Three Main Elements Everyone must have Healthcare Insurance Exemptions are available (Form 8965) No Insurance and No Exemption? Additional tax Individual Shared Responsibility Payment ( SRP ) Financial Assistance Credit may be available (Form 8962) NTTC Training TY2015 1
Level 1 vs Level 2 Level 1 All preparers Limited Scope Level 2 Specially trained preparers All IRS/Tax Aide approved scope 2
Level 1 Can Do Simple determination if coverage is MEC Simple determination of PTC months of eligibility Determination of dependency for ACA tax family Determine MEC coverage months ACA Worksheet (if no ISRP & no dependent income) 3
Level 1 Can Do (Con t) 8965 MarketPlace exemptions Simple (e.g. 2 month gap) exemptions 8962 (remember Household Income MAGI includes untaxed Social Security) 1095 A data entry TWO Calculate APTC repay / credit Sch A entry NTTC Training TY2015 4
What is Minimum Essential Coverage (MEC)? More than limited coverage, generally Pub 4012 p. ACA 4 Pub 4491 p. 3 20 definition 92% of all Tax Aide taxpayers had MEC for 2014 Can rely on taxpayer s good faith representation Pub 4012 ACA 4 NTTC Training TY2015 5
Types of MEC 1.Employer sponsored insurance ( ESI ) Includes private employers and governmental employers Can be insured or self insured NTTC Training TY2015 6
Types of MEC 1.Employer sponsored insurance ( ESI ) 2.Government sponsored insurance ( GSI ) Includes: Medicare Part A or Advantage; most Medicaid, CHIP, TRICARE (military); comprehensive VA; Peace Corps; etc. (see Form 8965 instructions) NTTC Training TY2015 7
Types of MEC 1.Employer sponsored insurance ( ESI ) 2.Government sponsored insurance ( GSI ) 3.Other HHS certified coverage Includes: Coverage available outside the U.S. and student health plans NTTC Training TY2015 8
Types of MEC 1.Employer sponsored insurance ( ESI ) 2.Government sponsored insurance ( GSI ) 3.Other HHS certified coverage 4.Individual market insurance If purchased through the Marketplace or State Exchange, it is a Marketplace policy NTTC Training TY2015 9
Does Taxpayer Have MEC? Rely on interview and on taxpayer s good faith representation May be exhibited by (but don t need to see) Insurance card Form 1095 B Health Coverage Form 1095 C Employer provided Insurance Offer and Coverage Other tax forms NTTC Training TY2015 10
Other Tax Forms That Show MEC Cost of employersponsored coverage Medicare premiums deducted from benefits NTTC Training TY2015 11
MEC Interview Questions Did you, your spouse and each dependent have Medicare, Medicaid, or other health insurance coverage all or part of the year? (See pub 4012 ACA 4) If not everyone, who did? who did not? If only part of the year which months were covered? If in doubt, consult a Level 2 preparer One day of coverage means that month is covered Pub 4012 ACA 4 NTTC Training TY2015 12
Is This MEC? 2. Peter's employer has a health plan that is "grandfathered." Is Peter's employer's health plan minimum essential coverage? Answer: Yes Grandfathered group health plans are minimum essential coverage Pub 4012 ACA 4 NTTC Training TY2015 13
Is This MEC? 1. Sandy is covered under health insurance offered by her spouse's employer. Does she have minimum essential coverage? Pub 4012 ACA 4 Answer: Yes Employer sponsored coverage is minimum essential coverage NTTC Training TY2015 14
Is This MEC? 3. James is retired and too young to be eligible for Medicare. He received his health coverage through a retiree health insurance plan offered by his former employer. Is the retiree plan minimum essential coverage? Answer: Yes Retiree health plans are minimum essential coverage Pub 4012 ACA 4 NTTC Training TY2015 15
Is This MEC? Pub 4012 ACA 4 4. Valerie is a local government employee and she enrolls in group health insurance coverage offered by her employer. Does she have minimum essential coverage? Answer: Yes Employer sponsored coverage is minimum essential coverage regardless of whether the employer is a governmental, nonprofit, or for profit entity NTTC Training TY2015 16
Who is Responsible for Coverage? Every Taxpayer! For self, spouse and dependents Anyone who can be claimed as a dependent. Collectively, the Tax Household The definition is in Form 8965 instructions (and Pub 4491 p. 3 22) NTTC Training TY2015 17
Who is Responsible for Coverage? Dependent that could be claimed by more than one taxpayer Taxpayer with the higher priority in the tie breaker rules is responsible for coverage NTTC Training TY2015 18
