e.g. premium payment receipts) If form is incorrect, client will have to request a correction to their Medicaid case. To either request a replacement form or ask for it to be corrected, clients should contact their local Family Community Resource Center (FCRC) in person or call 1-800-843-6154.
Tips on Reporting Minimum Essential Coverage ü Taxpayers are not required to send in proof of health care coverage to the IRS when filing their tax return in other words, keep the copies of the 1095-A, 1095-B or 1095-C for your tax records, but don t send them in to the IRS. ü Tax filers should only check the box on Tax Form 1040 if everyone in their tax household had MEC for all twelve months of the year. ü If anyone experienced gaps in health coverage, the tax filer cannot check the box but may qualify for an exemption or may need to pay a fee for each month without MEC.
Step 2: Health Coverage Exemptions Consumers may not have had coverage for part or all of the year. They may qualify for an exemption. HealthCare.gov: Exemption Screening Tool A full list of exemptions is here: http://www.irs.gov/affordable-care-act/individuals-and-families/ ACA-Individual-Shared-Responsibility-Provision-Exemptions
Exemptions from the Fee for Not Having Health Coverage Income-related exemptions (e.g., plan would cost more than 8.05% of household income) Health coverage-related exemptions (e.g., short coverage gap) Group membership exemptions (e.g., member of a federally recognized Indian tribe) Other exemptions (incarcerated, citizen living abroad or not lawfully present) Hardship exemptions
Hardship Exemption for Medicaid Spend Down 1095-B forms for Medicaid recipients have special instructions for Spenddown recipients
22 How Do Taxpayers Claim an Exemption? Exemptions can be granted through the Marketplace, IRS or both depending on the exemption reason. In either case, exemptions are reported on Form 8965, Health Coverage Exemptions.
Marketplace-Granted Exemptions There are many different Marketplace granted exemptions. HealthCare.gov has an Exemption Screener tool and instructions on how to apply. Applications for Marketplace exemptions must be printed and mailed to the Marketplace. When granted a Marketplace exemption, an Exemption Certificate Number (ECN) is issued with a time period for the exemption. This ECN must be entered in Part I of Form 8965. A tax penalty may still need to be paid for some months if the ECN is not for the entire year. If the Marketplace is still processing the filer s application for an exemption, the filer can write pending on line 1c of Form 8965.
24 Marketplace-Granted Exemptions (continued) Must apply in a timely way & report change in circumstance to Marketplace A consumer is eligible to purchase catastrophic coverage (even if age 30 or over) if: They receive an exemption based on hardship or affordability, AND They are in an open or special enrollment period.
Exemptions Claimed on Tax Return Exemptions claimed in Part II of 8965 are for when the entire household income is below the tax filing threshold. Exemptions claimed in Part III of Form 8965 are for each individual in the household and & may apply for only certain months, or for the full year. Consumers indicate on the form whether the exemption is for the full year (column d) or only for certain months out of the year (columns e-p). The instructions for Form 8965 show what exemption code to use in column c, Exemption Type, below.
Exemptions Claimed on Tax Return Source: Center on Budget and Policy Priorities: What Tax Preparers Need to Know, Part 1
Special Note: Exemption Code C for Some Noncitizens People who are ineligible to buy insurance through the Marketplace because they are not classified as lawfully present for ACA purposes are exempt noncitizens and are not subject to the Individual Shared Responsibility Payment. This exemption includes persons through the Deferred Action for Childhood Arrivals (DACA) program. Taxpayers who are not lawfully present but file taxes should claim Exemption Code C on Form 8965. This does NOT disclose immigration status as the code is also used by US citizens living abroad and residents of other countries. For more information, please see this document Immigrants & Exemptions from the ACA Individual Mandate by the National Immigration Law Center.
Step 3: No MEC and No Exemption: Individual Shared Responsibility Payment (ISRP) An Individual Shared Responsibility Payment is computed when anyone on the tax return (or who could be claimed as a dependent) did not have MEC for any month of the tax year and did not qualify for an exemption for that month. For 2015, the amount of the ISRP is the greater of the following: 2% of income above the tax filing threshold, prorated for the number of months someone was uninsured (Capped at the national average premium of a bronze level plan purchased through the Marketplace) OR $325 per adult and $162.50 per child, prorated for the number of months someone was uninsured (Capped at $975 per household for the year).
How does the ISRP get reported? The total goes on Form 1040, Line 61. The IRS s Taxpayer Advocate Service s Individual Shared Responsibility Provision payment estimator can help estimate the penalty: http://www.taxpayeradvocate.irs.gov/estimator/isrp/ During tax time, it is calculated using the Instructions for Form 8965 (but it s not necessary to file Form 8965 unless someone is claiming an exemption). Remember the ISRP is prorated for the number of months without coverage during the tax filing year
Individual Shared Responsibility Payment Increases in Future Years Source: Amplifying the Connections Between Health Coverage Enrollment and Tax Filing, Enroll America. September 2015.
