If you think that Halloween is scary, wait till you see what is going to be required for your 2014 income tax preparation for the Affordable Care Act!
The Affordable Care Act calls for each individual to have qualifying health insurance coverage for each month of the year. The health care act talks a lot about “the Individual Shared Responsibility Provision” What does that mean?
Starting in 2014, everyone must either:
Have minimum Essential Coverage (MEC) OR have a coverage exemption OR make a shared responsibility payment with the filing of their 2014 Federal income tax return
What is minimum essential coverage? It is whatever health coverage you might have, whether it be through an employer or if you purchased an individual policy or if you are covered through a government program like Medicaid or Medicare. Basically, DID YOU HAVE HEALTH INSRANCE COVERAGE ALL 12 MONTHS.
What Qualifies as coverage exemption? There is a list of 9 possible exemptions from not being required to have health insurance, but the few that will affect most taxpayers in our area are as follows:
- Anyone who makes so little income that they are not required to file an income tax return. For 2014 those thresholds are: MFJ $ 20,000, HOH $ 12,850, S $ 10,000. – No documentation need, however, the taxpayer must still file Form 8965 with their tax return if the individual files a return to get a refund of withholding to obtain an earned income credit.
- If a taxpayer had a gap in coverage of less than 3 months they are exempt from any penalty for not having coverage during that time.
- If the taxpayer had a hardship as defined by (Health and Human Services) – You would need documentation for this and send an attachment along with your 1040.
- If the minimum amount of obtainable health care coverage was ABOVE 8% of the “household Income”. – For instance, the average minimum “bronze level” coverage for an individual is $204 per month, OR $2,448 for the year. If the individual earned less than $30.600, he or she would be exempt because the minimum coverage would exceed 8% of their household income. You would need to get the exemption from the “marketplace” ie: healthcare.gov. And you better get it sooner than later because they are going to be VERY busy. Hmmmmmm…… remember how easy it was to get into that very busy website last fall????
ARE YOU SCARED YET?????? It becomes even more complicated!!!!
A payment for “shared responsibility” will be due with your 2014 federal income tax return if you did not have health insurance coverage and did not qualify for an exemption.
How is this payment calculated you ask? Individual shared responsibility payment calculations are based on the GREATER of the percentage of income, OR the flat dollar amount.
For families, the shared responsibility payment cannot exceed 3X the flat dollar amount.
The shared responsibility payment amount may not exceed an amount equal to the national average premium for bronze level qualified health plans
SAMPLE CALCULATION
Facts
- Married w/two children under 18
- No Health Insurance coverage
- Does not qualify for an exemption
- Household Income = $70,000
- Need to file a return for income above $20,300
Payment Calculation
- Percentage of income calculation (1% for 2014, 2% for 2015, 2.5% for 2016)
$70,000 – $20,300 = $49,700
1% of $49,700= $497
- Flat Dollar Calculation ($95 for each adult and ½ of $95 for each child equals $285)
The payment due with the tax return would be $497 – Greater of the 1% of income or flat dollar calculation.
IRS does not have any authority to place a lien to collect this money, however, they can take the amount due from any refunds due to you with the filing of your return.
What is the Premium Tax Credit?
- A refundable tax credit claimed on NEW Form 8962 filed with Form 1040
- To help eligible individuals and families pay for health insurance
- There are TWO payment options
Get an ADVANCE credit on your monthly health insurance premium payments. You must apply for coverage through the marketplace for the advance premium credit OR Get the refundable credit while filing your income taxes.
Who is eligible for the Premium Tax Credit? PTC
You may be eligible if you were NOT part of an employer sponsored plan, are within certain income limits, did not file a “married filing separate” income tax return, and cannot be claimed as a dependent on a another taxpayer’s tax return.
The eligible income thresholds are as follows: You must have income LESS THAN $45,960 for a single individual, $62,040 for a family of TWO, and $94200 for a family of THREE or more.
What Information Document will an individual receive?
Form 1095-A will be issued by the marketplace to anyone who has purchased health insurance in 2014.
This form (1095-A ) will provide the information necessary to complete the filing of Form 8962, which must be completed with the 1014 1040 form.
Form 1095-A will actually have 36 numbers that will need to entered onto Form 8962. Then there is a claim and reconciliation section, a calculation for repayment of excess of advance payments, shared policy allocations, and an alternative calculation for marriage. OH MY!!!!!!
I am thinking that my Halloween costume this year will be FORM 8962
It is the scariest thing that I have seen in a long time. Oraschin and Associates has attended seminars and webinars at be sure that we are prepared to tackle ALL of this additional tax reporting in the upcoming tax season. Feel free to contact us through our website (Oraschin and Associates) if we can answer any questions about the Affordable Health Care Act income tax reporting for you.