10a ACA pt2

Report
Patient Protection and
Affordable Care Act
(PPACA)
Better known as ACA
What ACA means to the taxpayer
and to the counselor – Part 2
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1
Three Situations to Consider
See charts in ACA Tab Pub 4012
1. Taxpayer, Spouse and Dependents had
insurance all year
2. Taxpayer, Spouse and Dependents had
NO insurance all year
3. Taxpayer, Spouse and/or Dependents
had insurance part of the year
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2
Taxpayer, Spouse and Dependents
Had Insurance All Year
Refer to Pub 4012 Tab ACA Page ACA-1 for more detail
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ACA Tab Pub 4012 – 2014 Federal Tax
Filing Requirements Thresholds
See Pub 4012 ACA Tab page ACA-6 for definition of gross income
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Taxpayer, Spouse and Dependents
Had Insurance All Year
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Examples – Minimum Essential
Coverage – ACA Tab Pub 4012
SEE PUB 4012 TAB ACA PAGE ACA-4 FOR ADDITIONAL QUALIFING COVERAGE
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Example – Does Not Qualify for Minimum
Essential Coverage – ACA Tab Pub 4012
SEE PUB 4012 ACA TAB PAGE ACA-4 FOR ADDITIONAL NONE QUALIFING MEC
*
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Verification of MEC
● Many taxpayers will not have tax document
that verifies MEC in 2014

Coverage reporting by employers and
insurers is voluntary for 2014; will be
mandatory starting in Tax Year 2015.
● In general, tax preparers will take clients at
their word on insurance coverage this year

Standard rules apply: Tax return is signed
under penalty of perjury
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8
MEC Questions
1. Sandy is covered under health
insurance offered by her spouse's
employer. Does she have minimum
essential coverage?
Yes - Employer-sponsored coverage is
generally minimum essential coverage
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9
MEC Questions
2. Peter's employer has a health plan
that is "grandfathered." Is Peter's
employer's health plan minimum
essential coverage?
Yes - Grandfathered group health
plans are minimum essential
coverage
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10
MEC Questions
3. James is retired and too young to be
eligible for Medicare. He received his health
coverage through a retiree health insurance
plan offered by his former employer. Is the
retiree plan minimum essential coverage?
Yes - Retiree health plans are generally
minimum essential coverage.
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MEC Questions
4. Valerie is a local government employee and
she enrolls in group health insurance coverage
offered by her employer. Does she have
minimum essential coverage?
Yes - Employer-sponsored coverage is
minimum essential coverage regardless of
whether the employer is a governmental,
nonprofit, or for-profit entity
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12
Tax Forms That Show MEC
Cost of employersponsored coverage
Medicare premiums
deducted from benefits
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1095-B – From Insurance Co where Taxpayer
purchased insurance – optional 2014
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Might See Form 1095-C – Optional 2014
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Minimum Essential Coverage
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MEC Purchased through
Marketplace – Form 1095-A
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Form 1095-A
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Taxpayer, Spouse and Dependents
Had Insurance All Year
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MEC Purchased Through
Marketplace
May be eligible for Premium Tax Credit
● Refundable Credit
● Must buy Health Insurance through Marketplace
● Household income within 100%*– 400% of
government federal poverty guidelines
* See F8962i page 5, line 6 for exceptions
● Exchange will send Form 1095-A to taxpayer by
1/31/15 to allow reconciliation on tax return
using Form 8962
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21
Premium Tax Credit Available 100% – 400%
Poverty Guidelines – Pub 4012 Tab ACA
Separate tables available in Pub 4012 Tab ACA Page ACA-8 for Alaska and Hawaii
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22
Income Limits Based on 2013 FPL
● One Individual
 $11,490 (100% FPL) – $45,960 (400% FPL)
● Family of two
 $15,510 (100% FPL) – $62,040 (400% FPL)
● Family of four
 $23,550 (100% FPL) – $94,200 (400% FPL)
Example – Based on 2013 FPL, family of four
could have household income up to and
including $94,200 and still be eligible for PTC
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Affordable Percentage Calculation
Example
● John is single and had household income
of $28,725
● FPL for single: $11,490 – 100%
● $28,725/$11,490 = 250%
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Expected Premium Contribution
Expected Premium Contribution
(% of Income)
10.0%
9.0%
8.0%
7.0%
6.0%
5.0%
4.0%
3.0%
2.0%
1.0%
0.0%
0%
50%
100%
150%
200%
250%
300%
350%
400%
450%
Household Income (% FPL)
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Affordable Percentage Calculation
Example
● John is single and had household income
of $28,725
● FPL for single: $11,490 – 100%
● $28,725/$11,490 = 250% (.0805)
● Benchmark premium plan – $5,200
● $28,725 x .0805 = $2,312 (John Paid)
● $5,200 - $2,312 = $2,888 PTC
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Calculation of Credit
● Credit claimed on Form 8962
● Need Benchmark Plan Premium for area

