Affordable Care Act Exemptions and Affordability Information. Exemptions. Exemption from What? 10/2/2014

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1 Affordable Care Act Exemptions and Affordability Information Kristy Maitre Tax Specialist Center for Agricultural Law and Taxation October 14, 2014 Exemptions What qualifies for an exemption? How is the exemption obtained through the Marketplace? When should your client apply? Other exemptions, how are they determined and how will your client be able to get the exemption? Exemption from What? Having to have insurance coverage Having to pay the Shared Responsibility Payment the higher of 2014 = 1% of annual income less the filing requirement or $95.00 per adult /$47.50 per child 1

2 Form 8965 Exemption Section What Exemptions Qualify? Statutory Exemptions You re uninsured for less than 3 months of the year The lowest priced coverage available to you would cost more than 8% of your household income THE AFFORDIBILITY FACTOR Worksheet in the Form 8965 instructions You don t have to file a tax return because your income is too low No need to apply for an exemption true even if only filing to obtain a refund You re a member of a federally recognized tribe or eligible for services through an Indian Health Services provider You re a member of a recognized health care sharing ministry You re a member of a recognized religious sect with religious objections to insurance, including Social Security and Medicare You re incarcerated (either detained or jailed), and not being held pending disposition of charges You re not lawfully present in the U.S. 2

3 Hardship Exemptions You were homeless. You were evicted in the past 6 months or were facing eviction or foreclosure. You received a shut off notice from a utility company. You recently experienced domestic violence. You recently experienced the death of a close family member. You experienced a fire, flood, or other natural or human caused disaster that caused substantial damage to your property. You filed for bankruptcy in the last 6 months. You had medical expenses you couldn t pay in the last 24 months which resulted in substantial debt. Hardship Exemptions You experienced unexpected increases in necessary expenses due to caring for an ill, disabled, or aging family member. You expect to claim a child as a tax dependent who s been denied coverage in Medicaid and CHIP, and another person is required by court order to give medical support to the child. In this case, you do not have the pay the penalty for the child. As a result of an eligibility appeals decision, you re eligible for enrollment in a qualified health plan (QHP) through the Marketplace, lower costs on your monthly premiums, or cost sharing reductions for a time period when you weren t enrolled in a QHP through the Marketplace. You were determined ineligible for Medicaid because your state didn t expand eligibility for Medicaid under the Affordable Care Act. Your individual insurance plan was cancelled and you believe other Marketplace plans are unaffordable. You experienced another hardship in obtaining health insurance. Exemption Codes 3

4 Exemption Codes How to apply for an exemption If you're applying for an exemption based on Coverage being unaffordable Membership in a health care sharing ministry Membership in a federally recognized tribe Incarcerated: You have 2 options: You can claim these exemptions when you fill out your 2014 federal tax return, which is due in April 2015 or How to apply for an exemption You can apply for the exemptions using the right form below: Form to apply for exemption based on coverage being unaffordable (if you live in a state using Healthcare.gov) Form is 9 pages, basic information plus income information Form to apply for exemption based on coverage being unaffordable (if you live in a state using its own health exchange) Similar to the Form above with 6 pages to complete Form to apply for exemption based on membership in a health care sharing ministry Similar and 5 pages to complete 4

5 How to apply for an exemption Form to apply for exemption for American Indians and Alaska Natives and others who are eligible for services from an Indian health care provider Similar with 6 pages to complete Form to apply for exemption based on being incarcerated Similar with 5 pages to complete Note: If you get an exemption because coverage is unaffordable based on your expected income, you may also qualify to buy catastrophic coverage through the Marketplace. This may be more affordable than your other options. All Application Forms Require: Documents to support your clients position All Application Forms Require: Documents to support your clients position 5

6 Contact Information Online: HealthCare.gov. Health Insurance Marketplace Help Center at TTY users should call In person: There may be counselors in your area who can help. Visit HealthCare.gov or call for more information En Español: Llame a nuestro centro de ayuda gratis al There is an Appeal Process If you don t agree with the results of your exemption application, you can ask for an appeal. The Appeal The Health Insurance Marketplace must receive your appeal request within 90 days of the date of the notice of the application results. The client can have someone request or participate in your appeal That person can be a friend, relative, lawyer, or other individual. in your appeal on your own. The outcome of an appeal could change the eligibility of other members of your household. To appeal the results of your exemption application, there is a phone number your client to call You can also mail an appeal request form or your own letter requesting an appeal to Health Insurance Marketplace Exemption Processing, 465 Industrial Blvd., London, KY Sign this application. More Exemptions If you re applying for an exemption based on: Membership in a recognized religious sect whose members object to insurance; Eligibility for services through an Indian health care provider; Or a hardship: You fill out an exemption application using the right form below. See instructions to help you fill out an exemption application. Form to apply for exemption based on membership in a recognized religious sect whose members object to insurance Form to apply for exemption based eligibility for services through an Indian health care provider Form to apply for exemption based on a hardship 6

7 All Application Forms Require: Documents to support your clients position All Application Forms Require: Documents to support your clients position Hardship Documents 7

8 Other Documents for Hardship Other Documents for Hardship If you have a gap in coverage of less than 3 months, or you're not lawfully present in the U.S.: You don t need to apply for an exemption. This will be handled when you file your federal tax return 8

