ACA & the Tax Season 2014 Assets Learning Conference Tara Straw September 17, 2014
Reporting Coverage on the Form 1040 2 There is a requirement to have health insurance coverage starting Jan. 1, 2014. Step 1 Did everyone on the tax return have coverage all year? YES NO See Step 2. Determine whether any person on the return can be exempt from penalty. (Form 8965) Step 2 Exemptions? From the IRS? From the Marketplace? Step 3 If no coverage and no exemption, calculate Individual Responsibility Payment using tax worksheet.
Did everyone on the tax return have coverage all year? 3 Tax volunteer will complete a section of the intake sheet during the taxpayer interview: Did you, your spouse and everyone claimed as a dependent have health coverage in 2014? Yes, coverage all year Coverage part of the year No coverage at all I qualify for an exemption To count, the coverage must be minimum essential coverage (MEC) The vast majority of coverage will qualify as MEC or will earn the taxpayer relief from the 2014 individual responsibility payment.
EXEMPTIONS
Exemption Granted by the Marketplace 5 Form 8965 Part I Exemptions Granted by the Marketplace Types of Exemption Hardship, including: Life circumstances Insurance is unaffordable (based on projected income) State failure to expand Medicaid Eligible for Indian Health services Plan cancellation Member of certain religious sects Incarceration Membership in an Indian tribe People who were granted an exemption will receive an ECN (exemption certificate number), a 6 digit letter/number code.
Exemptions Granted by the IRS Form 8965 Part II Coverage Exemptions for Your Household Type of Exemption Income below filing threshold
Exemptions Granted by the IRS Form 8965 Part III Coverage Exemptions for Individuals on Your Return Types of Exemption Insurance is unaffordable (based on actual income) Certain noncitizens Short coverage gap (< 3 months) Months prior to effective date of MEC that is effective on or before May 1, 2014 Incarceration Membership in an Indian tribe People who are eligible for exemption from the IRS will enter an exemption type (A-F).
INDIVIDUAL RESPONSIBILITY PAYMENT
Individual Responsibility Payment Calculate Individual Responsibility Payment for a taxpayer, spouse or dependent who is uninsured, has income above the filing threshold and is not eligible for an exemption. Year 2014 NO PENALTY if income is less than filing threshold Individual Responsibility Payment 2016 In 2014: Single $10,150 $695 per adult, $347.50 per child (up to $2,085) MFJ $20,300 If income is above filing threshold, the penalty is the greater of... $95 per adult, $47.50 per child (up to $285) 2015 $325 per adult, $162.50 per child (up to $975) or or or 1% of income above the tax filing threshold* 2% of income above the tax filing threshold* 2.5% of income above the tax filing threshold* 2017 Values are increased by a cost of living adjustment The penalty calculation is for a person who is uninsured all year. If a person is uninsured for only some months, prorate the payment. *Capped at the national average premium of a bronze level plan purchased through a Marketplace.
Example #1: John (Single) 10 Income: $17,000 (148% FPL) Tax Filing Threshold: $10,150 Filing Status: Single Months Uninsured: 12 Adults: 1 Children: 0 1. $17,000 - $10,150 = $6,850 x 1% $68.50 2. $95 x 1 adult = $95.00 Report on F1040, Line 61 95
Tax Penalty Calculating the Payment Single 11 $600 $500 1% of income $400 $19,650 $300 $10,150 $200 $100 no penalty no penalty $95 1% of income (above threshold) $95/adult $0 Household Income
Calculating the Payment Partial Year Coverage 12 The tax penalty is prorated for the number of months without coverage during the tax filing year Gets a job with employer coverage Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Uninsured for 7 months Penalty = 7/12 of annual penalty calculation
PREMIUM TAX CREDIT
Premium Tax Credit (PTC) Eligibility Filing status/dependency Cannot be claimed by a dependent Cannot be married filing separately Exceptions for domestic violence and abandoned spouses Enrolled in a plan through a marketplace Marketplace prohibits enrollment of people who are: Incarcerated or Undocumented immigrants However, family members of those individuals may enroll Household income between 100% and 400% of the federal poverty level (FPL) Lawfully residing immigrants who are ineligible for Medicaid are eligible even if income is below 100% FPL Not eligible for other public or employer-sponsored coverage
Premium Tax Credits Determine PTC eligibility Determine PTC amount Reconcile that amount with any PTC taken in advance
Premium Tax Credit Limitation on Repayment If a taxpayer claimed too much PTC in advance, some or all of the overpayment must be paid back. Household Income Limitation for Single, MFS, HoH taxpayers Limitation for all others Less than 200% FPL $300 $600 200% but less than 300% FPL $750 $1,500 300% but less than 400% FPL $1,250 $2,500 *If income is greater than 400% FPL, all PTC must be repaid.
Coming Soon IRS Materials IRS forms and instructions VITA training and testing CBPP Materials VITA Basic & Advanced training slides Training webinars Tools to facilitate discussions with taxpayers Advice and answers during the tax season through weekly emails
Contact Information Tara Straw Center on Budget and Policy Priorities tstraw@cbpp.org For health reform basics, our Refresher webinar series starts October 9. A VITA-specific webinar series begins in mid-october. Email tstraw@cbpp.org to be notified of future VITA webinars & materials. For more information and resources, please visit: www.healthreformbeyondthebasics.org This is a project of the Center on Budget and Policy Priorities www.cbpp.org