HDAP & the MA Health Connector:

Transcription

1 HDAP & the MA Health Connector: Understanding Premium Tax Credits & Tax Reconciliation March 15, 2016 Annette Rockwell HDAP and Federal Grants Coordinator, Office of HIV/AIDS, Massachusetts Department of Public Health Lauren Dunn HDAP BRIDGE Team Coordinator George Hastie HDAP BRIDGE Team Project Manager BRIDGE = Benefits Resources Infectious Disease Guidance and Education

2 Webinar Tips Audio Options Participate using a telephone: select the Telephone option Call in using the phone number & access code provided in the registration Participate on a computer: select the Mic & Speakers option For Tech Support, call

3 Webinar Tips Muting All participants will be muted for the entirety of this webinar Questions Type a question at any time Questions (not specific to an agency/program/client) will be answered at the end of the webinar, if time allows. For Tech Support, call

4 Webinar Tips Viewing Minimize the webinar control panel after you are set up except when you need to type a question Help Call GoTo Webinar Support at Press 1 for GoTo Webinar Press 1 for Tech Support Press 1 for In Session Minimized Maximized 4

5 Overview Review of Premium Tax Credits (PTCs) PTC-Related Tax Forms and Reconciliation HDAP/CHII Requirements for PTCs o Paying PTC adjustments to the IRS on behalf of clients o Collecting PTC-related refunds from clients 5

6 Premium Tax Credits 6

7 What are Premium Tax Credits (PTCs)? A new tax credit that can help individuals and families afford health insurance purchased through the MA Health Connector. * 7

8 What are Premium Tax Credits PTCs can be received in one of two ways: o Advanced Premium Tax Credits (APTCs) - paid directly to the insurer and lower the cost of one s monthly health insurance premium; or o Lump sum - claim the Premium Tax Credit in a lump sum when filing federal income taxes for the previous year (paid to individual). To receive premium assistance from CHII, clients must apply the full amount of APTC that they are eligible for upfront to their monthly MA Health Connector plan premium. 8

9 PTC Eligibility Requirements Individuals and families may be eligible for PTCs if they: 1) Enroll in a health plan through the MA Health Connector; 2) Are not eligible for affordable and adequate employer coverage or government plan (i.e., VA or Medicare); 3) Have household income at or below 400% FPL; and 4) Agree to file taxes (if married must file jointly except in specific circumstances). In tax year 2015, 400% FPL = $47,080 for a single person 9

10 Estimating Annual Income for APTCs The amount of APTCs a household receives, if any, is based on the annual income they estimated on their MA Health Connector application. 10

11 Based on what you know today, how much do you think you will make [this year]? 11

12 Based on what you know today, how much do you think you will make [this year]? 12

13 Why does this matter? If CHII is paying a Health Connector premium on client s behalf, then the client must take the full amount of PTCs they are eligible for in advance (applied monthly). If APTCs are used to lower the cost of a client s monthly health insurance premium, the client is required to reconcile this amount when filing a federal income tax return. 13

14 If you get APTC do you agree to file a federal income tax return? 14

15 Reconciliation Process Reconciliation is done by comparing two figures: 1. The amount of APTCs applied during the year (paid by the IRS directly to the health plan). 2. The PTC that you actually qualify for based on your household s actual income for that year. If there s a difference between the two figures, this will affect the amount of your refund or taxes owed. 15

16 Reconciliation Process If your actual income for 2015 was more than your estimated income, you may have to pay back some or all of the money that lowered your monthly insurance premium payments (APTCs). If your actual income for 2015 was less than your estimated income, you may receive the difference as an extra credit on your federal tax return. 16

17 Reconciliation Process: Important Considerations If you received APTCs (including ConnectorCare) in 2015 and you do not file a 2015 tax return and reconcile the APTCs you received: you will not be eligible for APTCs or ConnectorCare in AND- the IRS may contact you to pay back some or all of the 2015 APTCs. 17

18 PTC-Related Tax Forms and Reconciliation 18

19 Tax Forms and the Reconciliation Process 19 19

20 Tax Forms and the Reconciliation Process IRS Form Purpose Origin 1095-A Health Coverage through the MA Health Connector 8962 Premium Tax Credit 1040 US Individual Income Tax Return Verifies type and period of coverage for 2015, premiums paid, and APTCs Reconciles projected APTC with actual PTC due to the client Individual/family tax filing document IRS Form sent by the MA Health Connector IRS Form that you will need for filing federal taxes IRS Form 20 20

21 Tax Forms and the Reconciliation Process Step 1: Form 1095-A From the MA Health Connector, includes: A. monthly premium amount; B. the monthly premium amount of the second lowest cost silver plan (benchmark federal government uses to determine how much a person will receive in APTCs) C. the amount you received in APTCs every month. 21

22 Tax Forms and the Reconciliation Process Step 2: Form 8962 When you file your federal taxes, use the information from the 1095-A to fill out IRS Form This compares the amount received in APTCs to the amount that you were entitled to based on your actual federal income reported for

23 Tax Forms and the Reconciliation Process Step 2 continued: Form 8962 Finally, record the amount owed as a refund (on line 26) or the excess payment owed back to the IRS (line 29). 23

24 Tax Forms and the Reconciliation Process Step 3: Putting It Together on the Federal Tax Return Form 1040 includes specific boxes to document either: money owed to you as a refund; or money you owe to the IRS because of an overpayment, which needs to be included with your tax return. Line 46 on IRS Form 1040 indicates excess PTCs one owes to the IRS. 24