Example of ISRP: Single person, no coverage all year Mark, unmarried and with no dependents, did not have minimum essential coverage for any month during 2015 and does not qualify for an exemption. For 2015, Mark s household income was $40,000 and his filing threshold was $10,300. To determine his payment using the income formula, subtract $10,300 (filing threshold) from $40,000 (2015 household income). The result is $29,850. Two percent of $29,850 equals $597. Mark s flat dollar amount is $325. Mark s annual national average premium for bronze level coverage for 2014 is $2,484. Because $597 is greater than $325 and is less than $2,484, Mark s shared responsibility payment for 2015 is $597, or $49.75 for each month he was uninsured (1/12 of $597 equals $49.75). Mark will make his shared responsibility payment for the months he was uninsured when he filed his 2015 income tax return.
Partial Year Coverage
33 What happens if a client can t pay the ISRP? IRS notice Taxpayers failing to pay a penalty will receive a due notice from Internal Revenue Service (IRS). Continued non-payment The IRS can collect funds by reducing future tax refund(s). An unpaid ISRP balance due will accrue interest but not additional penalties for late payment. Note The IRS will collect ISRP balances due through voluntary payments and refund offsets but is prohibited from using liens or levy to collect. A person s eligibility for future tax credits is not affected by unpaid IRS balance.
Step 4: For Marketplace Consumers And Those Who Receive Premium Tax Credits There are two special tax forms for Marketplace consumers: Form 1095-A (Health Insurance Marketplace Statement) received by all Marketplace consumers. Information in this form is used to complete Form 8962 (Premium Tax Credit), which is used to calculate an individual s premium tax credits and reconcile it with any advanced premium tax credits. You can help consumers understand what the Form 1095-A is, why it is important, and how the information will be used when preparing their taxes.
What Should A Consumer Do if They Did Not Receive Form 1095-A or Need Another Copy from the FFM Consumers should access their Form 1095-A from their Marketplace online account in the tax form section. If consumers do not have online accounts, they can create one to view their Form 1095-A. If consumers experience issues when creating their online accounts or their Form 1095-A is not posted in their online account, they should contact the Marketplace Call Center.
Corrected Form 1095-As Beginning in February 2016, corrected Form 1095- A s from the FFM will be mailed and uploaded to consumers HealthCare.gov accounts. The updated Form 1095-A will have the corrected check box marked. CMS will also report corrected information to the IRS.
Reminder: How is the Tax Credit Determined? SLCSP Annual/Monthly Contribution for Health Care Source: Renewals, Reconciliation and Exemptions, CBPP, October 2014.
Source: CBPP Webinar: Part 1: Premium Tax Credits, October 8, 2015. 39
Why Might Projected PTC differ from PTC Income may fluctuate (part-time, seasonal, job loss) Household size may change due to marriage, birth, death etc. Tax filing status may change due to marriage, divorce, filing status etc. It s important to report changes to the Marketplace as they occur: https://www.healthcare.gov/keep-or-change-plan/report-changes/
Enrollment Reconciling Marketplace PTCs The premium tax credit can be taken in "advance and based on expected income at enrollment. The monthly premium reflects member responsibility after the federal government pay the insurer. Income change, however frequent, must be reported promptly to the Marketplace! 41 Tax Time Final amount of the tax credit is based on actual income as reported on tax return. The individual member is responsible for repayment of any excess premium tax credits paid!
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Form 8962: PTC Reconcilia?on Form 8962 reconciles the APTC by determining the amount of PTC based on actual income. Consumers must file Form 8962 with their federal taxes if: they took Advanced Premium Tax Credits (APTC) or they bought a Marketplace plan without APTC and want to claim a Premium Tax Credit (PTC) on their taxes. Form 1095-A will help consumers complete Form 8962. If consumers took APTC and do not file Form 8962 with their federal taxes, the IRS will consider their federal tax return incomplete. Form 8962 can be filed with Form 1040, 1040A or 1040NR but cannot be filed with 1040 EZ.
Informa?on Required for Form 8962: Part 1 Part 1 of Form 8962 asks for family size, income, and where the taxpayer falls on the Federal Poverty Line. Remember that FPL is important for determining premium tax credit amounts. Consumers choosing not to use commercial software or a tax preparation service should be very careful to complete this section. Question 8a references the Annual Contribution for Health Care also called the Expected Premium Contribution.
