Understanding The Affordable Care Act Ed... · Premium Tax Credits • Can help make purchasing...

Understanding The Affordable Care Act

2016 Tax Education

Affordable Care Act Overview

2015 Tax Year Considerations

Premium Tax Credit

Individual Shared Responsibility Payment

Small Business Health Care Tax Credit

Household Income

IRS Forms

Supplemental Material

In this course, we will cover the following topics:Overview

2©2016

Affordable Care Act Tax Provisions

3

The Affordable Care Act (ACA) requires that most individuals have health insurance coverage and uses the tax system to enforce that requirement.

The health insurance coverage must meet certain standards, called minimum essential coverage (MEC)• Most private and public coverage, including employer‐sponsored coverage,

individual coverage, Medicaid and Medicare, is considered MEC

Potential penalty for taxpayers who do not maintain Minimum Essential Coverage for three months or more and do not qualify for an exemption. Individuals who do not have coverage must either• Be able to claim an exemption from the coverage requirement, or• Incur a penalty that is collected when they file their taxes

©2016


4©2016

The ACA also created a new federal tax credit to help people purchase coverage in health insurance Marketplaces (also known as exchanges).• The premium tax credit can be provided on a monthly basis to pay a

share of the monthly health insurance premiums charged to individuals and families, or

• the credit can be claimed as a lump sum on the tax return.

In either case, a person who wants to claim the credit must file a tax return for the year in which the credit is received


5

Health insurance coverage and financial assistance options with the Affordable Care Act

Employers may send letters with additional information to Taxpayers about the Marketplace and health insurance through the employer• For more information about coverage options through the Marketplace,

visit HealthCare.gov• Taxpayers with questions about coverage offered by their employers

should contact their employer

©2016

2015 Tax Year Provisions

6

Minimum Essential Coverage

Premium Tax Credits


Small Business Health Care Tax Credit For 2015

Household Income

IRS Forms

©2016

Minimum Essential Coverage• Provisions requiring individuals to maintain Minimum Essential

Coverage, and to provide for a tax credit to offset an individual’s health care expenses

• Penalty for taxpayers who do not maintain Minimum Essential Coverage for three months or more and do not qualify for an exemption

Considerations for 2015Affordable Care Act Tax Provisions

7©2016


8©2016

QUALIFIES AS MEC

Employer sponsored coverage− Employee coverage− COBRA − Retiree coverage

Individual health insurance − Purchased from a health insurance company− Purchased through the Marketplace− Provided through a student health plan

Government-sponsored plans− Medicare− Most Medicaid− CHIP− Most TRICARE− Most VA− State high‐risk insurance pools− Peace Corps− Refugee Medical Assistance

LIMITED BENEFITS THAT ARE NOT MEC

• Single-benefit coverage (e.g., dental-only or vision-only plans)

• Accident or disability insurance• Workers’ compensation• AmeriCorps/AfterCorps coverage• Medicaid coverage that does not provide

comprehensive benefits

Some people are eligible for a Marketplace exemption

Remember! Coverage for one day of the month is enough to fulfill the coverage requirement for the entire month


9©2016

Who does the coverage requirement apply to?

The taxpayer, spouse and anyone who is or could be claimed on the tax return as a dependent

How does tax preparer know if coverage is MEC?

Most coverage is MEC and reported on Form 1095 series (A,B,C)

Consult Form 8965 Instructions for detailed table


10©2016

How does tax preparer verify that a person was covered?

Taxpayers may have evidence of coverage (e.g. insurance card or Form 1095)• Tax preparers are not required to see evidence of coverage to verify

that each individual was insured. The interview is often sufficient

Taxpayers are responsible for accuracy of information reported on the return • (e.g. return signed under penalty of perjury)

Premium Tax Credits• Can help make purchasing health insurance more affordable through

the marketplace

Claiming Premium Tax Credits• To claim the premium tax credit, a taxpayer must get insurance through

the Marketplace• Individuals can elect to have some or all of the estimated Premium Tax

Credit paid in advance to their insurance company or wait to receive the credit when they file their 2015 tax return

• If an individual chooses to have advance payments sent to their insurer, they will have to reconcile the payments on their 2015 tax return


11©2016

Individual Shared Responsibility Payment• Taxpayers and their families must either have health care coverage, an

exemption from coverage, or make a payment when they file their 2015 tax return

• Taxpayers that have qualifying health care coverage will simply need to maintain it throughout 2015

Filing Requirement• Taxpayers MUST file a tax return for 2015 in order to qualify for lower

costs on monthly premiums for health insurance

See details at https://www.healthcare.gov/


12©2016

The maximum credit increases to 50 percent of premiums paid for small business employers and 35 percent of premiums paid for small tax‐exempt employers

To be eligible for the credit, a small employer must pay premiums on behalf of employees enrolled in a qualified health plan offered through a Small Business Health Options Program (SHOP) Marketplace or qualify for an exception to this requirement

Changes to the Credit for 2014 and Later Tax Years2015 Small Business Health Care Tax Credit

13©2016

The credit is available to eligible employers for two consecutive taxable years

The credit is computed using Form 8941• Tax Exempt Organizations will use Form 8941 and Form 990‐T

Changes to the Credit for 2014 and Later Tax Years2015 Small Business Health Care Tax Credit

14©2016

To be eligible for the Premium Tax Credit, three rules generally need to be satisfied. Health Insurance needs to be purchased through the Health Insurance

Marketplace Household income needs to be between one and four times the federal

poverty line• For a family of four for tax year 2015, that means income from $23,850 to $95,400.

Medicare, Medicaid, or sufficiently generous employer‐sponsored coverage does not meet eligibility

The Premium Tax Credit cannot be claimed on a Married Filing Separate Return

2015 Premium Tax Credit BasicsPremium Tax Credit Overview

15©2016

There are two choices a taxpayer can make if a Marketplace determines they may qualify for the Premium Tax Credit: • Some or all of the estimated credit can be paid in advance to their

insurance company• Wait to receive all of the credit when they file their 2015 tax return in

2016

Waiting to receive the credit will either increase their refund or lower their balance due

Qualifying for the 2015 Premium Tax CreditPremium Tax Credit Overview

16©2016

If receiving the credit in advance, changes in their income or family size will affect the amount they are eligible to receive

If the amount of credit they are eligible for is less than the advanced payments, they will be required to repay the excess

If the amount of credit is more than the advance payment, they may receive it as part of their refund

Qualifying for the 2015 Premium Tax CreditPremium Tax Credit Overview

17©2016

Individuals who do not maintain insurance coverage throughout the year, or who do not qualify for an exemption from coverage, must make a payment when they file their 2015 federal income tax return in 2016

There are exemptions from the requirement to maintain qualified coverage if the taxpayers meet certain conditions

For the months in 2015 that the taxpayer and their dependents do not maintain coverage and do not qualify for an exemption, an individual shared responsibility payment will have to be made with their 2015 tax return filed in 2016

Individual Shared Responsibility PaymentsShared Responsibility Payment Overview

18©2016

An individual shared responsibility payment will need to be made with the return if the taxpayer, or their dependents, did not maintain coverage or did not qualify for an exemption

The payment amount can either be a percentage of the taxpayer’s income or a flat dollar amount, whichever is greater• 1/12th of the annual payment will be owed for each month the

taxpayer, or their dependents, did not have coverage and are not exempt

Computing the Shared Responsibility PaymentShared Responsibility Payment

19©2016

The annual payment amount for 2015 is the greater of:• 2 percent of your household income that is above the tax return

threshold for their filing status• The family’s flat dollar amount, which is $325 per adult and $162.50

per child, limited to a maximum of $975 The payment is capped at the cost of the national average premium for

a bronze level health plan available through the Marketplace in 2015


20©2016

For 2015, the annual national average premium for a bronze level health plan is $2,484 per individual, but $12,420 for a family with five or more members.

