Questions (and Answers) to Questions Answered During Webinar #7 on Exemptions from the Tax Penalty for AI/ANs (Webinar Held on 10/22/14)

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1 Questions (and Answers) to Questions Answered During Webinar #7 on Exemptions from the Tax Penalty for AI/ANs (Webinar Held on 10/22/14) Disclaimer: The following Q&A is for informational purposes only and is not intended as tax or legal advice. Please talk with your attorney or tax professional for specific questions related to your Tribe or Tribal entity as an employer. December 9, 2014 Question (answered during Webinar) Do AI/ANs ages 65 and older who have not enrolled in Medicare and have no other health coverage have to apply for an Indian-specific exemption to avoid the tax penalty? If individuals claim on their tax return a dependent who does not have health coverage and who dies during the year, do they need to apply for an exemption for the deceased dependent? Answer Yes. The requirement to have health insurance coverage or an exemption applies to persons of all ages. Yes, there is a hardship exemption for the death of an immediate family member, but this application must be filed with the Marketplace. An alternative is for the taxpayer to claim an exemption for the dependent on the taxpayer s annual federal income tax filings if the dependent is eligible for one of the Indian-specific exemptions. Page 1 of 5 December 9, 2014

2 Are Webinar #7 ( Updated and Simplified!!! Securing an Exemption from the Affordable Care Act s Tax Penalty for Not Maintaining Minimum Essential Coverage ) and the related materials available for redistribution? How does IRS know whether individuals have health coverage? What happens if individuals receive an exception certificate number (ECN) with a misspelled name from the Marketplace? Do AI/AN parents need to apply for exemptions for newborns who do not have health coverage? Will the questions and answers from this Webinar appear on the TSGAC Web site? Yes. Information from this Webinar and the related materials are available at NEWSGCE/index.html Individuals will indicate on their federal income tax forms whether they have health insurance coverage (and for which months of the year). If audited, an individual would need to demonstrate they had health insurance coverage. In addition, certain employers and insurers are required to submit reports to the Federal government on health coverage offered to employees. For individuals who receive an ECN with a misspelled name from the Marketplace or who experience other problems with an exemption application filed through the Marketplace, draft IRS instructions currently direct the individuals to contact the Call Center to resolve the issue. The Call Center typically requests that applicants send a letter to the exemption application processing center (at Health Insurance Marketplace Exemption Processing465 Industrial Blvd.London, KY 40741). As individuals work to resolve these problems with the Marketplace, they can separately claim an exemption on their tax returns without using an ECN (assuming they are eligible for one of the Indian-specific exemptions or another exemption that may be claimed through the federal tax-filing process). The individual does not have to wait for the Marketplace to issue a corrected ECN. Yes. Parents need to obtain health coverage or an exemption for newborns to avoid the tax penalty. If seeking an Indian-specific exemption for children born in 2015, parents may wait to claim the exemption on their 2015 federal taxes, which are generally prepared and filed between January 1 and April 15 of the following year (e.g., 2016). Yes. All questions asked during the Webinar and corresponding answers are posted on the Self-Governance Communication and Education website at: tribalselfgov.org. Page 2 of 5 December 9, 2014

3 Do non-ai/an pregnant women who obtain Medicaid coverage because of their pregnancy need to obtain an exemption to avoid the tax penalty? What should individuals do if they lose their exemption certificate number (ECN)? Do non-ai/an spouses of members of federally recognized Tribes qualify for an Indian-specific exemption? Would a member of a federally recognized Tribe benefit more by applying for an exemption through the Marketplace than through the tax filing process? Will individuals experience delays in their taxes if they apply for an Indian-specific exemption at the time of filing taxes? Generally, non-ai/an pregnant woman who obtain Medicaid coverage because of their pregnancy would remain exempt from the tax penalty through the period of their coverage, as this coverage satisfies the minimum essential coverage (MEC) requirement under the shared responsibility provision. These women, however, would need to obtain health insurance or an exemption when their Medicaid coverage ends. If choosing not to purchase health insurance coverage, non-ai/an pregnant women carrying the child of an IHS-eligible individual can apply for a temporary Indian-specific exemption that covers their pregnancy and a post-partum period during which the mother is eligible for IHS services. Individuals can obtain a new document with their ECN by mailing a request to the address where they initially sent their exemption application. (Health Insurance Marketplace Exemption Processing465 Industrial Blvd. London, KY 40741) Possibly. If a Tribe has passed a resolution that extends eligibility for health care services to the spouses of its members, they would qualify for an Indianspecific hardship exemption. An exemption provided to those applying for and/or claiming an exemption under either one of the two Indian-specific exemptions have the same effect. Each is permanent and can be applied retroactively. No. If individuals apply for either of the Indian-specific exemptions through the federal tax filing process, they will not experience delays in their taxes. Prior to the tax filing process being approved, delays could have occurred because individuals who sought the IHS-eligible exemption had to apply through the Marketplace and may have had to wait to file their taxes until they obtained the exemption certificate number. Individuals now can claim either of the Indian-specific exemptions through the federal tax filing process without having to file an application though a Marketplace. Page 3 of 5 December 9, 2014