Who is Responsible for Coverage? 5. Stevie is 20 years old, in school and claimed as a dependent by his parents He also has a part time job and will file a return Who is responsible for Stevie s coverage? Answer: Stevie s parents are responsible for Stevie s MEC because they can claim him as a dependent NTTC Training TY2015 19
Who is Responsible for Coverage? 6. Bob s ex wife gave him an 8332 so he can claim their child, Jenny, for tax purposes even though Jenny does not live with Bob Who is responsible for Jenny s coverage? Answer: Bob is responsible for Jenny s MEC because he will claim her as his dependent NTTC Training TY2015 20
Who is Responsible for Coverage Unclaimed Dependent Generally, Taxpayer that could claim the dependent is responsible for their coverage However Coverage exemptions apply to the unclaimed dependent separately IRS guidance assumes no exemption will be shown for an individual that is not claimed Dependent cannot claim own exemption and does nothing with ACA NTTC Training TY2015 21
Intake & Interview 13614 C Complete the ACA section of the I&I form as much as possible Finish when return is finalized If need an exemption, make initial determination on which exemption(s) Decide whether to consult a Level 2 counselor NTTC Training TY2015 22
Intake & Interview 13614 C If MEC was purchased through the Marketplace, must have Form 1095 A Should be received by ~ 1/31/16 Screen for out of scope issues Shared policy or Alternative calculation for year of marriage NTTC Training TY2015 23
Intake & Interview 13614 C Make notes of information received from the Taxpayer on the Intake form Finish the notes when the return is completed NTTC Training TY2015 24
Intake & Interview 13614 C Preparer and Reviewer notations sample: NTTC Training TY2015 25
New ACA Wkt Preliminarily: SR P NTTC Training TY2015 26
When Everyone Has MEC All Year GoTo TaxWise ACA Wkt Check for each person: TaxWise checks the box on Line 61 Done! NTTC Training TY2015 27
Coverage End Result: Form 1040 Coverage or SRP line 61 (exception for exemptions) Never coverage and SRP Not just any coverage must be minimum essential coverage (MEC) NTTC Training TY2015 28
Now It Gets a Little Complicated When any individual on the return lacks MEC for any full month Step 1: look for an exemption that applies NTTC Training TY2015 29
Who needs an exemption? Pub 4012 ACA 2 Any individual on the tax return who did not have MEC for one or more months during the tax year NTTC Training TY2015 30
Types of Exemptions Exemptions that can be requested from the Marketplace Some are prospective; some can be retrospective Exemptions that can be claimed on the tax return Some exemptions are available in both places Pub 4012 ACA 6 NTTC Training TY2015 31
Types of Exemptions Some exemptions cover everyone on the return; some cover the particular individual only Some exemptions are good for the whole year; some cover specific months Exempt for one day means exempt for the whole month NTTC Training TY2015 32
Exemption Form 8965 Marketplace exemptions Tax Return exemptions NTTC Training TY2015 33
Types of Exemptions Does the taxpayer already have an exemption from the Marketplace or have an application pending? NO Does the taxpayer have income below the filing threshold? Applies to the entire household for the entire year. NO Exemptions for individuals (duration varies): Short coverage gap Code B YE S YE S Pub 4012 ACA 6 Enter on Form 8965, Part I Enter on Form 8965, Part II Resided in Medicaid non expansion state Code G Certain noncitizens and citizens living abroad Health care sharing ministry Federally recognized Indian tribe or eligible for IHS Code C Code D Code E YE S Enter on Form 8965, Part III Incarceration Code F Member of household born, adopted or died Code H Insurance is unaffordable Code A Aggregate cost of insurance is unaffordable NO Code G Does anyone qualify for a Marketplace hardship exemption? YE S apply Enter on Form 8965, Part I NTTC Training TY2015 34
Types of Exemptions First, ask if taxpayer already has an exemption from the marketplace Marketplace Exemptions may exempt one or more individuals for some or all months of the year Interview hint: taxpayer provides their marketplace exemption certificate number ( ECN ) letter If not yet received, use PENDING Less than ½of 1% had a Mkt exemption in 2014 NTTC Training TY2015 35
ACA Exemptions No Mkt exemption? Start with exemptions that can be claimed on tax return Simpler than applying for Marketplace exemptions But note that some Marketplace exemptions can be granted retroactively NTTC Training TY2015 36