The payment will be made with their 2015 federal income tax return filed in 2016.

Example: a single adult under age 65 with household income less than $19,650 (but more than $10,150) would pay the $325 flat rate. However, a single adult under age 65 with household income greater than $19,650 would pay an annual payment based on the 2% rate.


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Higher Penalty for 2015Affordable Care Act Tax Provisions

22©2016

• 2% of the taxpayer’s yearly household income, (The maximum penalty is the national average premium for a Bronze plan)

• $325 per person for the year ($162.50 per child under 18)• The maximum penalty per family using this method is $975

Taxpayers who do not have coverage in 2015 must pay the higherof these two amounts

• 1% of the taxpayer’s yearly household income, (The maximum penalty is the national average premium for a Bronze plan.)

• $95 per person for the year ($47.50 per child under 18)• The maximum penalty per family using this method is $285

Taxpayers who did not have coverage in 2014 must pay the higher

of these two amounts:

Higher Penalty in future yearsAffordable Care Act Tax Provisions

23©2016

•2.5% of the taxpayer’s yearly household income•$695 per person for the year ($347.50 per child under 18)

• In future years, the fee is adjusted for inflation

Taxpayers who do not have coverage in 2016 must pay the higherof these two amounts

The annual payment amount for 2016 is the greater of:• 2.5% percent of your household income that is above the tax return

threshold for their filing status.» The payment is capped at the cost of the national average premium for a bronze level health plan available through the Marketplace in 2016

• The family’s flat dollar amount, which is $695 per adult and $347.50 per child, limited to a maximum of $2,085


24©2016

For 2016, the annual national average premium for a bronze level health plan is $2,676 annually per individual, but $13,380 for a family with five or more members.

The payment will be made with their 2016 federal income tax return filed in 2017.

Example: a single adult under age 65 with household income less than $19,650 (but more than $10,350) would pay the $695 flat rate. However, a single adult under age 65 with household income greater than $38,500 would pay an annual payment based on the 2.5% rate.


25©2016

If a taxpayer or their dependents do not maintain coverage, they will need to make a payment.

To calculate the payment, the taxpayer needs the household income and filing threshold. Household income is the adjusted gross income from your tax return

plus any excludible foreign earned income and tax‐exempt interest you receive during the taxable year• Household income also includes the incomes of all of your dependents who are required to file tax returns

Tax return filing threshold is the amount of gross income an individual of your age and with your filing status (e.g., single, married filing jointly, head of household) must make to be required to file a tax return


26©2016

No liens or levies from the IRS to collect any Individual Shared Responsibility Payment.

Amounts owed may reduce any tax refund on the 2015 tax return or on a future tax return. Presumably any late payment penalties computed on a tax return with

a balance due will be based only on income tax owed, and not any Individual Shared Responsibility payment


27©2016

For Affordable Care Act considerations, the household consists of the following:• Taxpayer• Spouse• Children who live with the taxpayer, even if they make enough money

to file a tax return themselves• Unmarried partner who needs health coverage• Anyone included on the tax return as a dependent, even if they don’t

live with the taxpayer• Anyone else under 21 who the taxpayer takes care of and lives with

them

HouseholdHousehold and Household Income

28©2016

For Affordable Care Act considerations, the household does NOT consist of the following: Unmarried partner who doesn’t need health coverage and is not their

dependent• Parents who live with the taxpayer, but file their own tax return and

are not their dependents Other relatives who file their own tax return and are not their

dependents

Do not include these individuals on any forms related to health premiums or credits

To learn about who qualifies as a dependent, refer to IRS Publication 501

HouseholdHousehold and Household Income

29©2016

For purposes of the Premium Tax Credit, the tax family consists of the following: The taxpayer The spouse, if filing a joint return Their dependents

NOTE: Family Size equals the number of individuals in an individual’s tax family

Tax Family – Used for Form 8962, Premium Tax CreditHousehold and Household Income

30©2016

For purposes of Form 8965, the tax household consists of the following: The taxpayer The spouse Any individual claimed as a dependent on their return Generally, each individual that can, but do not, claim as a dependent on

your return

An individual is included in the tax household in a month only if he or she is alive for the full calendar month

An adopted child is only included in the taxpayer’s household for the full months that follow the month the child is adopted

Tax Household ‐ Used for Form 8965, Health Coverage Exemptions

Household and Household Income

31©2016

Household income consists of modified adjusted gross income (MAGI), plus the MAGI of the dependents who make enough money to have to file a tax return.

MAGI is the adjusted gross income (Line 37 on Form 1040) plus: Any tax‐exempt Social Security benefits

» Non‐taxable Social Security Benefits (Line 20a minus 20b on Form 1040)o Supplemental Security Income (SSI) IS NOT counted as part of MAGI

Tax‐exempt interest (Line on 8b on Form 1040) Tax‐exempt foreign income and housing expenses for Americans living

abroad (Form 2555)

Note that your MAGI for household income purposes may include the income information (MAGI) from other persons in your home who file tax returns, even if they are not your dependents

Modified Adjusted Gross Income and Household IncomeHousehold Income

32©2016

Household Income and MAGI do not include any of the following: Supplemental Social Security Income (SSI) The modified AGI for those individuals in your tax family who are filing

a 2015 return only to claim a refund of withheld income tax or estimated tax

Do not include any of these amounts either on Form 1040 or on Form 8962

Amounts NOT Included in Household IncomeHousehold Income

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If a taxpayer can claim a person as a dependent, the dependent may need to file a tax return.

If a dependent is required to file a tax return, their MAGI should be included in the household income of the taxpayer who claims them as dependents.

A single dependent who is not either age 65 or blind must file a tax return if any of the following apply:

• Dependents unearned income was more than $1,050• Earned income was more than $6,300• Gross income was more than the larger of:

» $1,050, or» Earned income (up to $5,950) plus $350

See IRS Publication 501 for further information about dependents and filing requirements

Filing Requirements for DependentsHousehold Income

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Household income amounts are only used for computations related to insurance coverage under the Affordable Care Act

Household income is not used to compute individual income tax liability

Household income should NOT be included on any form or schedule used to compute income tax

Tax vs Insurance AmountsHousehold Income

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Joe (age 60) and Alice Matthews (age 63) are married and will file a joint return. Their dependents are their niece, Jenny, and their nephew, Jerry. For 2015, Joe got health insurance for his family through an Exchange. They have the following income for 2015.

Income from Wages (Joe): $40,000 Social Security Benefits (Alice): $28,000 Tax Exempt Interest Income (Joint): $1,000 Ordinary Dividends (Joint): $1,000 Regular Roth IRA Distribution (Alice): $5,000

Tax vs Insurance Comparison: Example 1Household Income

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Tax vs Insurance Comparison Example 1Household Income

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TAX vs INSURANCE

Type Income Amount Federal AGI MAGI for Household Income

Wages $40,00 $40,000 $40,000

Tax Exempt Interest $1,000 $0 $1,000

Ordinary Dividends $1,000 $1,000 $1,000

Social Security Benefits $28,000 $16,200 $28,000

Regular Roth IRA Distribution

$5,000 $0 $0

TOTALS $75,000 $57,200 $70,000

Where reported on Tax Return

Form 1040, Line 37 Form 8962, Line 2a

Household income is used for the new health care coverage forms. It is not used to compute individual income tax.

