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This post is a follow up to the numerous posts I've written about the Affordable Care Act (ACA) over the last two years. It's primary purpose is to let you know how to handle the upcoming tax year. It's not about getting insurance, or using the marketplaces. It's really about three things:
1. What to do if you (or a member of your household) didn't have health insurance all of 2014.
2. What to do if you had health insurance, and received a subsidy through the marketplace (www.healthcare.gov or a state exchange).
3. What to do if you (and your household) had health insurance all year but did not receive a subsidy (Premium Assistance Tax Credit).
If you want more than this, feel free to check out the other ACA posts linked at the bottom of this post.
First, a quick definition:
Household: Your household includes you and your spouse (if filing Married Filing Jointly). It also includes everyone you claim, or could have claimed on your tax return as a dependent, unless someone else claimed them, (or could have claimed them, and had a higher right to claim them). What we mean about could have claimed and had a higher right is tie-breakers. Tie breakers are used when two people can both claim a dependent, and can't agree who should claim them. They generally go like this (in order):
Parents win over non-parents (step parent has equal weight as birth parent)
If both are parents (or non-parents) the one the child spends the most nights with wins
If the number of nights are the same, the higher income wins.
As a general rule, every member of your household as defined above has to have minimum acceptable health insurance in order for you to avoid having to pay a penalty (called a shared responsibility payment - but we're going to call it the penalty.)
1. What to do if you (or a member of your household) didn't have health insurance for 2014:
Unless you don't have to file a tax return AND aren't going to file one, you'll find yourself on Form 8965. This form is going to see if you qualify for an exemption or hardship, and then calculate your penalty if you don't qualify.
Some exemptions and hardships have to be granted through the marketplace at www.healthcare.gov. I can't help a lot with these, so you should go to the website ASAP if you think you qualify. These are:
a. You are a member of a health sharing ministry, a recognized Indian tribe, incarcerated or a member of certain religious sects.
b. You are experiencing circumstances that prevent you getting coverage
c. You don't have access to affordable coverage based on your projected income
d. You are not eligible for Medicaid solely because the state you live in does not participate in the ACA Medicaid expansion
e. Your health plan was not renewed and you consider the other plans unaffordable
The others exemptions and hardships are claimed on Form 8965. These are:
a. Your premiums would be more than 8% of your household income
b. You had only one coverage gap and it was less than three months
c. You lived abroad the whole year (you get a little time in the U.S., but not much)
d. Your income is below that which requires you to file a tax return
e. For 2014 only - you could have signed up for an employer plan in 2013 that ended in 2014, but didn't (basically you missed a 2013 enrollment period for coverage in 2014.)
f. You got coverage through the marketplace during the enrollment period but it didn't kick in before the start of 2014
g. You got CHIP coverage but have a coverage gap at the beginning of 2014
If you don't qualify for a hardship or exemption, you use Form 8965 to calculate your penalty. If you and your household were uncovered the entire year, your penalty is the LARGER of 1% of your income or $95 per adult and $47.50 per child in your household. If there are a lot of people in your household such that the total would be more than $285, that's the maximum for family size.
If you had coverage for some of the year, it gets quite complicated, and you will end up filling out a checklist by months for each member of your household, and calculating the total number of "person-months" of non coverage, dividing it by the number of household members x 12, and then multiplying it by the penalty from the above paragraph. This is OVERSIMPLIFIED and can change if people weren't in your household for a full year. Here's a simplified example:
You and your spouse are the only members of the household. You didn't have insurance for 4 months, and your spouse didn't have it for 5 months. That's 9 "person-months" of non-coverage. Two people times 12 months is 24 months, so you divide 9 by 24, and multiply it by the LARGER of 1% of your income or $190 ($95 times 2 adults). Again, this is OVERSIMPLIFIED - your software or tax guy will probably make this easier to work out.
The important thing is that you need to know when you were covered and when you were not - for every member of your household. If you had coverage for a single day during the month, you are considered covered the whole month. Next year, your insurance company MUST send you a 1095 form (A, B, or C) showing your months of coverage. This year it's optional, so you may have to figure it out yourself. Know this information BEFORE you try to do your taxes.
2. What to do if you had health insurance, and received a subsidy (Premium Assistance Tax Credit) through the marketplace.
First of all, if you didn't have this coverage the whole year, for every member of your household, you'll need to read the section above as well as this section.
If you're thinking of filing Married Filing Separately, read this post NOW!
