1 ACA Penalties Individual Shared Responsibility Provision Kristy Maitre Tax Specialist Center for Agricultural Law and Taxation October 9, 2014
2 Enrollment period You can generally buy Marketplace health insurance only during the annual Open Enrollment period. Upcoming dates to know: March 31, 2014: 2014 Open Enrollment ended November 15, 2014: 2015 Open Enrollment starts December 31, 2014: Coverage ends for 2014 Marketplace plans January 1, 2015: 2015 coverage can begin February 15, 2015: 2015 Open Enrollment ends
3 Enrollment The Open Enrollment period for 2015 coverage is November 15, 2014 to February 15, If you haven t enrolled in coverage by then, you generally can t buy Marketplace health coverage for 2015 until the next Open Enrollment period for coverage the following year. If you re enrolled in a 2014 Marketplace plan, your benefit year ends December 31, To continue health coverage in 2015, you can renew your current health plan or choose a new health plan through the Marketplace during the 2015 Open Enrollment period. If you don t have health coverage during 2015, you may have to pay a fee. The fee in 2015 is higher than it was in % of your income or $325 per adult/$ per child, whichever is more.
4 Enrollment and coverage start dates During Open Enrollment, if you enroll: Between the 1st and 15th days of the month, your coverage starts the first day of the next month. Between the 16th and the last day of the month, your coverage starts the first day of the second following month. So if you enroll on March 16, your coverage starts on May 1. You may buy Marketplace insurance outside Open Enrollment only if you qualify for a Special Enrollment Period due to a qualifying life event such as marriage, birth or adoption of a child, or loss of other health coverage. Learn more about how you qualify for a Special Enrollment Period. You can enroll in Medicaid or the Children s Health Insurance Program (CHIP) any time. There is no limited enrollment period for these programs. You can apply any time. If you re qualified, you can enroll immediately. If you own or operate a small business, you can start offering coverage to your employees at any time.
5 Individual Shared Responsibility Payment (ISRP) Starting in 2014 EVERYONE must either: Have Minimal Essential Coverage Or Have a Coverage Exemption Or Make a Shared Responsibility Payment
6 % Penalty Worksheet Form 8965
7 Flat Amount Worksheet
8 What is Minimal Essential Coverage? Employer-sponsored plans, including COBRA and retiree coverage Coverage purchased in individual market or the New Marketplace Coverage under specific government sponsored programs
9 Minimum Essential Coverage Employer-sponsored coverage, including self-insured plans, COBRA coverage and retiree coverage Coverage purchased in the individual market, including a qualified health plan offered by the Health Insurance Marketplace Medicare Part A coverage and Medicare Advantage plans Most Medicaid coverage Children's Health Insurance Program (CHIP) coverage Certain types of veterans health coverage administered by the Veterans Administration Most types of TRICARE coverage under chapter 55 of title 10 of the United States Code
10 Minimum Essential Coverage Coverage provided to Peace Corps volunteers Coverage under the Non-appropriated Fund Health Benefit Program Refugee Medical Assistance supported by the Administration for Children and Families Self-funded health coverage offered to students by universities for plan or policy years that begin on or before Dec. 31, 2014 for later plan or policy years, sponsors of these programs may apply to HHS to be recognized as minimum essential coverage State high risk pools for plan or policy years that begin on or before Dec. 31, 2014 for later plan or policy years, sponsors of these program may apply to HHS to be recognized as minimum essential coverage Other coverage recognized by the Secretary of HHS as minimum essential coverage
11 Minimum Essential Coverage Does Not Include Coverage consisting solely of excepted benefits, such as: Stand-alone vision care or dental care Workers' compensation Accident or disability policies Medicaid providing only family planning services Medicaid providing only tuberculosis-related services Medicaid providing only coverage limited to treatment of emergency medical conditions Pregnancy-related Medicaid coverage
12 Minimum Essential Coverage Does Not Include Medicaid coverage for the medically needy Section 1115 Medicaid demonstration projects Space available TRICARE coverage provided under chapter 55 of title 10 of the United States Code for individuals who are not eligible for TRICARE coverage for health care services from private sector providers Line of duty TRICARE coverage provided under chapter 55 of title 10 of the United States Code
13 Exemption Several issues associated with the Exemption Will be covered in the October 14, 2014 class
14 When Would an Individual Need to Make a Payment? A payment may be due for an individual and dependents if they do not have: MEC for every month of the year An exemption for the months without MEC This information is reported on the federal income tax return
15 Individual Shared Responsibility Lesser of: Payment The sum of monthly penalty amounts for each individual in the shared responsibility family or The sum of the monthly average BRONZE plan premiums for the share responsibility family
16 How is the Payment Computed?
17 Calculating Shared Responsibility Penalty The penalty is the greater of: a flat dollar amount; or a specific percentage of income. For 2014, the penalty amount will be the greater of $95 per adult and $47.50 per child under age 18 (maximum of $285 per family) OR 1% of income over the tax-filing threshold (currently, $20,300 for a 2014 joint return).
18 Sample Calculation Single
19 National Average for Bronze Level Coverage Penalty amount is CAPPED at the cost of the national average premium for the bronze level plan available through the Marketplace in Monthly Nation Bronze Level Plan Premium for 2014 = $204 per individual Maximum Monthly National Average Bronze Plan Premium for a family of Five or more members = $1,020 for 2014.
20 Prorated for each Month without Coverage The 2014 shared responsibility penalties are payable when individuals file their 2014 federal income tax returns in 2015 If the penalty applies for less than a full calendar year, it is prorated to 1/12 of the annual penalty for each month without coverage.