Household income is used for any of the following:

Compute any allowable Premium Tax Credit to be refunded to the taxpayer

Compute any Excess Advanced Premium tax credit that must be repaid by the taxpayer

Compute the Individual Share Responsibility Payment for taxpayers who did not have health insurance throughout 2015

Note: Household Income for Health Coverage Exemptions and Individual Shared Responsibility Payments does not include non‐taxable Social Security amounts

Why is Household Income Important?Household Income

38©2016

Individuals must estimate their income when they apply for health insurance through the Health Insurance Marketplace. They should notify the Marketplace of any changes to family circumstances or income during the year.

Low and moderate income individuals may qualify for lower premiums or subsidies based on income.

Household income amounts from Form 8962 and the tax return is used to reconcile the initial estimates with actual amounts, and to determine: • Any allowable Premium Tax Credit, or • Any Excess Advanced Premium tax credit that must be repaid by the taxpayer

A different computation of household income is used to compute the Individual Share Responsibility Payment for taxpayers who did not have health insurance throughout 2015

Why is Household Income Used for Premium Tax Credit?Household Income

39©2016

The tax preparer must determine if the taxpayer, spouse, and dependents had minimum essential coverage. Collect and review any Health Coverage related forms and verify the Health Care Coverage Provider.

These questions must be confirmed for everyone on the tax return.

Did Each Person Listed on the Tax Return Have Health Care Coverage:• For the Entire Year (12 months)?• For Part of the Year (Less than 12 months)? • No Health Care Coverage at all? • Qualify For an Exemption?

The taxpayer should receive any health insurance related forms by 01/31/16

Taxpayers should visit healthcare.gov or call 1‐800‐318‐2596 for more information on health insurance options and assistance

Health Coverage Interview Questions Applying Affordable Care Act Provisions

40©2016

JB2

JB2 Need to come backJesse Baltazar, 3/11/2015

Applying Affordable Care Provisions

41©2016

If the taxpayer, spouse and dependents Documents or Information Required

Had health insurance all year provided by their employer, or a government program

Proof of health insurance coverage (health Insurance card, Form 1099 SSA, Form 1095‐B, Form 1095‐C,

Other information provided by taxpayer

Had health insurance all year provided by a Health Insurance Marketplace (“Exchange”) provider

Form 1095‐A Information showing MAGI of any dependent who

was required to file a tax return (Form 1040, page 1) Other information provided by the taxpayer

Are claiming an Exemption from Health Care Coverage Requirements

Exemption Certificate Number provided by Health Insurance Marketplace


Did not have Minimum Essential Coverage (MEC) for all or part of the year

Insurance related forms for any month in which taxpayer had health insurance

Information showing MAGI of any dependent who was required to file a tax return (Form 1040, page 1)


Taxpayers with Health Care Coverage

Applying Affordable Care Act Provisions

42©2016

Taxpayer, spouse and dependents had health

care coverage throughout 2015

Health Insurance from employer or government plan

Indicate full coverage on Form 1040, Line 61

Taxpayer, spouse and dependents had health

care coverage throughout 2015

Health Insurance from Health Insurance

Marketplace

Indicate full coverage on Form 1040, Line 61

Compute any Premium Tax Credit or any Excess Advanced Premium Tax

Credit, Form 8962

Taxpayers without Health Care Coverage

Applying Affordable Care Act Provisions

43©2016

Taxpayer, spouse and dependents claim an

exemption from health care coverage throughout 2015

Complete Form 8965 to claim exemption

Attach Form 8965 to the tax return

Taxpayer, spouse or dependents did not have health care coverage for all

or part of 2015

Make a shared responsibility payment for any month in 2015 that taxpayers did not have coverage and did not qualify for a coverage

exemption

Complete Shared Responsibility Payment

WorksheetEnter payment amount on

Form 1040, Line 61

2015 ACA IRS Forms & Worksheets

44

Form 1095‐A

Form 1095‐B

Form 1095‐C

Form 8962

Form 8965

Individual Shared Responsibility Worksheet

Form 1040, Page 2

TaxWise Affordable Care Act Worksheet

Affordability Worksheet

Marketplace Affordability Worksheet

©2016

2015 IRS ACA Forms

45©2016

The IRS has provides three tax forms and several worksheets to help it enforce the individual mandate provisions of the Affordable Care Act

The 1095 series forms are used to provide taxpayers with proof of insurance coverage

Individuals who purchase health insurance through an Exchange must also file Form 8962 to reconcile amounts spent or received for insurance premiums

2015 IRS ACA Forms

46©2016

Individuals need to file Form 8965 to claim an exemption from coverage• This includes individuals who can show that they’re without coverage

because of a hardship, as well as individuals whose policies were canceled and who can’t buy affordable coverage

The Shared Responsibility Payment Worksheet is used to compute the any penalty for those who did not have insurance coverage during the year

2015 1095 Series IRS Forms

47©2016

Exchanges issue Form 1095‐A • Information from Form 1095‐A is used to complete Form 8962

Taxpayers will receive a 1095‐B if they were covered by other insurers such as small self‐funded groups or employers who use the Small Business Health Options Program (SHOP)• They may also receive a 1095‐B from your insurance carrier if they are

enrolled in a fully‐insured employer sponsored plan

Taxpayers will receive a 1095‐C if coverage was provided by their employer

The 2015 filing season is the first year that the Affordable Care Act requires employers to send Form 1095‐B and Form 1095‐C to certain employees.

Filing Deadline Same as Schedule for Forms W‐2, 1099• The reporting requirements fall under I.R.C. Sections 6055 and 6056

and are intended to aid the IRS in determining whether employers and individuals have met the compliance requirements of the ACA

• The filing deadline for the information reports is similar to that of Forms W‐2, Wage and Tax Statement, and Forms 1099: Jan. 31 to employees and no later than Feb. 28 for filing with the IRS, or March 31 if filing electronically

• Under the ACA, employers with at least 250 Forms W‐2s in the previous year still are to report the cost of coverage under an employer‐sponsored group health plan on an employee's W‐2 in Box 12, using Code DD

Filing Deadlines for Forms 10952015 IRS ACA Forms

48©2016

Employers must file Form 1095‐C and Form 1094‐C with the IRS annually, no later than February 28 (or March 31 if filed electronically) for the previous calendar year, starting in 2016 for 2015

Employers must distribute Form 1095‐C to full‐time employees annually, no later than February 1, 2016 for the previous calendar year, starting in 2016 for 2015

The penalty for failure to file a Form 1095‐C is generally $250 per employee

The total penalty for a calendar year cannot exceed $3,000,000

Filing Deadlines for Forms 1095‐C2015 IRS ACA Forms

49©2016

On December 28, 2015, the IRS issued Notice 2016‐4,which extended the deadlines a few months for Information Reporting

The extensions apply only for 2016, not for future years

Form 1095 Reporting ExtendedIRS Delays Information Reporting Deadlines

50©2016

Form to be Filed ORIGINAL Due Date NEW Due Date

1095‐B or 1095‐C to employees February 1, 2016 March 31, 2016

1094‐B or 1094‐C to IRS + copies of 1095‐C, paper filing

February 29, 2016 May 31, 2016

1094‐B or 1094‐C to IRS + copies of 1095‐C, electronic filing

March 31, 2016 June 30, 2016

The IRS encouraged employers and other coverage providers to furnish statements and file the information returns as soon as they were ready and accepted filings beginning January 2016