Form 8965 Part II Filing Threshold Exemptions 7a exemption Household Income below filing threshold, where Household Income = * Pub 4012 ACA 7 Include MAGI of claimed dependents required to file a return due to gross income Must do ACA Wkt First *MAGI = modified adjusted gross income for 8965 NTTC Training TY2015 37
Dependent Filing Requirement Required to file due to gross income only Pub 4012 ACA 8 NTTC Training TY2015 38
TW ACA Worksheet Bottom of ACA Wkt pg 2 provides a field to enter dependents MAGI TaxWise has taxpayer s MAGI Enter dependents MAGI on TaxWise ACA Wkt 10000 NTTC Training TY2015 39
Filing Threshold Exemptions TaxWise shows Household MAGI on 8965 carried from ACA Wkt 20XX Must enter on ACA Wkt NTTC Training TY2015 40
TW ACA Worksheet Reminder: enter dependent s MAGI only if dependent s gross income exceeds the filing threshold Same 8965 MAGI definition for dependents: NTTC Training TY2015 41
2015 Federal Filing Threshold Exemption 7a Is Household Income less than: NTTC Training TY2015 42
7a Exemption When Household Income is less than the filing threshold: EVERYONE on the return is exempted for the WHOLE year TW checks the 7a box on 8965 based on return data and ACA Wkt entry Done! NTTC Training TY2015 43
Form 8965 Part II Filing Threshold Exemption 7b 7b exemption Gross Income below filing threshold Pub 4012 ACA 7 DO NOT include any dependent s income NTTC Training TY2015 44
2015 Federal Filing Threshold Exemption 7b Is Gross Income less than: NTTC Training TY2015 45
7b Exemption When Gross Income is less than the filing threshold: EVERYONE on the return is exempted for the WHOLE year Check the 7b box on 8965 Note: TW shows estimated* gross income on 8965 based on return data and ACA Wkt entry Done! *May need to adjust for Sch D losses if grouped for input NTTC Training TY2015 46
Filing a Return to claim a Coverage Exemption 7. If Randy is not required to file a federal income tax return, does he need to file to claim an ACA exemption? Answer: Randy does not need to file just to claim the ACA exemption. If he files a return anyway, he should claim exemption 7a or 7b on Form 8965 NTTC Training TY2015 47
Individual Exemptions Form 8965 Part III Will need to enter each individual for whom a tax return exemption is claimed May need to list more than once if multiple exemptions apply to the same individual NTTC Training TY2015 48
Short Gap Exemption (code B) Gap must be less than 3 consecutive months Exemption does not apply if gap is 3 months or more Look back (to 2014) but no need to look forward (to 2016) If a month is covered by another exemption, it is treated as having coverage Means short gap exemption is not used NTTC Training TY2015 49
Short Gap Exemption Can use short gap exemption only once per individual per year If two short gaps, short gap exemption applies to earlier gap Can use another exemption for another gap or for adjacent months NTTC Training TY2015 50
Short Gap Exemption Example 1 Taxpayer: claimed the short gap exemption for Dec 2014; had no coverage for Jan 2015; had coverage for Feb Nov; had no coverage Dec 2015 Can use short gap exemption for Jan 2015 as the total short gap is less than 3 months Cannot use the short gap exemption for Dec 2015 (only one short gap exemption per year) NTTC Training TY2015 51
Short Gap Exemption Example 2 Taxpayer: had no insurance Nov 2014 Feb 2015; claimed short gap exemption for 2014 gap; had coverage Mar Dec 2015 Even though only 2 months of gap in 2015, cannot use short gap exemption for Jan Feb 2015 as total gap is 3 months or more Hint: If short gap exemption might apply for January 2015, check the 2014 return! NTTC Training TY2015 52
Short Gap Exemption Example 3 Taxpayer: had no insurance Jan Jun 2015; was incarcerated* Jan Apr 2015 Claim incarceration exemption for Jan Apr (treated has having coverage) Can claim short gap exemption for May and June 2015 *See exemption chart covered in a later slide NTTC Training TY2015 53
Last Chance Exemption If none of the tax return exemptions applies Taxpayer can review whether a Marketplace hardship or other exemption might apply See 4012 ACA 6 If so, they need to apply a.s.a.p. Use PENDING for the ECN on 8965 Part I Remind taxpayer that IRS follows up on all Pending exemptions Pub 4012 ACA 6 NTTC Training TY2015 54
Last Chance Exemption Exemption application forms: Marketplace.cms.gov/applications and forms For Connecticut only: www.accesshealthct.com/ahct/jsp/frontend/ feiam/individualexemptionapplication.pdf Mailed in with required documentation NTTC Training TY2015 55