Informa?on Required for Form 8962: Part 2 Most of this can be obtained from Form 1095- A, Part III
Reconciling APTC and PTC: Part 3 The bottom of Form 8962 reconciles the amount of tax credit the consumer has received or is owed based on their actual income. Line 24 is the total premium tax credit someone is owed and Line 25 is what was received in advance. If Line 24 is greater than Line 25, the taxpayer will receive the excess as a payment. If Line 24 is less than Line 25, the taxpayer will have to repay some or all of the amount received in advance. This will be reported on Line 26
47 Avoid Repayments of Tax Credit! Report changes to Marketplace to recalculate enrollee s credit so they don t owe money if: Report changes to Marketplace to recalculate enrollee s credit because they might get more of a credit if: Family size goes down Income goes up Receives job-sponsored health insurance. Family size goes up Income goes down Lose job-sponsored health insurance
Example of Repayment of Tax Credit 48 Claudia and Patrick s story In January, we decided to take the tax credit in advance. On August 1, I got a new job that increased our income so we no longer qualified for the tax credit. We forgot to inform the Marketplace. At tax time in April, we had to pay back $2,000. Tax credit they got over 12 months $4,800 Amount they should have gotten since credit ended in August $2,800 Amount they must pay back $2,000
Capped Maximum Payback Repayment of Advance of APTC Credits Source: Part III Premium Tax Credits, CBPP, November 2014
Remember: Taxes Must be Filed to Receive Premium Tax Credits 50 Filing taxes is a prerequisite for receiving premium tax credits in the Marketplace. New in 2015: If someone received advanced premium tax credits in 2014 and did not file taxes in 2015, they will not be eligible for premium tax credits in 2016! Limited Time Special Enrollment Period (until March 31 st ) for people who failed to file in 2015.
51 NEW SEP: Failure to Reconcile On Feb. 8 th, CMS announced a special enrollment period (SEP) for consumers who: are not currently enrolled in 2016 coverage through the Federally-facilitated Marketplace (FFM); are not receiving advance payments of the premium tax credit (APTC) in 2016 because they failed to file a tax return for 2014 and reconcile their APTC, and subsequently filed their 2014 tax return and reconciled their 2014 APTC.
52 NEW SEP: Failure to Reconcile (continued) This SEP is available from Feb 1 March 31, 2016. It will only be available to consumers after they restore their eligibility for APTC by: filing a 2014 tax return reconciling APTC paid on their behalf in 2014, and returning to the Marketplace to attest to having filed and reconciled 2014 APTC. The Effective date of coverage under this SEP will be the first of the month following plan selection.
53 NEW SEP: Failure to Reconcile (continued) Eligible consumers can access this SEP through HealthCare.gov by updating their application and attesting that they have filed and reconciled their 2014 APTC. Consumers who are currently enrolled in FFM coverage but have since filed and reconciled 2014 APTC should update their application, attest that they have filed and reconciled, and receive a new APTC/CSR eligibility determination. These consumers do not need a SEP to complete this step. For more information, see here: https://www.regtap.info/uploads/library/ ENR_FTR_SEP_Guidance_020516_5CR_020516.pdf
54 Continuous engagement with the Marketplace is crucial for consumers who receive premium tax credits. Source: Amplifying the Connections Between Health Coverage Enrollment and Tax Filing, Enroll
Additional Resources Tax Help: Free File Software (for those with income below $62,000): https://www.irs.gov/uac/free-file:-do-your-federal-taxes-for-free Free tax help for people who make less than $54,000, people with disabilities and limited English speaking taxpayers: VITA (Volunteer Income Tax Assistance) Sites: http://irs.treasury.gov/freetaxprep/ Free tax help for low to moderate income older adults trough AARP Tax Aide: http://www.aarp.org/applications/vmislocator/searchtaxaidelocations.action HHS Fact Sheet on Preparing For Tax Season 2016 ACA Tax Provisions for Individuals and Families - IRS Website Health Coverage and Your Federal Income Taxes - Healthcare.gov - Resource Center The Health Care Assister s Guide to Tax Rules - Center on Budget and Policy Priorities - Comprehensive Guide Health Insurance and the 2015 Federal Income Tax Return - Kaiser Family Foundation - FAQ
QUESTIONS? ASK QUESTIONS USING THE CHAT BOX FEATURE Stephani Becker, Senior Policy Specialist Sargent Shriver National Center on Poverty Law stephanibecker@povertylaw.org v A recorded copy of the webinar will be posted on EverThrive IL s website in the coming days: http://everthriveil.org/resources/starting-strong-webinars For questions related to this and other Starting Strong webinars: asiani@everthriveil.org