Form 1095-A
● Need Household Income + Federal
Poverty Line (FPL) for area
● Affordable percentage table value
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Household Income for PTC
● Modified adjusted gross income for
taxpayer (and spouse)
Plus
● MAGI for all other individuals for whom
claim personal exemption deductions and
are required to file a federal income tax
return
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Different Definitions of MAGI
Modified Adjusted Gross Income is AGI Plus:
Form 8962 (PTC)
Form 8965 (Exemptions/SRP)
● Foreign earned income
● Foreign earned income
● Tax-exempt interest
● Tax-exempt interest
● Social Security benefits
● Foreign housing
not included in income
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exclusion or any foreign
housing deduction
claimed
29
Form 8962 (Draft)
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31
Form 8962 (cont)
$2312
$5,000
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$2,888
$5,200
$2,888
$?????
32
Net Premium Tax Credit
$2,888
<$2,888
Form 1040
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Repayment of Excess Advance Net
Premium Tax Credit
$2,888
>$2,888
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Repayment of Excess Advance Net
Premium Tax Credit
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Question on Advance PTC
Roger's advance credit payments are $2,400. He is single with
no dependents, and lives in Mississippi. His household income
is over 400% of the FPL for a family size of one. How much of
his advance credit payments will be included as an additional
income tax liability on his tax return?
A $0
B $1,000
C $1,400
D $2,400
Answer: D - Because Roger's household income is over the
400% FPL, his additional tax liability is not capped by the
additional tax limitation table.
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Form 8962 Continued – See ACA
Tab in Pub 4012 for Worksheet
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Form 8962 Continued – See ACA
Tab in Pub 4012 for Worksheet
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1. Question on PTC
Judy is single with no dependents.
In December 2013, Judy enrolled through the
Marketplace in a qualified health plan for 2014.
On July 14, 2014, Judy enlisted in the Army and
was immediately eligible for government
sponsored minimum essential coverage
For what period is Judy able to claim a premium tax
credit (if she meets all of the eligibility criteria)?
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1. Answer to Question on PTC
A The entire year
B January through June
C January through July
D Judy is not eligible for the premium tax
credit
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2. Question on PTC
Piper’s income is 300% of the FPL for her
family size. For this tax year, she purchased
health insurance through her employer. Is
she eligible to take the premium tax credit
for herself?
Answer: No. The coverage must have
been purchased through the
Marketplace.
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3. Question on PTC
Patrick is single and has no dependents.
In November 2013, the Marketplace projected his
2014 household income to be $27,825
Patrick enrolled in a qualified health plan
The Marketplace determined he was eligible for
advance payments of the premium tax credit, but
he decided to claim the credit on the return
Patrick began a new job in August 2014 and
became eligible for employer-sponsored coverage
on September 1st.
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3. Question on PTC
● Is he eligible for the premium tax credit?
● Answer: Since Patrick became eligible
for employer-sponsored coverage in
September, he is eligible for a premium
tax credit from January through August
of 2014.
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4. Question on PTC
Harry purchased insurance through the
Marketplace. What documentation will he
receive to prepare his tax return?
Answer: He will receive Form 1095-A.
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44
5. Question on PTC
Changes in circumstances that can affect the
amount of the premium tax credit include:
A Decrease in household income
B Marriage
C Birth of a child
D Losing employer-sponsored health care
coverage
E All of the above
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Summary – Taxpayer Who Had
Insurance All Year
● If Taxpayer had minimum essential
coverage and insurance was purchased
through the Marketplace, there is
potential for Premium Tax Credit
● Premium Tax Credit is calculated on Form
8962 with information provided by the
Marketplace on Form 1095-A
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46
Taxpayer, Spouse and Dependents Had
No Insurance All Year
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47
Who needs an exemption?
● Screen each individual on tax return who did not have MEC
for the entire year exemption eligibility