21 Sample Calculation Family Facts: Married w/two children under 18 No minimum essential coverage for any month Does not qualify for an exemption Household income = $70,000/filing threshold = $20,300 Payment calculation Percentage of income: $70,000 20,300 = $49,700, 1% x $49,700 = $497 Flat dollar: 285 = ((95 x 2) + ($95/2 x 2)) 2014 ISRP = $497 ($497 is > $285) < the national average for bronze level coverage
22 What Information Documents Will be Issued in 2014? Form 1095-A Marketplace Purchase Starting for the 2014 tax year Received By January 31, 2015
23 Form 1095-A Issued by the Health Insurance Marketplace Sent by January 31 of each year Shows: Documentation of coverage by month Premiums AND Advanced Payments of the Premium Tax Credit
24 Form 8962 Applies Only to Form 1095-A Part 1 Annual and Monthly Contribution Part 2 PTC Claim and Reconciliation Part 3 Repayments of Excess of Advanced Payment Part 4 Shared Policy Allocations Part 5 Alternative Calculation for Marriage
25 2015 IRS announced a DELAY in the reporting requirement for the following Forms: Form 1095-B Health Insurance Coverage Form 1095-C, Employer Provided Health Insurance Coverage At that time the Regulations are still in proposed form, entities must wait for final regulation (issued later) review following
26 Form W-2 Box 12 of Form W-12 generally will be used in 2014 to report health insurance BUT Only reports a gross amount Does not report who was covered Does not report months covered Does not report when insurance was offered Does not provide adequate information to determine the penalties
27 Information Required on Form 1095-B Name, address and EIN for the person required to file the return Name, address and TIN, or date of birth of the responsible individual Name and TIN or date of birth for each individual covered under the policy or program For each covered individual, the months for which the individual was enrolled in coverage and entitled to receive benefits In addition, name, address and EIN of the employer sponsored plan Whether the coverage is a qualified health plan enrolled through the Small Business Health Options Program (SHOP) and the SHOP s unique identifier Finally, any other information specified in the forms, instructions or published guidance
28 Information Required on Form 1095-C The employer s name, address, EIN; Name and phone number of the employer s contact person; Identification of the calendar year for which the information is reported; Certification as to whether the employer offered to its full-time employees (and their dependents) the opportunity to enroll in minimum essential coverage under its group health plan by calendar month; The months during the calendar year for which coverage under the plan was available; Each full-time employee's share of the lowest cost monthly premium (selfonly) for coverage providing minimum value offered to that full-time employee under the employer-sponsored plan, by calendar month; The number of full-time employees for each month during the calendar year; and The name, address, and taxpayer identification number of each full-time employee during the calendar year and the months, if any, during which the employee was covered under the plan.
29 Highlights of the Final Regulations Here are some of the highlights of the final regulations: Form 1094 Transmittal and Form 1095 information returns will be used to report health care information and are subject to the 250 e- file threshold requirements Reporting will be required for all individuals unless specifically excepted No reporting required for onsite medical clinics or Medicare Part B considered supplements to MEC Wellness or self-insured employee provided retiree benefits - considered supplemental to MEC Controlled groups are allowed flexibility in information reporting to allow combined reporting, rather than each entity reporting For Statutory Employees the plan sponsor is responsible for the reporting
30 Highlights of the Final Regulations Insurance purchased through the Market Place, the exchange ( Market Place) must report this information SHOP reporting, an area where small business can purchase an employer plan through the exchange the insurers are required to report, rather than the Market Place Government Employees reporting hinges on the undefined agency or instrumentality term. Until further guidance, use a reasonable cause standard to make that determination of whether to file The Medicare Advantage Program issuers are not considered MEC therefore they are not required to report this coverage
31 Highlights of the Final Regulations Taxpayer Identification Number s (TIN s) must be provided for ALL individuals covered. If the TIN is not available a date of birth is an alternate way to report but only after reasonable attempts to obtain the TIN (Due Diligence). This enables IRS to match and avoid notices to verify coverage or erroneous issue of penalties. The final regulations clarify that reporting entities are permitted to use Truncated TIN s on 6055 statements For Combined Reporting, coverage must be reported using the new 1095 information returns and transmittals rather than the Form W-2
32 Highlights of the Final Regulations Reporting is required for a deceased participant Forms 1095 can be provided at the same time as the Form W-2 and in the same envelope without restrictions. The required forms must be mailed to the last known address or the address the reporting entity uses for requesting information about coverage The IRS TIN matching program is not permitted to verify TIN s for the 6055 reporting
33 When Does Your Client Pay the Penalty? Payment, if due, is reported and paid with the tax return IRS cannot place a lien or levy to collect the penalty but Can take the penalty due from refund of current year return or future returns
34 Summary Everyone Must: Have Minimum Essential Coverage or An Exemption July 15, 2014 class or Make a shared responsibility payment MEC is reported on the Tax return Exemptions are reported on Form 8965 filed with the tax return The Shared Responsibility Payment is reported on the tax return
35 Form 8965 Form 8965 is the Exemption Certificate that must be attached to the tax return, if an exemption applies Part 1 Marketplace granted exemption Part 2 Exemption for the household Part 3 Exemption for individuals Discussion of Affordability and Exemption October 14, 2014
36 UP Coming Seminars 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
37 2014 Farm Tax Schools October 28, 2014 to December 16, Locations in Iowa To register: https://www.calt.iastate.edu/2014- 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.
38 2014 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
39 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
40 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)
41 CALT Website
42 Tour of the CALT Website
43 CALT Staff Roger A. McEowen CALT Director and is a Leonard Dolezal Professor in Agricultural Law Phone: (515) Fax: (515) Kristine A. Tidgren Staff Attorney Phone: (515) Fax: (515)
44 CALT Staff Kristy S. Maitre Tax Specialist Phone: (515) Fax: (515) Tiffany Kayser Program Administrator Phone: (515) Fax: (515)
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