25 Tax Forms and the Reconciliation Process Tax liabilities (money you may owe) and refunds (money owed to you) are assessed in total. This means that if you owe the IRS because of a premium tax credit overpayment, the IRS will take the payment directly from other income tax refunds you are due (if any). On the other hand, if you are owed a refund from the IRS because of a premium tax credit underpayment, the IRS will first look to whether you owe other income taxes for that year and apply the refund to those liabilities first

26 HDAP/CHII Requirements for PTCs 26

27 CHII Requirements for PTCs If CHII is paying a Health Connector premium for a client, then the client must take the full amount of PTCs in advance (applied monthly), if eligible. CHII enrollees with Health Connector Plans must submit copies of all 2015 federal tax forms to HDAP/CHII. 27

28 CHII Requirements for PTCs If a client owes a payment to the IRS because they received too much in APTCs in 2015, HDAP/CHII may be able to pay this amount to the IRS on the client s behalf. If client gets a refund from the IRS related to APTCs and HDAP/CHII paid for their health insurance premiums, the net Premium Tax Credit portion of their 2015 federal income tax refund must be paid by the client to HDAP/CHII. 28

29 HDAP/CHII Notices to Clients HDAP/CHII has sent a series of notices to clients who, at some point during 2015: o were enrolled in HDAP/CHII; o were enrolled in a health insurance plan through the MA Health Connector; and o received help paying for their health insurance premiums through HDAP s Comprehensive Health Insurance Initiative (CHII) program. 29

30 HDAP/CHII Notices to Clients 1 st notice was sent first week in January Defined PTCs Explained need to file taxes Outlined specific tax forms Explained basics of PTC reconciliation Requested a copy of completed tax return and all tax forms to HDAP/CHII Provided list of free tax help resources (flier) 2 nd notice was sent first week in March Requested a copy of completed tax return and all tax forms to HDAP/CHII Explained consequences for not filing taxes Explained the APTC reconciliation process Agreement Regarding Reconciliation of PTCs 30

31 1 st Client Notice re: PTCs 31

32 2 nd Client Notice re: PTCs 32

33 2 nd Client Notice re: PTCs 33

34 2 nd Client Notice re: PTCs Agreement Regarding Reconciliation of Premium Tax Credits Clients receiving premium assistance from CHII for MA Health Connector plans (including ConnectorCare) must sign, date, and return this agreement as soon as possible. 34

35 2 nd Client Notice re: PTCs Agreement Regarding Reconciliation of Premium Tax Credits REQUIRED: Client must agree to make payment to CRI for any refund from the IRS related to APTCs. Payment of this portion of the refund may be made in the form of check or money order and is expected within 10 days of receipt of the refund. Failure to return the APTC portion of the tax refund may negatively impact future enrollment in to CHII premium assistance

36 2 nd Client Notice re: PTCs Agreement Regarding Reconciliation of Premium Tax Credits OPTIONAL: Provides authorization for HDAP/CHII to make payment to the IRS on a client s behalf. This payment would cover money owed to the IRS as a result of APTC overpayment (due to underestimation of income at time of application) 36

37 HRSA/HAB Policy on Tax Credit Reconciliation (PCN 14-01) Ryan White HIV/AIDS Program grantees and subgrantees that use program funds to purchase health insurance in the Marketplace [MA Health Connector] must establish appropriate mechanisms to vigorously pursue any excess premium tax credit a client receives from the IRS. 37

38 Reconciliation Process: Example Rosa estimated on her MA Health Connector application that her annual income for 2015 would be $30,000. She was approved for $175 a month in APTC. She enrolled in a plan through the MA Health Connector and CHII paid her monthly premiums. At tax time, Rosa realizes that she actually earned $28,000 and should have been eligible for $200 a month in APTC. Therefore, when she reconciles her APTCs, she will receive $300 from the IRS due to an underpayment. ($ = $25 x 12months = $300) 38

39 Reconciliation Process: Example When Rosa submits a copy of her 2015 federal income tax return to HDAP/CHII in April, she will also need to send a check or money order to HDAP/CHII for $300 (as a result of her PTC-related refund). 39

40 40

41 Reconciliation Process: Key Takeaways If a client s income ends up being higher than initially estimated: They may owe the IRS related to APTCs. HDAP/CHII may be able to pay this amount to the IRS on the client s behalf. If a client s income ends up being lower than initially estimated: They may be due a refund from the IRS related to APTCs. If HDAP/CHII paid for their health insurance premiums, the net Premium Tax Credit portion of their 2015 federal income tax refund must be paid to HDAP/CHII. 41

42 Health Connector Tips Report life changes to the MA Health Connector as they occur. It may change the amount of APTC a client receives and prevent an overpayment (or underpayment). Life changes include, among others,: o Changes in income; o Changes in health coverage, such as becoming newly eligible for Medicare; o Changes to one s household, like birth or adoption, becoming pregnant, and marriage or divorce. 42

43 This webinar has been recorded and will be available as a webcast along with the slide deck on CRI s website: 43

44 Questions? 44

45 Lauren Dunn HDAP BRIDGE Team Coordinator How to Contact Us George Hastie, MPH HDAP BRIDGE Team Project Manager Massachusetts HIV Drug Assistance Program, c/o CRI of New England 38 Chauncy Street, Suite 500 Boston, MA (toll-free) (fax) 45