If you got a subsidy, you'll use Form 8962 to figure out the subsidy you qualified for, and compare it to the subsidy that was sent to your insurance company. If you didn't get enough, you'll get the extra on your tax return. If you got too much, you might have to pay some back! As long as your income is less than 4 times the poverty level, this repayment is capped at between $300 and $2500, depending on your income.
You'll receive a Form 1095-A from your insurance provider detailing the coverage you received, who you received it for, how much it cost, and how much your subsidy was. You'll use this form, and the information from your tax return, to fill out Form 8962 and calculate your credit amount. If any other member of your household is required to file a tax return, you will need information from their return as well. Your tax preparer or software should handle it smoothly, but you MUST wait to get Form 1095-A before you can file your 2014 tax return.
3. What to do if you (and your household) had health insurance all year but did not receive a subsidy (Premium Assistance Tax Credit).
The only thing you really need to do is to make sure it qualifies as minimum essential coverage. Chances are good that it does, unless you got some special coverage that doesn't cover all the required things. Insurers may, but are not required, to send you a 1095 form (A, B, or C) telling you if you are covered. Next year they will be required to send it. Here's some good details to help you be sure:
a. If you're active duty military, your coverage and the Tricare for your family counts
b. Medicare Part A counts
c. Medicaid counts (with very limited exceptions)
d. Retired military Tricare coverage counts
e. Most employer sponsored coverage is going to count - check with your employer.
f. Insurance through the marketplace counts
g. Most student health plans count
h. Most private insurance plans count, and they should have told you when you bought it if it doesn't
i. Children's Health Insurance Program (CHIP) counts
j. Comprehensive VA coverage counts (but not limited coverage for specific disabilities)
k. State high risk pools count (but next year they might not, depending on the coverage)
l. Peace Corps coverage counts
m. DOD NAF insurance counts
If the above list doesn't fully tell you if it counts, your health insurance provider can tell you if it counts. If it turns out the coverage doesn't qualify, read the first section and figure out your penalty. If it does qualify, you'll just indicate that you and your household were covered all year and you'll be done.
Your tax guy or software is only going to ask you if you had coverage (though a professional can help you determine if it qualifies for minimum essential coverage), but you will pretty much need to know before you try to prepare your taxes for 2014.
Links to my posts and other helpful stuff:
http://supertaxgenius.blogspot.com/2013/01/helathcare-law-obamacare-affordable.html
http://supertaxgenius.blogspot.com/2013/10/affordable-care-act-obamacare-update.html
http://supertaxgenius.blogspot.com/2014/09/obamacare-affordable-care-act-and.html
http://supertaxgenius.blogspot.com/2013/11/weird-obamacare-strategies-and.html
http://supertaxgenius.blogspot.com/2013/11/weird-obamacare-strategies-and_16.html
http://supertaxgenius.blogspot.com/2013/11/weird-obamacare-incentives-and.html
http://supertaxgenius.blogspot.com/2013/11/weird-obamacare-incentives-and_29.html
http://supertaxgenius.blogspot.com/2013/12/this-is-fifth-and-definitely-not-last.html
http://supertaxgenius.blogspot.com/2013/12/weird-obamacare-strategies-and.html
IRS information
I picked out my family's plan on ehealthinsurance.com and beginning October 2013 (or so), ALL plans were labeled with a bronze, silver, gold, or platinum badge to show you where any particular plan fell in the ACA categories. I know it's not the same level of assurance as, say, an independent audit but I went ahead and relied on it because what else is there?
ReplyDeleteAnyway, my point was that if you buy your insurance independently, it should have been fairly obvious: 1) that your plan was ACA compliant (they don't seem to have any plans that AREN'T ACA compliant anymore); and 2) which level your plan is.
I agree. Most people will have very little difficulty assuring themselves that their plan is compliant. I just wanted to cover as many bases as possible.
ReplyDeleteMost confusing part is for self employed individuals (especially if both husband and wife are) and received care through the Marketplace. Complicate it even more if the income level is not particularly high for family size. Even the IRS on page 21 of Publication 974 states: "Because the amount of the self employed health insurance deduction is based on the amount of the PTC and the amount of the PTC is based on the amount of the deduction, a taxpayer who may be eligible for both may have difficulty determining the amounts of those items. THEY AREN'T KIDDING! Used H & R Block software and couldn't efile. Talked to them and they said their programmers couldn't figure out how to put it in so they wanted me to go to their office. Still trying to determine what to do.
ReplyDeleteYep. It's a mess. The reason is that you have to use 3 worksheets to calculate everything and then the results effect everything you just did, so you start over with the new numbers and go through the worksheets again. You repeat this until the numbers stop changing. I can understand why the programmers are frustrated.
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