ACA & the Tax Season

2014 Assets Learning Conference

Tara Straw

September 17, 2014

Reporting Coverage on the Form 1040

There is a requirement to have health insurance coverage starting Jan. 1, 2014.

2

See Step 2. Determine whether any person on the return

can be exempt from penalty. (Form 8965)

Exemptions?

From the IRS?

From the Marketplace?

Step

2

If no coverage and no exemption, calculate Individual

Responsibility Payment using tax worksheet. Step

3

Step

1 Did everyone on the tax return have coverage all year?

YES

NO

Did everyone on the tax return have coverage all year?

• Tax volunteer will complete a section of the intake sheet during the

taxpayer interview:

• 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.

3

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

EXEMPTIONS

Exemption Granted by the Marketplace

People who were granted an exemption will

receive an ECN (exemption certificate

number), a 6 digit letter/number code.

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

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

Individual Responsibility Payment†

Year If income is above filing threshold, the penalty is the greater of...

2014 NO PENALTY if income is less

than filing threshold

In 2014:

Single $10,150 MFJ $20,300

$95 per adult, $47.50 per child (up to $285)

or 1% of income above the tax filing threshold*

2015 $325 per adult, $162.50 per child (up to $975)

or 2% of income above the tax filing threshold*

2016 $695 per adult, $347.50 per child (up to $2,085)

or 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.

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.

1. $17,000 - $10,150 =

2. $95 x 1 adult =

Example #1: John (Single)

Income: $17,000 (148% FPL)

Filing Status: Single

Adults: 1

Children: 0

$6,850

x 1%

$68.50

$95.00

Report on F1040, Line

61

Tax Filing Threshold: $10,150

Months Uninsured: 12

10

95

$0

$100

$200

$300

$400

$500

$600

Calculating the Payment

Single

$10,150

$19,650

$95/adult

1% of income

no penalty

1% of income (above threshold) $95

no penalty

Household Income

Tax

Pe

nal

ty

11

The tax penalty is prorated for the number of months

without coverage during the tax filing year

Calculating the Payment

Partial Year Coverage

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Gets a job with employer coverage

Uninsured for 7 months

Penalty = 7/12 of annual penalty calculation

12

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

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.

If a taxpayer claimed too much PTC in advance, some or all of the overpayment must be paid back.

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 more information and resources, please visit:

www.healthreformbeyondthebasics.org

This is a project of the Center on Budget and Policy Priorities www.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.