The IRS did not extend the due dates for Health Insurance Marketplaces to issue Form 1095‐A• Individuals who enrolled for coverage through the Marketplace should

have received Form 1095‐A by February 1, 2016

Individuals did not have to wait to receive their Form 1095‐B or Form 1095‐C, and could use other health insurance information in order to file their tax returns

Impact on EmployersIRS Delays Information Reporting Deadlines

51©2016

Form 1095‐A is a notice from the ACA Exchange to those who enrolled in coverage through the Health Insurance Marketplace• Information from this form will

be used if the taxpayer is claiming any Premium Credit for Marketplace Health Insurance Contributions

• Information from this form is also used to compute any repayment of the Advance Premium Credit

Form 1095‐A, Health Coverage Marketplace Statement

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Generally, 1095‐B forms are filed by insurers for:• Employers who use the

SHOP, small self‐funded groups

• Individuals who get covered outside of the health insurance Marketplace

Form 1095‐B, Health Coverage

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A. Small Business Health Options Program (SHOP)

B. Employer‐sponsored coverage

C. Government‐sponsored program

D. Individual market insurance

E. Multiemployer plan

F. Other designated minimum essential coverage

Line 8. Policy Origin Codes2015 Form 1095‐B

54©2016

Employers will use Form 1095‐C to report information about health care coverage offered to their full‐time employees

The form also helps the IRS administer premium tax credits for any employee who qualified and enrolled for coverage at a Health Insurance Marketplace rather than enrolling in an employer plan

Form 1095‐C, Health Coverage

55©2016

Line 14 is used to report whether an offer of coverage was made to an employee for each month of the year

Line 142015 Form 1095‐C

56©2016

Offer of Coverage Codes2015 Form 1095‐C

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Code What it means

1A Your employer made a qualifying offer of healthcare coverage that is affordable based on the federal poverty line to you, your spouse, and your dependent(s), if any.

1B Your employer made a qualifying offer of healthcare coverage to you.

1C Your employer made a qualifying offer of healthcare coverage to you and your dependent(s).

1D Your employer made a qualifying offer of healthcare coverage to you and your spouse.

1E Your employer made a qualifying offer of healthcare coverage to you, your spouse, and your dependent(s).

1F Your employer made an offer of healthcare coverage to you, your spouse, and your dependent(s), if any, that does not qualify as providing “minimum value”.

1G You were not a full‐time employee but were enrolled in healthcare coverage.

1H Your employer did not make an offer of coverage or the offer was not a qualified offer.

1I Your employer did not make an offer of coverage to you, your spouse, or your dependent(s), the offer was not a qualified offer, or the offer was qualified but was for less than 12 months.

Line 15 is used to report employee’s share of the lowest‐cost monthly premium for self‐only qualifying coverage

Line 15 will show an amount only if code 1B, 1C, 1D, or 1E is entered on line 14

Line 152015 Form 1095‐C

58©2016

NP1

NP1 Should we also touch on line 16 Code Series 2?Nathan Plant, 7/25/2016

Form 8962, Page 1, Premium Tax Credit

Subsidized Exchange purchasers will file Form 8962 to compute any Premium Tax Credit.

The Premium Tax Credit will show on Form 1040, Page 2, Line 69.

Part 3 of Form 8962 will also be used to compute any repayment of Advance Premium Tax Credit.

Form 8962, Page 1

59©2016

Form 8962, Page 2, Premium Tax Credit

Page 2 is used if insurance policies are shared and have to be allocated.

Form 8962, Page 2

60©2016

In Part 1, the Family size and MAGI are used to calculate how much Insurance Premium the taxpayer should have contributed• Note that the taxpayer may have to include the MAGI of dependents

who file a tax returnModified AGI (MAGI) is entered here Dependent’s MAGI is entered here

Contribution Amount Form 8962, Part I: Details

61©2016

Part 2 is completed with the information from the Form 1095‐A, Premium Information from the Marketplace.

If the taxpayer or family members did not have insurance for the entire year, the amount for each month must be entered.

Contribution Amount Form 8962, Part 2: Details

62©2016

If the Taxpayer received Advance Payment of the Premium Tax Credit, Part III is used to calculate this amount along with the information calculated on lines 24 and 25• The taxpayer may have to repay any Excess Advance of the Premium

Tax Credit. Any repayment will be included on Form 1040, Page 2, line 46.

Contribution Amount Form 8962, Part III: Details

63©2016

Form 8965, Health Coverage Exemptions

Individual mandate exemptions are claimed on Form 8965.

Marketplace granted exemptions will require a form showing an Exemption Certificate Number.

Form 8965

64©2016


Individual mandate exemptions are claimed on Form 8965.

Part I of Form 8965 is for exemptions granted by the Marketplace.

Parts II and III of Form 8965 are for exemptions claimed on the tax return.

Form 8965

65©2016

1040 Affordable Care Act Worksheet • This worksheet has been

revised for 2015. It is now a two page form

• Page 1 is used to enter taxpayer, spouse or dependent information concerning health care coverage

• Page 2 is used to show the computation of the Shared Responsibility payment

REVISED Shared Responsibility Payment Worksheet

66©2016

Found on page 5 of Form 8965 Instructions

Used to compute payment for taxpayers who do not have health coverage for the year• Is also used to indicate whether Form

8962 or Form 8965 is required).

Preparers need indicate each month that the individual did not have health care coverage

Any Individual Responsibility Payment will be shown on Form 1040, Line 61

The Shared Responsibility Payment is based on either a percentage of household income or a flat dollar amount.

Shared Responsibility Payment Worksheet

67©2016

Repayment of Excess Advance Premium Tax Credit will be shown on Form 1040, Page 2, Line 46

The repayment will be part of total tax liability shown on Line 47

Form 1040, Page 2

68©2016

Non‐refundable credits could reduce the amount of any repayment owed

Preparers should seek to maximize use of non‐refundable credits here if there is any repayment of the Premium Credit

Form 1040, Page 2

69©2016

A checkbox on Line 61 is checked if the if the taxpayer had health care insurance all year• This box is also checked if the tax return qualifies for an exemption

from health care coverage

Form 1040, Page 2

70©2016

Any computed Individual Responsibility Payment is included with Other Taxes, and will be shown on Form 1040, Page 2, Line 61

Form 1040, Page 2

71©2016

Form 1040, Page 2

72©2016

Any net Premium Tax Credit will be shown on Line 69, included with other Payments

This credit is a refundable credit

John (age 65) and Mary Jones (age 65) are married and will file a joint return. Their dependents are their niece, Michelle (age 22) a college student and nephew, Matt (age 14). John and Mary have insurance through Medicare. They purchased health insurance through the Exchange for their 2 dependents.

John and Mary have the following income and withholding for 2015:

Example

Household Income, Form 8962, Form 8965

73

Social Security Benefits (Joint, total): $67,000 Tax Exempt Interest Income (Joint): $3,000 Taxable IRA Income (Mary): $12,000 Federal Income Tax Withholding: $1,200 Modified AGI for 2014 is $82,000

©2016

Form 1040, page 1• Line 22 shows total Income of $21,825• This is also the AGI for the taxpayer

ExampleAGI

74©2016

The Family Size is 4. The Modified AGI is $82,000 John Jones got insurance through the Marketplace Exchange for the 2

dependent children Line 8a shows the computed amount for their annual contribution for

health care coverage of $7,790

Example, Form 8962Form 8962, Part 1

75©2016

Form 8962, Premium Tax Credit Calculation John Jones got health insurance for the 2 dependents from the

Marketplace. He received Forms 1095‐A for their Niece and Nephew Enter Amounts from Form 1095‐A for the covered individuals

ExampleForm 8962 PTC

76©2016

Form 1040, page 2, Line 69 Net Premium Tax Credit• The Premium Tax Credit shows on Form 1040, page 2• This amount is included with Federal withholding and other payments• This amount is refundable

ExampleForm 1040, PTC

77©2016

Form 8962, Excess Advance Payment of Premium Tax Credit

If John Jones had been credited with an Advance of the Premium Tax Credit, you would use amounts from Form 1095‐A to compute any excess repayment.