ACA Worksheet Carefully read the options on ACA Wkt Check the applicable box(es) Check a month only if SRP is to be computed! Double check 1040 p. 2 to make sure the result is proper NTTC Training TY2015 56
No Insurance, No Exemption? Must make an Individual Shared Responsibility Payment (ISRP or SRP) with tax return 2014 small penalty 2015 bigger penalty 2016 even bigger penalty Adjusted thereafter SRP is core, but when SRP applies the Reviewer must have comprehensive training to assure that no exemption applies NTTC Training TY2015 57
SRP Year 2014 1% of household income above tax filing threshold (up to cap*) 2015 2% of household income above tax filing threshold (up to cap*) 2016 2.5% of household income above tax filing threshold (up to cap*) Full year payment is greater of: $95 per adult, $47.50 per child (up to cap of $285) $325 per adult, $162.50 per child (up to cap of $975) $695 per adult, $347.50 per child (up to cap of $2,085) > 2016 Values increased by a cost of living adjustment Pub 4012 ACA 14 * Capped at national average premium of a bronze level plan purchased through a Marketplace. For 2015, the cap is $2,484 per individual ($207 per month per individual), with a maximum of $12,420 for a family with five or more members ($1,035 per month for a family with five or more members). NTTC Training TY2015 58
Household Income for SRP Taxpayer s MAGI (and spouse if MFJ) Plus claimed dependent s MAGI if dependent is required to file a return due to gross income MAGI is 8965 definition NTTC Training TY2015 59
Household Income for SRP TaxWise ACA Wkt TaxWise has taxpayer s MAGI Enter dependents MAGI on TaxWise ACA Wkt NTTC Training TY2015 60
TaxWise ACA Wkt Carefully check the appropriate box(es) for each person on the return Check month(s) for which SRP must be paid TaxWise will compute the SRP NTTC Training TY2015 61
SRP Make doubly sure no exemption applies and that SRP is due TaxWise does the calculation based on entries on ACA Wkt Check the right boxes for each individual Children < 18 years of age count 1/2 NTTC Training TY2015 62
Two Show forms in TWO NTTC Training TY2015 63
Example: John (Single) Income: $17,000 Filing Status: Single Adults: 1 Children: 0 Tax Filing Threshold: $10,300 Months Uninsured: 12 Penalty Calculation: 1. $17,000 $10,300 = $6,700 x 2% $ 134 2. $325 x 1 adult = $325 SRP for 2015 NTTC Training TY2015 64
Premium Tax Credit Premium Tax Credit ( PTC ) a refundable credit Marketplace estimates PTC at time of purchase PTC can be paid in advance ( APTC ) to insurance company OR applied as refundable credit on federal tax return Must be reconciled on tax return Must file to reconcile APTC even if not otherwise required to file Use Form 8962 using Form 1095 A information NTTC Training TY2015 65
PTC Eligibility For each month: Must have qualified health plan through Marketplace as of the first day of each month TP s share of premiums paid by due date of return Not eligible for other MEC includes an offer, even if it was not taken Affordable employer coverage Government sponsored coverage Other HHS certified MEC Exceptions apply NTTC Training TY2015 66
PTC Eligibility For the year: Household income within 100% to <401% of FPL Cannot be claimed as a dependent Cannot file MFS Exceptions apply NTTC Training TY2015 67
PTC Eligibility The Marketplace will make the eligibility determination based on truthful data provided by applicant The preparer can merely confirm that the facts have not changed The preparer can compute the final amount of PTC based on the final 2015 income NTTC Training TY2015 68
PTC End Result: Form 1040 Repay excess credit line 46 or claim more credit line 69 NTTC Training TY2015 69
Calculation of PTC Pub 4012 ACA 15 Final amount of PTC is computed on Form 8962 Need Form 1095 A Monthly premium amount SLCSP (second lowest cost silver plan) APTC Need Household Income TaxWise then computes the credit NTTC Training TY2015 70
What is Household Income for PTC? MAGI for the taxpayer (and spouse if MFJ) Plus MAGI of any individual claimed as a dependent and who is required to file a federal income tax return due to gross income Having to file for self employment tax does not count! NTTC Training TY2015 71
Different Definitions of MAGI Modified Adjusted Gross Income is AGI Plus: Form 8962 (PTC) Tax exempt interest Form 8965 (Exemptions/SRP) Tax exempt interest Untaxed Social Security benefits* Untaxed foreign earned income** Untaxed foreign earned income** * Includes untaxed lump sum benefits received in 2015 and untaxed tier 1 RR ** Form 2555 Lines 45 + 50; or Form 2555 EZ Line 18 NTTC Training TY2015 72
