This year, the overlap between the open enrollment period and the tax season becomes especially important as the tax-related provisions of the Affordable Care Act (ACA) begin. Specifically, the Internal Revenue Service (IRS) will begin administrating the individual shared responsibility mandate and Premium Tax Credits (PTCs).
What does this mean for health coverage outreach and enrollment professionals?
Most likely, you will receive lots of questions about taxes and health insurance. Here is how to answer some of them.
Questions from Individuals who had Coverage Outside of the Marketplace
If an individual and his or her dependents had minimum essential coverage (MEC) for the full year, he or she will simply check a box on their 2014 federal income tax return (using form 1040, 1040-A, or 1040-EZ). They will not receive or need to file any additional forms.
What is MEC?
MEC includes coverage such as employer-sponsored health insurance, Medicare, Medicaid, and Children’s Health Insurance Program (or Child Health Plan Plus in Colorado). For a detailed list of coverage that qualifies as MEC, see the IRS MEC page.
What Does Full-Year Coverage Mean?
An individual must have had MEC for at least nine months of the tax year (note: if someone was insured for at least one full day of a certain month, he or she is considered to have had coverage for that entire month).
Health Care https://www.viagrasansordonnancefr.com/viagra-ou-cialis/ Law: What’s New for Individuals & Families (IRS, 2015)
Questions from Connect for Health Colorado Customers
Purchasing a qualified health plan (QHP) through the Connect for Health Colorado marketplace is the only way to receive PTCs and Cost Sharing Reductions (CSRs) to lower the cost of health insurance. Therefore, marketplace customers will have a few extra steps when filing their taxes to determine their correct amount of PTCs.
STEP 1: Customers will need to determine if they received their PTCs in advance or if they will need to claim them at the end of the tax year. Here are the key differences between the Advanced PTC (APTC) and the PTC:
Advanced Premium Tax Credit
Premium Tax Credit
|Determined by the marketplace application||Determined by the IRS at tax filing|
|Based on projected household income and size||Based on actual household income and size|
|Payments are made directly to the taxpayer’s health insurance carrier||Payments are made directly to the taxpayer|
|Payments are made monthly throughout the coverage year||One payment is made at the end of the tax year|
STEP 2: Beginning early February 2015, marketplace customers and the IRS will receive Form 1095-A: Health Insurance Marketplace Statement from Connect for Health Colorado. This form will have the information marketplace customers will need to correctly file their taxes.
STEP 3: Customers will use the information from Form 1095-A to fill out Form 8962: Premium Tax Credit to determine their correct PTC amount for 2014. For help with filling out Form 8962, see the accompanying instructions from the IRS.
STEP 4: The IRS will reconcile the amount of the APTC with the actual amount of the PTC based on the customer’s tax return (note: only the APTC amount will be reconciled and not the CSR amount). If the customer’s APTC was:
- Less than the amount of the PTC determined on Form 8962, the customer’s refund will increase by that difference or the amount of taxes owed will be lowered.
- Greater than the PTC amount on Form 8962, the customer may see a decrease in his or her tax return or an increase the amount of taxes owed.
- There may be limitations to how much taxpayers will reconcile according to their income:
Household Income Percentage of Federal Poverty Level
Limitation Amount for Single Tax Filers
Limitation Amount for All Other Filing Statuses
|Less than 200%||$300||$600|
|At least 200%, but less than 300%||$750||$1,500|
|At least 300%, but less than 400%||$1,250||$2,500|
|400% or more||No limit||No limit|
Source: IRS Publication 5187 (2015).
- Tax Info (Connect for Health Colorado January, 2015)
- PTC Change Estimator – note: to use the estimator, the cost of the lowest-cost silver or benchmark plan used to determine the APTC will be needed. To get a general idea, in 2014, the average price of the benchmark plan in Colorado was $268 per month (Taxpayer Advocate Service, 2015)
- Marketplace Coverage & Your Taxes Infographic (Healthcare.gov, 2015)
- How Getting Financial Assistance to Pay for Health Insurance Affects Your Taxes (Families USA, 2015)
- My Tax Checklist – a useful list of what marketplace customers will need when filing their taxes (Healthcare.gov, 2015)
- Videos (IRS, 2015)
- Podcasts (IRS, 2015)
Questions from Individuals who were Uninsured in 2014
Individuals who did not have MEC in 2014 will have to determine if they qualify for an exemption or pay a fine on their 2014 taxes.
Who is Exempt from the Individual Shared Responsibility Mandate?
Some individuals may be exempt from the mandate based on their access to affordable coverage, religious beliefs, immigration status, incarceration, or tribal membership status. Those who did not have MEC for less than three months are achat sildenafil generique youtube also exempt from making a payment.
This infographic from the Kaiser Family Foundation provides easy-to-understand, comprehensive guidance on who could qualify for an exemption.
How to Apply for an Exemption
Some exemptions may only be obtained through the marketplace or only through the IRS, and some may be obtained by both. This chart from Enroll America provides detailed information on each type of exemption that was available to taxpayers in the 2014 coverage year and how it should be obtained. Note that in Colorado, marketplace issued exemptions should come from the federally-facilitated marketplace, www.healthcare.gov.
Taxpayers will then use Form 8965: Health Coverage Exemptions to claim their exemption. Here is what taxpayers will need to know to complete Form 8965:
- The price of the lowest-cost bronze plan available to him or her. For example, the lowest-cost bronze plan for a single 40-year old living in the Denver area was $186 in 2014.
- For exemptions that can only be claimed through the marketplace, taxpayers will need their Exemption Certificate Number (ECN) which will be provided by the marketplace.
- Taxpayers who can apply for an exemption directly through the IRS do not need an ECN.
For more information on completing Form 8965, see the accompanying instructions from the IRS.
What is the Individual Shared Responsibility Payment?
If the individual does not qualify for an exemption, he or she will make an individual shared responsibility payment on their tax return. For 2014, the payment is the greater of:
- One percent of the household income; OR
- $95 per adult and $47.50 per child under age of 18, with a family maximum of $285.
The payment is capped at the national average premium for a bronze level QHP available through the marketplace. The penalty is prorated to one-twelfth of the annual payment for each month without coverage.
The payment will also increase each tax year:
- 2015: $325 or two percent of the household income
- 2016: $695 per person or two and a half percent of income
- After 2016: the payment will be adjusted for inflation
- Tax Penalty Calculator (Tax Policy Center, 2014)
- No Health Coverage? What That Means for Your Taxes (Centers for Medicare and Medicaid Services, 2015)
- Videos (IRS, 2015)
- IRS Commissioner: Individual Shared Responsibility Provision
- Individual Shared Responsibility Provision: English | Spanish | ASL
- Podcast: Individual Shared Responsibility – Overview:English | Spanish (IRS, 2015)
Tax Preparation Assistance Sites
Just as health coverage enrollment sites can expect many tax-related questions, tax preparation assistance sites can also expect questions about health insurance. Partnerships between the two seem only natural, and may be integral in educating the public about the importance of getting insured and the new ACA provisions. Here are a couple resources to find free tax preparation assistance sites to refer clients or to form partnerships:
- Tax Help Colorado – A partnership between The Piton Foundation and the Colorado Community College System, Tax Help Colorado offers free tax preparation help to individuals earning less than about $52,000 per year. For more information, download the program flyer or click here.
- Volunteer Income Tax Assistance or VITA – IRS-sponsored programs operated by volunteers that provide free and confidential tax preparation assistance to those who qualify. Click here for more information and to find a site.