Any Excess advance payment would be shown on Line 29.

ExampleForm 8962 APTC

78©2016

Form 1040, page 2, Line 46. Excess advance premium tax credit repayment

Any repayment of Excess Advance PTC is shown on Form 1040, Line 46 and is included with any other income taxes.

The repayment can be reduced by nonrefundable credits, e.g. the Child tax credit shown on Line 52.

ExampleForm 1040, Line 46

79©2016

Individual Shared Responsibility Payment John and Mary Jones have their own health insurance through

Medicare; however they did not provide health care coverage for the 2 dependents

They would have to compute their Individual shared responsibility payment using the Shared Responsibility Payment Worksheet

The amount would show on Form 1040, Line 61

Example:Shared Responsibility Payment

80©2016

The data entered in the Shared Responsibility Payment Worksheet will determine the amount of the penalty this taxpayer will owe for their dependents because they didn’t have the required minimum essential coverage for the entire year

ExamplePayment Worksheet

81©2016

The worksheet will use the information you entered for the dependents who did not have health care coverage and the Household Income above the filing threshold for the taxpayer to compute the Shared Responsibility Payment

The computed payment of $488 will be shown on Form 1040, Line 61

ExamplePayment Worksheet

82©2016

Form 1040, page 2 The Individual Shared Responsibility Payment will show on Form 1040,

page 2, line 61 This amount will be included with other taxes

ExampleForm 1040, Line 61

83©2016

Form 8962, Page 1, Premium Tax Credit vs Individual Shared Responsibility Worksheet:

Note that MAGI and Household Income is computed differently for Form 8962 and for the Shared Responsibility Worksheet:

Both forms add back tax exempt interest, but the Shared Responsibility Worksheet does not include non‐taxable Social Security amounts

ExampleForm 8962 vs Payment Worksheet

84©2016

1040 Affordable Care Act Worksheet • This worksheet has been

revised for 2015. It is now a two page form

• Page 1 is used to enter taxpayer, spouse or dependent information concerning health care coverage

• Page 2 is used to show the computation of the Shared Responsibility payment

REVISED Affordable Care Act Worksheet

85©2016

Using the 2015 information and Modified AGI amounts, John and Mary Jones would owe $1,042 for their dependents in tax year 2016 because they didn’t have the required minimum essential coverage for the entire year

Example2016 Shared Responsibility Payment

86©2016

Household Income Exemption

Gross Income Exemption

Form 8965 ExemptionsApplying Affordable Care Act Provisions

87©2016

Household Income ExemptionApplying Affordable Care Act Provisions

88©2016

Taxpayer, spouse and dependents did not have health coverage for all

or part of 2015. The household income is less than

the filing threshold.

Complete Form 8965. Mark Part II, Line 7a to claim exemption for the entire tax return


Taxpayer, spouse and dependents did not have health care coverage

for all or part of 2015.The gross income is less than the

filing threshold.

Complete Form 8965. Mark Part II, Line 7b to claim an exemption for the entire tax return


A taxpayer is not required to have insurance coverage and does not have to pay the Individual Responsibility payment if certain income amounts are below the filing requirement threshold

This exemption applies to everyone on the tax return

Household Exemptions

89©2016

Exemption Type Details

Household Income below filing threshold (Form 8965, line 7a)

Household income is the sum of the modified adjusted gross income (MAGI) from the tax return and the MAGI of all dependents required to file a tax return.

Gross Income below filing threshold (Form 8965, line 7b)

Gross income means all income (money, goods, property and services) that is not exempt from tax. Gross income includes gains, but not losses, reported on Schedule D or Form 8949, and Schedule C or Schedule F.

Gross income for Form 8965, line 7b does not include income of any dependents.

A taxpayer who does not have a filing requirement and does not file gets the exemption automatically for everyone properly claimed on the tax return• There is no need to file only to report health coverage or claim the

exemption

A taxpayer who does not have a filing requirement but chooses to file anyway should file a Form 8965 if one or more people on the tax return are uninsured• This includes taxpayers who are filing a return in order to claim

nonrefundable and refundable tax credits

If this exemption applies, there is no need to consider other exemptions for individual members of the household

Who should claim this exemption Household Exemptions

90©2016

2015 Federal Tax Filing Requirement Thresholds

Household Exemptions

91©2016

Filing Status AgeMust File a Return If Gross Income Exceeds (2015)

SingleUnder 65 $10,300

65 or older $11,850

Head of HouseholdUnder 65 $13,250

65 or older $14,800

Married Filing Jointly

Under 65 (both spouses) $20,600

65 or older (one spouse) $21,850

65 or older (both spouses) $23,100

Married Filing Separately Any age $4,000

Qualifying Widow(er) with Dependent Children

Under 65 $16,600

65 or older $17,1850

John Jones earned $13,00 in 2015• He did not have any other income for the year

John’s filing status is Head of Household

He has 1 dependent child under age 15

He did not have health insurance for himself or his son at any time during 2015

ExampleForm 8965 Household Income Exemption

92©2016

The tax preparer completes the Affordable Care Act Worksheet

The tax preparer indicates that the taxpayer did not have health insurance during the year

The preparer also indicates that the taxpayer wants to apply for a household income exemption

ExampleHousehold Income Exemption

93©2016

Form 8965 is generated when insurance information is entered in the ACA Worksheet and income information is entered in the tax return

Form 8965, Part II Line 7a is automatically marked when household income is less than the amount for the taxpayer’s filing status


94©2016

The Shared Responsibility Payment Worksheet indicates that a payment is not required

Form 1040, Line 61 shows that the taxpayer is considered to have full coverage and does not owe an Individual Responsibility payment


95©2016

Coverage Exemptions• Coverage Considered Unaffordable

Form 8965 ExemptionsApplying Affordable Care Act Provisions

96©2016

Coverage considered unaffordable: Health care insurance is considered to be unaffordable if the minimum amount a taxpayer would have paid for premiums was more than 8.05% of their household income• This exemption is claimed on Form 8965 using Exemption Code A

Aggregate self‐only coverage considered unaffordable: Health care insurance is considered to be unaffordable if the aggregate cost of self‐only employer‐sponsored coverage for two or more family members was more than 8.05% of household income• This also applies if the cost of any available employer‐sponsored

coverage for the entire family was more than 8.05% of household income

• This exemption is claimed on Form 8965 using Exemption Code G

See the instructions for Form 8965 for more information

2015 Coverage Exemptions ACA Affordability Provisions

97©2016

Coverage considered unaffordable: Health care insurance is considered to be unaffordable if the minimum amount a taxpayer would have paid for premiums was more than 8.13% of their household income• This exemption is claimed on Form 8965 using Exemption Code A