Start with exemptions that can be claimed on tax return
 Much simpler than applying for Marketplace applications
on paper

Some exemptions cover specific months; some are good all
year

Some exemptions need advance approval from Marketplace

Some exemptions represent “transition relief” to help
taxpayers in 2014 only
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Form 8965
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Marketplace Granted Exemptions
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Form 8965 Part II Taxpayer
Selected Exemptions
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Question – Coverage Exemption
If Randy is not required to file a federal
income tax return, does he need to claim an
exemption from the individual shared
responsibility provision?
Answer - If Randy is not required to file a
because gross income is below filing
threshold, he is exempt from the shared
responsibility provision. If he files return
anyway, he should claim the exemption on
Form 8965.
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Form 8965 Part III Exemptions Claimed on
the Return
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Form 8965 Part III Exemptions
Claimed by the Taxpayer
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Part III Exemptions From the
Marketplace or on Tax Return
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Types of Exemptions
Does the taxpayer already have an exemption from the Marketplace?
YES
Enter on Form 8965,
Part I
YES
Enter on Form 8965,
Part II
NO
Does the taxpayer have income below the filing threshold?
Applies to the entire household for the entire year.
NO
Exemptions for individuals (duration varies):
Exemption
Exemption Code
Exemptions for individuals that have a
limited duration:
Certain noncitizens and citizens living abroad
Code C
Exemption
Health care sharing ministry
Code D
Short coverage gap
Code B
Federally-recognized Indian tribe or eligible
for IHS
Code E
Coverage by May 1 or
“in-line”
Code G
Limited benefit Medicaid
Code H
Non-calendar year
coverage
Code H
Incarceration
Code F
Insurance is unaffordable
Code A
Aggregate cost of insurance is unaffordable
Code G
NO
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Exemption Code
NO
Does anyone qualify for a
Marketplace hardship exemption?
YES
apply
Enter on Form 8965,
Part I
56
Taxpayer, Spouse and Dependents Had
No Insurance All Year
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57
Individual Shared Responsibility
Payment (ISRP)
Year
Full-year payment is greater of:
2014
1% of income above tax filing
threshold (up to cap*)
$95 per adult, $47.50 per child
(up to cap of $285)
2015
2% of income above tax filing
threshold (up to cap*)
$325 per adult, $162.50 per child
(up to cap of $975)
2016
2.5% of income above tax filing
threshold (up to cap*)
$695 per adult, $347.50 per child
(up to cap of $2,085)
> 2016
Values increased by a cost-of-living adjustment
* Capped at national average premium of a bronze level plan purchased through a Marketplace.
For 2014, the cap is $2,448 per individual ($204 per month per individual), with a maximum of
$12,240 for a family with five or more members ($1,020 per month for a family with five or
more members).
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Calculating the ISRP– Partial Year
Coverage
● ISRP is prorated for number of months without
coverage during tax filing year
Uninsured and not
eligible for exemption
Jan
Feb
Mar
Apr
May
Gets job with
employer coverage
Jun
Jul
Aug
Sep
Oct
Nov
Dec
Without coverage
for 7 months
ISRP = 7/12 of annual calculation
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Example: Reyes Family (MFJ)
Income: $39,500 (168% FPL)
Filing Status: Married, filing jointly
Adults: 2 (both uninsured)
Children: 2 (both uninsured)
Tax Filing Threshold:
$20,300
Months Uninsured:
12
ISRP Calculation:
1. $39,500 - $20,300 =
$19,200
x 1%
$192.00
2. $95 x 2 adults
ISRP for
+ $47.50 x 2 children = $285.00 2014
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60
Shared Responsibility Payment
Entered on 1040 Ln 61
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Summary – Taxpayer Had No
Insurance All Year
● If the taxpayer qualifies for exemption –
Form 8965 must be completed
● If taxpayer does not qualify for
exemption, then individual shared
responsibility payment (ISRP) may be
required on 2014 Form 1040
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ISRP Partial Year Essential
Health Insurance Coverage
● Refer to ACA Tab Pub 4012

Worksheet for partial year coverage (ACA-9)