9 What happens after I apply for an exemption? After you submit your application, The Marketplace will review it and determine your eligibility. The time it takes to receive a response will depend on how complicated your request is, how complete your application is, and whether you need to submit supporting documentation after you apply. The Marketplace will mail you a notice of the exemption eligibility result. If you are granted an exemption, the Marketplace notice will show your unique exemption certificate number (ECN). You will use your ECN when you complete your taxes for the 2014 tax year beginning in January 2015 to avoid paying the shared responsibility payment. How long will a hardship exemption last? Hardship exemptions are usually provided for the month before the hardship, the months of the hardship, and the month after the hardship. However, the Marketplace may provide the exemption for additional months after the hardship, including up to a full calendar year. For a hardship exemption based on affordability, the exemption will be granted for the remaining months in the coverage year. For individuals ineligible for Medicaid solely based on a state s decision not to expand coverage, the hardship exemption will be granted for the entire calendar year. For individuals eligible for Indian Health Services, the hardship exemption will be granted on a continuing basis. It may be kept for future years without having to submit another application as long as there are no changes to your membership in a tribe or eligibility for services from an Indian health care provider. Information on Form 8965 Form 8965 is the Exemption Certificate that must be attached to the tax return Part 1 Marketplace granted exemption Part 2 Exemption for the household Part 3 Exemption for individuals Form 8965, Reporting of Exemptions From Coverage This form intends to report the exemption certificate to the IRS a taxpayer receives form the marketplace, or if individuals wants to apply for an IRS exemption. This is basically a way for taxpayers to tell the IRS that they do not need to maintain the MEC in order to avoid the penalty. 9

10 Determination of Affordability Household Income for the most recent year for which income is available Determines whether coverage is affordable Magic 8% calculation (Maximum Contribution) Income $35,000 X 8% = $2,800 Form 8965 Worksheet 10

11 Household Income for Purpose of Affordability of Minimum Essential Coverage 8%Caculation Modified Adjusted Gross Income PLUS The aggregate MAGI of all other individuals taken into account to determine the family s size BUT Only if those individuals are required to file a tax return Does not include a return to claim a full refund of tax withhold or report a tax other than income tax (i.e.: IRA early distribution penalty or Self employment income) Must increase Household Income by any exclusion from gross income for any portion of the required contribution made through a Salary Reduction Arrangement 8% Required Contribution Percentage Determined on an annual basis For Minimum Essential Coverage (MEC) Deemed Affordable Coverage Example: Household Income $35,000 $25,000 wages + $10,000 (Salary Reduction Agreement) $35,000 X 8% = $2800 $2,800 is the required contribution Example: Rebecca A65 Income $35,000 Persons in Household 1= $11,490 Poverty Guideline Amount Premiums possible Bronze $4700 Silver $5000 (Benchmark Plan) 11

12 Step One Calculate the Federal Poverty Guideline Income $35,000/$11,490 = 305% = 9.5% Step Two Calculate the Premium Assistance Credit Use Benchmark Premium (second lowest cost for selfonly silver plan $5,000) $5,000 ($35,000 X 9.5%) = $3,325 $5,000 $3,325 = $1,675 (PAC) Bronze Plan $4,700 $1,675 =$3025 (required taxpayer contribution) $1675 can be paid in advance by the exchange to the insurance company or taken as a credit at year end, if Rebecca enrolls in plan Step Three Does Rebecca have affordable coverage? Rebecca s Contribution $3,025 Rebecca s Magic 8% +$2,800 No, Rebecca does not have affordable coverage and is exempt from the individual mandate, no penalty 12

13 UP Coming Seminars 10/9 ACA Penalties 10/14 Exemptions and Affordability 10/15 Navigating the ACA Forms 10/16 Employer obligation and penalties 10/21 Ethics and the ACA December session for ETHICS are posted at the CALT website Farm Tax Schools October 28, 2014 to December 16, Locations in Iowa To register: registration farm and urban income tax schools Download the brochure: 2014 Tax School Brochure.pdf The program is intended for tax professionals and is designed to provide up to date training on current tax law and regulations. The program stresses practical information to facilitate the filing of individual and small business returns, in addition to farm returns Farm Tax Schools Dates and Locations Waterloo: Oct Maquoketa: Oct Sheldon: Nov Red Oak: Nov Ottumwa: Nov Mason City: Nov Denison: Dec. 8 9 Ames: Dec live as well as attendance via webinar available 13

14 2014 Farm Tax Schools Other Tax Return Preparers (IRS RPO Continuing Education) Approval pending: 16 hours of CPE Certified Public Accountants (Iowa Board of Accountancy) 16 hours of CPE (The Iowa Accountancy Examining Board does not preapprove seminars, but it is left to the individual to determine the appropriate course of study). Enrolled Agents (IRS RPO Continuing Education) Approval pending: 16 hours of CPE Certified Financial Planners (Certified Financial Planner Board of Standards) Approval pending: 16 hours of CPE Attorneys (Iowa Supreme Court Commission on Continuing Legal Education) Approval pending: 13 hours of CLE Real Estate Professionals (Iowa Real Estate Commission) Approval pending: 13 hours of CPE Insurance Professionals (Iowa Insurance Division) Approval pending: 13 hours of CPE Costs Two Day Registration: $290 ($30 discount if registered two weeks PRIOR to chosen location date) One Day Registration: $215 ($20 discount if registered two weeks PRIOR to chosen location date) Live Online Webinar: $315 (no discount available for this option) **Company Group Discount: $20 per individual if 5 or more are registered from the same employer (not available through online registration) CALT Website 14

15 Tour of the CALT Website CALT Staff Roger A. McEowen CALT Director and is a Leonard Dolezal Professor in Agricultural Law mceowen@iastate.edu Phone: (515) Fax: (515) Kristine A. Tidgren Staff Attorney E mail: ktidgren@iastate.edu Phone: (515) Fax: (515) CALT Staff Kristy S. Maitre Tax Specialist E mail: ksmaitre@iastate.edu Phone: (515) Fax: (515) Tiffany Kayser Program Administrator tlkayser@iastate.edu Phone: (515) Fax: (515)