Aggregate self‐only coverage considered unaffordable: Health care insurance is considered to be unaffordable if the aggregate cost of self‐only employer‐sponsored coverage for two or more family members was more than 8.13% of household income for 2016• This also applies if the cost of any available employer‐sponsored

coverage for the entire family was more than 8.13% of household income for 2016

• This exemption is claimed on Form 8965 using Exemption Code G

See the instructions for Form 8965 for more information

2016 Coverage Exemptions ACA Affordability Provisions

98©2016

The Affordability Worksheet is used to determine whether the “Coverage Considered Unaffordable Exemption” applies to a taxpayer or a member of the taxpayer’s tax household for one or more months of the tax year

The taxpayer may also need to provide Form 1095‐C in order to complete the worksheet

If the exemption applies, the taxpayer will use Code A on Form 8965

Affordability Worksheet

99©2016

Cost of an offer of coverage – Can be used to determine whether the employee is eligible for an affordability exemption if they did not accept coverage

Line 15 will contain the lowest cost plan for the employee. The form will not state the lowest‐cost family plan. • The employee may have to ask his or her Human Resources Dept for the correct 2015

plan cost

Line 152015 Form 1095‐C

100©2016

NP2

NP2 Should we also touch on line 16 Code Series 2?Nathan Plant, 7/25/2016

Taxpayers will use the Marketplace Coverage Affordability Worksheet if an individual was not eligible for employer sponsored coverage

A link at the top of the Marketplace Coverage Affordability Worksheet will take the tax preparer to the Health Care Tax Tools area in healthcare.gov

Marketplace Affordability Worksheet

101©2016

A link at the top of the Marketplace Coverage Affordability Worksheet will take the tax preparer to the Health Care Tax Tools area in healthcare.gov to get information on Look up your lowest cost 2015 Bronze plan premium

The taxpayer may also need price information about the second lowest cost Silver plan premium, from healthcare.gov

Healthcare.gov Tools

102©2016

Taxpayers will use the “Coverage Considered Unaffordable Exemption,” Code A, if it applies to the taxpayer or a member of the taxpayer’s tax household for one or more months of the year

If the exemption applies, the taxpayer will enter the information on Form 8965, Part III


103©2016

The tax preparation program will now generate Form 8965 and mark Line 7a if:• The tax preparer notes that

the taxpayer did not have insurance coverage during the year and is NOT applying for an exemption, AND

• Household Income is less than the filing threshold amount

New for 2015 Household Income Exemption

105©2016

Reminder: Do NOT enter the Adjusted Gross Income of dependents into the Shared Responsibility Payment Worksheet if the dependents are not required to file a tax return.

Household Income and Dependents

106©2016

A taxpayer’s son Ronald, aged 16, received a Form W‐2 for a part time job• Wages are $2,500 and the federal withholding is $300

Ronald is not required to file a tax return, does not have any taxable income, and will file a return to get a refund of his federal withholding

He will file as dependent of another and will be listed as a dependent on his parent’s tax return

The tax preparer will not include Ronald’s modified adjusted gross income in his parent’s household income

Example Household Income and Dependents

107©2016

Reminder: Do not complete the Shared Responsibility Worksheet if the taxpayer is filing as the dependent of another taxpayer

The Affordable Care Act Worksheet will not be marked in the Forms Tree and will not be included in the dependent’s tax return

Dependent of Another

108©2016

Preparers must make sure that health insurance coverage information is entered on the appropriate forms and on Form 1040, where required.• Make sure that any taxpayers who got health insurance through the

Marketplace have Form 1095‐A and related forms• Taxpayers who received an exemption from should have a document with an

ECN number (Exemption Coverage Number)• Make sure that other taxpayers have acceptable proof of health insurance

coverage information• The proof of Minimum Essential Coverage must be indicated by selecting the

Form 1040, Line 61 Full‐Year coverage checkbox

• Any Health Insurance Premium Tax Credit will be calculated on Form 8962• Health Coverage Exemptions must be indicated on Form 8965• It’s not totally clear how info about people with employer provided insurance

will be handled if taxpayers do not receive Form 1095‐B or 1095‐C

Affordable Care Act Best PracticeTax Practice Issues

109©2016

Form 8962 Premium Tax Credit • The Premium Tax Credit applies only to taxpayers who get their health

insurance through the Health Insurance Marketplace• Tax Preparers will have to make sure that they get Form 1095‐A information for

the taxpayer and all other individuals in the taxpayer’s household

Form 8965 Health Coverage Exemptions• Tax Preparers will have to make sure they get the Exemption Certificate

information for any taxpayers who received an exemption from the Marketplace

• Tax Preparers will have to get applicable information for individuals claiming an exemption for other reasons, who did not get an Exemption from the Marketplace

• Failure to get this information may result in delays in getting any refund Individuals who do not have health insurance may have to make a payment with

their 2015 tax return

Form 8962 and Form 8965 Summary InformationTax Practice Issues

110©2016

Gather Appropriate Forms

•Make sure that the taxpayers, spouse and dependents who got health insurance through the Marketplace have Form 1095‐A and related forms•Persons who received an exemption from the Marketplace should have a document with an ECN number (Exemption Coverage Number)•May need to get copies of Form 1095‐A from a divorced spouse or other person who got health insurance for a dependent

Compute Household Income

•Compute Household Income for taxpayer and spouse• Include Modified Adjusted Gross Income of any dependents required to file a tax return

Compute any Premium Tax

Credit

•Health Coverage Exemptions must be indicated on Form 8965•Repayment of Advance Premium Tax Credit will be shown on Form 1040, Line 46•Premium Tax Credit will be shown on Form 1040, Line 69

Taxpayers who get Health Coverage through the Marketplace

Tax Practice Issues

111©2016

There may be a need to do additional calculations for Form 8962 if any of the following apply:

Special SituationsTax Practice Issues

112

The taxpayer or someone in their tax family was enrolled in a qualified health plan by someone outside your tax family

• A niece, nephew or grandchild enrolled by another person• A child or stepchild enrolled by a divorced spouse

The taxpayer was married during 2015 The taxpayer needs to allocate amounts from a health plan between

two different tax families The taxpayer has more than one Form 1095-A for someone in their

tax family The taxpayer was divorced or legally separated in 2015

See the Instructions for Form 8962 for further information

©2016

IRS regulations address how taxpayers should compute their premium tax credits and reconcile advance premium tax credits in situations where a family member (the shifting enrollee, usually a child) is enrolled in a health plan by one taxpayer (the enrolling taxpayer, usually a parent) who receives an advance premium tax credit for the family member, but the shifting enrollee is ultimately claimed as a dependent for tax purposes by another taxpayer (the claiming taxpayer; the other parent).

In this situation the two taxpayers must allocate: The amount of the premium that each must take into account in determining his or her

tax credit The amount of the advance premium tax credit received by the enrolling taxpayer that

the claiming taxpayer must reconcile for the shifting enrollee’s coverage The adjusted monthly premium for the applicable benchmark plan that must be used for

determining the allocation of advance premium tax credits

Allocating premium tax credits between parentsAllocating Premium Tax Credits

113©2016

A self‐employed taxpayer may both collect a premium tax credit (if eligible) and claim a deduction in computing gross income for the amount of the premium that the taxpayer has paid for covering the taxpayer, the taxpayer’s spouse, and enrolled family members that is not covered by the advance premium tax credit.

The taxpayer can also claim as a deduction any advance premium tax credit amounts that must be paid back at reconciliation.

But the amount of the premium tax credit is dependent on the taxpayer’s gross income. Moreover, the amounts of excess advance tax credits that must be paid back are subject to limits that depend on the gross income of the taxpayer.