Household Income for PTC TaxWise computes the MAGI for the taxpayer Preparer needs to determine: Whether a dependent has to file a return If so, the amount of dependent s MAGI for 8962 purposes (including untaxed SS) NTTC Training TY2015 73
Final PTC Based on final tax return data Final PTC may be more than the Advance PTC ( APTC ) Claim a credit on the 1040 Final PTC may be less than the APTC Pay back the excess (may be capped) NTTC Training TY2015 74
Advance PTC 1. Roger's APTC is $2,400. He is single with no dependents, and lives in Mississippi. His household income is over 400% of the FPL for a family size of one. How much of his APTC will he have to repay with his tax return? A $0 B $1,000 C $1,400 D $2,400 Answer: D Because Roger's household income is over the 400% FPL, his additional tax liability is not capped by the additional tax limitation table NTTC Training TY2015 75
PTC 2. Judy is single with no dependents In December 2014, Judy enrolled through the Marketplace in a qualified health plan for 2015 On July 14, 2015, Judy enlisted in the Army and was immediately eligible for government sponsored minimum essential coverage For what period is Judy able to claim a premium tax credit (if she meets all of the eligibility criteria)? NTTC Training TY2015 76
PTC (cont.) 2. (continued) A The entire year B January through June C January through July D Judy is not eligible for the premium tax credit Answer: Judy is eligible for PTC for July assuming she paid her premium for July (and did not get a premium refund) because her government sponsored coverage was not in effect on July 1 NTTC Training TY2015 77
PTC 3. Piper s income is 300% of the FPL for her family size. For this tax year, she purchased health insurance through her employer. Is she eligible to take the premium tax credit for herself? Answer: No the coverage must have been purchased through the Marketplace to claim PTC NTTC Training TY2015 78
PTC 4. Patrick is single and has no dependents In November 2014, Patrick estimated his 2015 household income to be $27,825 and he enrolled in a Marketplace qualified health plan The Marketplace determined he was eligible for advance payments of the premium tax credit, but he decided to claim the credit on the return Patrick began a new job in August 2015 and became eligible for affordable employer sponsored coverage on September 1st (continued next slide) NTTC Training TY2015 79
PTC (cont.) 4. (cont.) Is Patrick eligible for the premium tax credit? Answer: Since Patrick became eligible for affordable employer sponsored coverage in September, he is eligible for a premium tax credit from January through August of 2015* only *See instructions if income falls below 100% FPL NTTC Training TY2015 80
PTC 5. Harry purchased insurance through the Marketplace. What documentation will he receive to prepare his tax return? Answer: He will receive Form 1095 A NTTC Training TY2015 81
PTC 6. Changes in circumstances that can affect the amount of the premium tax credit include: A B C Decrease in household income Marriage Birth of a child D Losing employer sponsored health care coverage and buying Marketplace coverage E All of the above NTTC Training TY2015 82
ACA Summary Taxpayers are responsible for MEC for themselves and their dependents The preparer can help determine if the taxpayer can claim an exemption, if needed If taxpayer doesn t have MEC and doesn t have an exemption, they owe a SRP NTTC Training TY2015 83
ACA Summary If taxpayer buys their coverage in the Marketplace, they may be eligible for PTC and may get APTC to help pay the premiums The Mkt will determine their eligibility for PTC The preparer can help the taxpayer determine whether they remained eligible and compute the final PTC amount NTTC Training TY2015 84
Updating Information Taxpayer should notify the Marketplace Changes in household Income Changes in household Marriage or divorce Birth, adoption or death Eligibility for other programs The Marketplace can adjust advance payments NTTC Training TY2015 85
Filing Returns Taxpayers who get APTC must file tax returns and reconcile their APTC If they don t, e.g. failed to file for 2014, may lose APTC in 2016 Up to the Marketplace Encourage taxpayers to file all returns as required NTTC Training TY2015 86
Affordable Care Act Questions Comments NTTC Training TY2015 87