4 Do AI/AN parents who do not qualify for Medicaid but who have children enrolled in the program need to apply for an Indian-specific exemption for themselves or their children? Will taxpayers receive an exemption certificate number (ECN) if they apply for an exemption electronically through the Marketplace? Is IRS Form 8965 available online? If individuals have health insurance and an exemption certificate number (ECN), do they need to claim an Indian-specific exemption on their tax return? Will individuals claiming an Indian-specific exemption on their tax return have to complete Part III of IRS Form 8965 annually? What about individuals who have obtained an exemption through the Marketplace? Do individuals who have not applied for an Indianspecific exemption through the Marketplace, and therefore do not have an exemption certificate number (ECN), have to complete Part I of IRS Form 8965? Do individuals who qualify for an Indian-specific exemption need to complete questions 7a and 7b on IRS Form 8965? Do non-ai/ans who have inherited Alaska Native Claims Settlement Act (ANCSA) shares qualify for an Indianspecific exemption? AI/AN parents do not need to apply for an Indian-specific exemption for children who have Medicaid coverage, as this coverage satisfies the minimum essential coverage (MEC) requirement under the shared responsibility provision. Parents, however, could claim an exemption for themselves if they do not have other health coverage. Individuals currently cannot apply for an exemption electronically through the Marketplace. However, individuals can visit the HealthCare.gov Web site to print the paper application. Once the submitted and processed, applicants will receive a form indicating their ECN. Form 8965 is available at Draft instructions for this form are available at No. Individuals who are not subject to the tax penalty because they have health insurance do not need to complete IRS Form 8965 to claim an Indianspecific exemption on their tax return. All individuals who wish to claim an (Indian-specific) exemption will need to do so annually through the tax filing process and will have to complete Part I or Part III of Form 8965, depending upon whether they already have an ECN or not. No. Individuals who solely claim an Indian-specific exemption on their tax return would complete only Part III of Form No. On Form 8965, questions 7a and 7b (in Part II) relate to income-based exemptions. Individuals who qualify for Indian-specific exemptions do not need to answer these questions, although they might also qualify for incomebased exemptions. Non-AI/ANs who have inherited ANCSA shares should refer this question to their contacts in Alaska, including the Alaska Native Health Board or the Alaska Native Tribal Health Consortium. Page 4 of 5 December 9, 2014

5 Will IRS conduct more audits to check the validity of exemptions claimed through the tax filing process? Should individuals not required to file taxes who qualify for an Indian-specific exemption apply for an exemption through the Marketplace? Does Medicaid coverage obtained through a spenddown satisfy the minimum essential coverage (MEC) requirement that individuals must meet to avoid the tax penalty under the shared responsibility provision? Do individuals need to submit documentation to prove their eligibility for an Indian-specific exemption if they apply through the tax filing process? If AI/ANs live outside the United States, do they need to apply for an Indian-specific exemption to avoid the tax penalty? In a response from the IRS on this question, the IRS stated that more frequent audits of an individual s taxes would not occur as a result of claiming an exemption through the tax filing process (versus through a Marketplace). A request was made for the IRS to issue a FAQ on this topic. Individuals who are not otherwise required to file taxes would not need to file taxes solely for the purpose of claiming an exemption. Persons not required to file taxes receive an automatic exemption from the tax penalty. Yes. If individuals have obtained comprehensive Medicaid coverage (through any means), that would satisfy the MEC requirement. No. Individuals do not submit documentation if they file for either of the Indian-specific exemptions through the tax filing process. Individuals would need to produce their documentation only in the event that IRS requests them to do so (so they should have it on hand or readily available). Regardless of whether they live inside or outside the United States, individuals who are required to file taxes and who qualify for an Indian-specific exception are advised to complete IRS Form 8965 if they do not have health coverage that meets the requirements under the shared responsibility provision. Page 5 of 5 December 9, 2014