IRS temporary regulations and other rules describe how to compute applicable amounts.

Premium tax credit rules and the deduction of health insurance costs

Premium Tax Credits and the Self‐employed

114©2016

If insurance is purchased in the Marketplace and taxpayers received a premium tax credit, the amount of the credit must be subtracted from the self‐employed health insurance deduction for AGI.

Example: Self‐employed taxpayer purchases health insurance for $15,000 and received a premium tax credit of $1,500.

The Self‐employed health insurance deduction is $13,500 ($15,000 ‐ $1,500).

PTC and Self‐Employed Health Insurance Deduction

Premium Tax Credits and the Self‐employed

115©2016

Nearly half of individuals who do not have health insurance are unaware of the individual mandate and 43 percent have not heard of the Marketplace, according to the Transamerica Center for Health Studies (TCHS)

Only half of small businesses with fewer than 50 employees are aware of the Small Business Health Options Program Marketplace (SHOP), these businesses have the opportunity to purchase coverage for their employees with potential tax credits

PPACA Marketplace Coverage IssuesTax Practice Issues

116©2016

Publications

117

IRS Publication 5093: Healthcare Law Online Resources

IRS Publication 5120: Facts About Premium Tax Credit

IRS Publication 5152: Affordable Care Act: Individuals and Families

IRS Publication 5156: Facts About the Individual Shared Responsibility Provision

IRS Publication 5172: Facts About Health Coverage Exemptions

©2016

Publications

118

Form 8962: Premium Tax Credit (PTC) ‐ (15 pages)

Form 8965: Health Coverage Exemptions ‐ (12 pages)• Includes Instructions for Computing the Shared Responsibility Payment

IRS Publication 974: Premium Tax Credit (PTC)• This is the new IRS publication related to the Premium Tax Credit and

completing Form 8962

©2016

Health Care Publications

119

IRS Publication 5187 – Health Care Law: What’s new for Individuals and Families. This new publication provides important information for taxpayers who:

• Had health insurance coverage for the entire year• Did not have health coverage for each month of the year• Purchased health insurance from the Marketplace• Might be eligible for an exemption from the coverage requirement• Had advance payments of the premium tax credit sent to their

insurance provider• Is claiming the premium tax credit on their tax return

©2016

Web Sites

120

Affordable Care Act (ACA) Tax Provisions• IRS.gov/aca

Health Insurance Marketplace Information• HealthCare.gov

Marketplace exemption information and applications• https://www.healthcare.gov/health‐coverage‐exemptions/exemptions‐

from‐the‐fee/

IRS ‐‐ Shared Responsibility Resources• http://www.irs.gov/uac/Individual‐Shared‐Responsibility‐Provision

Taxpayer Advocate Service – Shared Responsibility Payment Tool • http://www.taxpayeradvocate.irs.gov/get‐help/aca‐isrp?taxissue=112

©2016

Supplemental Information

121

Individual Shared Responsibility Provision


Exemptions from Minimum Essential Coverage

Individual Shared Responsibility Filing Thresholds

Immigration Status and the Affordable Care Act

©2016

What is the individual shared responsibility provision?• Each individual needs to have minimum essential health coverage for each

month, qualify for an exemption, or make a payment when filing his or her federal income tax return

Who is subject to the individual shared responsibility provision?• Individuals of all ages, including children. The adult or married couple who can

claim a dependent for federal income tax purposes is responsible for making the payment if the dependent does not have coverage or an exemption

• Provision went into effect on Jan. 1, 2014. It applies to each month in the calendar year

Basic InformationIndividual Shared Responsibility Provision

122©2016

Minimum essential coverage includes the following: 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 Other coverage recognized by the Secretary of HHS as minimum

essential coverage

Minimum Essential CoverageIndividual Shared Responsibility Provision

123©2016

The taxpayer may be exempt from the requirement to maintain qualified coverage if: Minimum amount for the annual premium is greater than eight

percent of their household income The taxpayer has a gap in coverage for less than three consecutive

months The taxpayer Qualifies for an exemption for having a hardship that

prevents you from obtaining coverage, or belonging to a group explicitly exempt from the requirement

Minimum Essential Coverage ExemptionsIndividual Shared Responsibility Provision

124©2016

A special hardship exemption applies to individuals who purchase their insurance through the Marketplace during the initial enrollment period for 2014 but due to the enrollment process have a coverage gap at the beginning of 2014.

For any month in 2014 that the taxpayer or their dependents don’t maintain coverage and don’t qualify for an exemption, they will need to make an individual shared responsibility payment with their 2014 tax return filed in 2015.

Minimum Essential Coverage ExemptionsIndividual Shared Responsibility Provision

125©2016

Religious conscience: The taxpayer a member of a religious sect that is recognized as conscientiously opposed to accepting any insurance benefits. The Social Security Administration administers the process for recognizing these sects according to the criteria in the law.

Health care sharing ministry: The taxpayer is a member of a health care sharing ministry.

Indian tribes: The taxpayer is (1) a member of a federally recognized Indian tribe or (2) an individual eligible for services through an Indian care provider.

Income below the income tax return filing requirement: The taxpayer’s income is below the minimum threshold for filing a tax return. The requirement to file a federal tax return depends on your filing status, age and types and amounts of income.

Short coverage gap: The taxpayer went without coverage for less than three consecutive months during the year.

Statutory exemptions from the requirement to obtain minimum essential coverage


126©2016

Hardship: You have suffered a hardship that makes you unable to obtain coverage, as defined in final regulations issued by the Department of Health and Human Services.

Affordability: You can’t afford coverage because the minimum amount you must pay for the premiums is more than eight percent of your household income.

Incarceration: You are in a jail, prison, or similar penal institution or correctional facility after the disposition of charges against you.

Not lawfully present: You are not a U.S. citizen, a U.S. national or an alien lawfully present in the U.S.

Statutory exemptions from the requirement to obtain minimum essential coverage


127©2016

What needs to be done if a taxpayer wants to be sure they have minimum essential coverage for 2014?

The vast majority of coverage that people have today counts as minimum essential coverage

For those who do not have coverage, who anticipate discontinuing the coverage they have currently, or who want to explore whether more affordable options are available, the Health Insurance Marketplace is open in every state and the District of Columbia

For more information about the Marketplace, visit the Health Insurance Marketplace website

For more information about financial assistance, see the IRS website



128©2016

What do I need to do if I want to be sure I have minimum essential coverage for 2014 and 2015?

For those seeking an exemption from the individual responsibility provision, the Marketplace is able to provide certificates of exemption for many of the exemption categories• The HHS has issued final regulations on how the Health Insurance Marketplace grants

these exemptions

Individuals will also be able to claim certain exemptions for 2014 and 2015 when they file their federal income tax returns in 2015 and 2016

Individuals who are not required to file a federal income tax return because their gross income falls below the return filing threshold do not need to take any further action to secure an exemption

Minimum Essential Coverage Exemption


129©2016

Household income is the adjusted gross income from your tax return plus any excludible foreign earned income and tax‐exempt interest you receive during the taxable year.

Household income also includes the incomes of all of your dependents who are required to file tax returns.

Tax return filing threshold is the amount of gross income an individual of your age and with your filing status (e.g., single, married filing jointly, head of household) must make to be required to file a tax return.

Individual Shared Responsibility Provision

130©2016

2015 Federal Tax Filing Requirement Thresholds

Filing Status AgeMust File If GrossIncome Exceeds

SingleUnder 65

65 or older

$10,300

$11,850

Head of HouseholdUnder 65

65 or older

$13,250

$14,800

Married Filing Jointly

Under 65 (both spouses)

65 or older (one spouse)

65 or older (both spouses)

$20,600

$21,850

$23,100

Married Filing Separately

Any age $4,000

Qualifying Widow(er) with Dependent Children

Under 65

65 or older

$16,600

$17,850

NATURALIZED CITIZENS• Same access and requirements for affordable coverage as U.S.–born citizens

LAWFULLY PRESENT IMMIGRANTS• Limited federal coverage:

- Subject to the individual mandate and related tax penalty (exempt if low‐income or meet specific exemptions)

- May enroll in a “qualified health plan (QHP)” from the state insurance exchanges- Eligible for premium tax credits and lower copayments- Current federal immigrant eligibility restrictions in Medicaid maintained, including the five‐year‐or‐

more waiting period for most lawfully residing, low‐income immigrant adults- Health care coverage may be available to other immigrants in some states

Citizens and Lawfully Present ImmigrantsImmigrants and the Affordable Care Act

131©2016

UNDOCUMENTED IMMIGRANTS• No federal coverage:

- Not allowed to purchase private health insurance at full cost in state insurance exchange(s)- Not eligible for premium tax credits or lower copayments- Exempt from individual mandate- Not eligible for Medicare, nonemergency Medicaid, or CHIP- Remain eligible for emergency care under federal law- Eligible for Emergency Medicaid if low‐income- May seek nonemergency health services at community health centers or safety‐net hospitals.

Undocumented ImmigrantsImmigrants and the Affordable Care Act

132©2016

No federal coverage• Citizen or lawfully present children of undocumented parents are eligible:

- To purchase from the state insurance exchange- For premium tax credits and lower copayments- For Medicaid or CHIP

Verification Requirements• Only those in a family who are applying for benefits are required to provide a Social

Security number (SSN) and their immigration/citizenship status.• Citizenship or lawful presence must be verified for everyone enrolling in:

- Private health insurance in the state exchanges- Health insurance premium tax credits- Medicaid and CHIP

• Social Security number of a nonapplicant may be requested to electronically verify household income. If unavailable, other proof of income can be provided.

Undocumented ImmigrantsImmigrants and the Affordable Care Act

133©2016

Beginning in 2014, individuals must have health care coverage, have a health coverage exemption, or make a shared responsibility payment with their tax return. Some coverage exemptions related to citizenship are available by claiming them on your tax return.

Exemption for Citizens living abroad and certain noncitizens

You are one of the following:• A U.S. citizen or resident who spent at least 330 full days outside the U.S. during a 12

month period• A U.S. citizen who is a bona fide resident of a foreign country or U.S. territory• Neither a U.S. citizen, a U.S. national, nor an alien lawfully present in the United States

NOTE: Actual citizenship or residency status is important in determining ACA Exemptions, no matter what type of documents the taxpayer may have (SSN, ITIN, work permits) or how long the taxpayer lived in the U.S.

Individual Shared Responsibility Provision ‐ ExemptionsImmigration Status and ACA

134©2016

A brief summary of U.S. immigration terminology follows. Any references below to USCIS refer to the United States Citizenship and Immigration Services• Alien: An individual who is not a U.S. citizen or U.S. national• U.S. National: An individual who owes his sole allegiance to the United

States, including all U.S. citizens, and including some individuals who are not U.S. citizens

For tax purposes the term "U.S. national" refers to individuals who were born in American Samoa or were born in the Commonwealth of the Northern Mariana Islands who have made the election to be treated as U.S. nationals and not as U.S. citizens

Terms and Definitions Related to ImmigrationImmigration Terms and Definitions

135©2016

A U.S. Citizen is• An individual born in the United States.• An individual whose parent is a U.S. citizen.*• A former alien who has been naturalized as a U.S. citizen• An individual born in Puerto Rico.• An individual born in Guam.• An individual born in the U.S. Virgin Islands

U.S. CitizenImmigration Terms and Definitions

136

*The Child Citizenship Act, which applies to both adopted and biological children of U.S. citizens, amends Section 320 of the Immigration and Nationality Act (INA) to provide for the automatic acquisition of U.S. citizenship when certain conditions have been met.

©2016

An Immigrant is an alien who has been granted the right by the USCIS to reside permanently in the United States and to work without restrictions in the United States. Also known as a Lawful Permanent Resident (LPR).

All immigrants are eventually issued a "green card" (USCIS Form I‐551), which is the evidence of the alien’s LPR status. LPR’s who are awaiting the issuance of their green cards may bear an I‐551 stamp in their foreign passports.

Immigrant visas are available for aliens (and their spouses and children) who seek to immigrate based on their job skills. If an alien has the right combination of skills, education, and/or work experience and are otherwise eligible, the alien may be able to live permanently in the United States.

Per USCIS, there are five employment‐based immigrant visa preferences (categories): EB‐1, EB‐2, EB‐3, EB‐4 and EB‐5. Refer to the USCIS Permanent Worker web site for more details.

ImmigrantImmigration Terms and Definitions

137©2016

A nonimmigrant is an alien who has been granted the right by the USCIS to reside temporarily in the United States. Each nonimmigrant is admitted into the United States in the nonimmigrant status, which corresponds to the class of visa with which, or purpose for which, he entered the United States (e.g., a foreign student may enter the United States on an F‐1 visa, which corresponds to the F‐1 student status in which he was admitted to the United States).

Aliens in some nonimmigrant statuses are allowed to be employed in the United States, and others are not. Some nonimmigrant statuses have rigid time limits for the alien’s stay in the United States, while others do not.

Each nonimmigrant status has rules and guidelines, which must be followed in order for the nonimmigrant to remain "in status." A nonimmigrant who violates one of these rules or guidelines will fall "out of status." An nonimmigrant who remains "out of status" for at least 180 days is deportable and will be unable to re‐enter the United States for 3 years. A nonimmigrant who remains "out of status" for at least 365 days is deportable and will be unable to re‐enter the United States for 10 years

NonimmigrantImmigration Terms and Definitions

138©2016

An illegal alien, also known as an "Undocumented Alien," is an alien who has entered the United States illegally and is deportable if apprehended, or an alien who entered the United States legally but who has fallen "out of status" and is deportable.

An undocumented or "illegal alien" is an alien who entered the United States illegally without the proper authorization and documents, or is an alien who once entered the United States legally and has since violated the terms of the status in which he entered the United States or has overstayed the time limits of his original status.

Aliens in some nonimmigrant statuses are allowed to be employed in the United States, and others are not. Some nonimmigrant statuses have rigid time limits for the alien’s stay in the United States, while others do not.

Each nonimmigrant status has rules and guidelines, which must be followed in order for the nonimmigrant to remain "in status." A nonimmigrant who violates one of these rules or guidelines will fall "out of status." An nonimmigrant who remains "out of status" for at least 180 days is deportable and will be unable to re‐enter the United States for 3 years. A nonimmigrant who remains "out of status" for at least 365 days is deportable and will be unable to re‐enter the United States for 10 years.

Undocumented AlienImmigration Terms and Definitions

139©2016

Affordable Care Act Overview

2015 Tax Year Considerations

Premium Tax Credit


Small Business Health Care Tax Credit

Household Income

IRS Forms

Supplemental Material

In this course, we have covered the following topics:Summary

140©2016

Understanding The Affordable Care Act Ed... · Premium Tax Credits • Can help make purchasing...

Documents

Transcript of Understanding The Affordable Care Act Ed... · Premium Tax Credits • Can help make purchasing...