2014 National Average Bronze Plan Premium
Table (ACA-10)

2014 Federal Tax Filing Requirement
Thresholds (ACA-6)
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TaxWise computation of ISRP
using 1040 Wkt8
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Question - ISRP
Keith and Kathy are married with dependent
children. Must they all be covered under the
same policy or plan to satisfy the individual
shared responsibility provision?
Answer - They do not have to be covered
under the same policy or plan. However,
they must all have minimum essential
coverage or qualify for an exemption, or
Keith and Kathy will owe a shared
responsibility payment when they file a
return.
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TaxWise and ACA
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Counselor verifies full year coverage
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1. Full-Year Coverage for Entire
Household
● Check box on 1040 Ln 61
No further action required for ACA
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2. Otherwise… If
● Any member of taxpayer’s household
has MEC for less than entire year -OR● Insurance was purchased through the
Marketplace -OR● Exemptions are applicable
Select 1040 Wkt8

Focal point for ACA
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Jeremy Clark Interview/Intake
Sheet Part VI
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TW14 1040 Wkt8
Determine SRP
● Check [Full] or months without MEC
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SRP Calculated on Wtk8
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SRP Transferred to 1040 Ln 61
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Gail Hudson Intake/Interview
Sheet Part VI
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Taxpayer qualifies for an
exemption
● Taxpayer purchased insurance through
Marketplace beginning in March for a
possible exemption in Jan and Feb
When Exm is checked, Form 8965 is loaded into the tree
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Without Coverage < 3 Months
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Complete Form 8965 for Exemption
for Jan and Feb
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4. Eligible for Premium Tax Credit?
When Mkt is checked, Form 8962 is loaded into the tree
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PTC Calculated from 2014 Return
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Marketplace sends Form 1095-A
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Enter Information from Form 1095-A
on Form 8962
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Calculated PTC Less Than Advance
PTC
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Repayment of Excess Advance PTC –
1040 Ln 46
Form 8962 Part 3
1040 Pg 2
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If Net PTC – 1040 Ln 69
Form 8962 Part 3
1040 Pg 2
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Keys to successful application of ACA
● Carefully complete Part VI of the
Intake/Interview Sheet using
probing questions
● Use the [ACA Resource Tool for Tax
Counselors] laminate to determine
steps needed
● Use TW 1040 Wkt8 as the starting
point if full year coverage isn’t
applicable
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Intake/Interview & Quality Review
Sheet – Form 13614-C
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87
Health Insurance Interview
Questions
● Did you, your spouse and all dependents have
Medicare or Medicaid all or part of the year?
 If only part of the year what months were
covered?
● Did you, your spouse and all dependents have
health insurance that meets the Minimum
Essential Coverage all or part of the year?
 If only part of the year what months were
covered?
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Health Insurance Interview
Questions
● Did you, your spouse and all
dependents purchase health
insurance through the Marketplace?

If yes, Form 1095-A is required
● Did you, your spouse and all dependents qualify
for an exemption for all or part of the year?

If yes, provide exemption certificate number(s)
or exemption code(s) received from the IRS or
Marketplace
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Counselor Interview Flow Chart
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90
Summary - ACA Steps in Tax Return
Step
1
Did everyone on the tax return have coverage all year?
YES
NO
Step
2
See Step 2. Determine whether any person on the return can be exempt
from penalty. (Form 8965)
Is anyone on the tax return eligible for an exemption from the coverage
requirement for any month during the year?
 Can this exemption be granted by the IRS on the tax return?
OR
 Does this exemption require approval from the Marketplace?
Step
3
If no coverage and no exemption, calculate Individual Responsibility
Payment using tax worksheet.
Step
4
If someone on the tax return purchased coverage in the Marketplace and
qualifies for a premium tax credit, complete Form 8962.
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Information to be distributed to
taxpayers IN ADVANCE
● What health care information do I need to bring
with me this year to support tax preparation?

Bring health insurance coverage information for
you, your spouse and all dependents

If you don’t have full year coverage, bring
information on monthly coverage

If you purchased health insurance through the
Marketplace/Exchange you must bring Form
1095-A with you. You should receive this form by
1/31/15.

Bring any health care exemptions received from
the IRS or the Marketplace.
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Exemption Status
● Exemptions – The most likely area for
change
● Form 8965 instructions – Not expected
to be finalized until late December /
early January
● Hardship options have been identified
by the Health Insurance Marketplace
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Marketplace Granted Exemptions
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From Health Insurance Marketplace Form OMB No. 0938-1900
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Center on Budget and Policy
Priorities (CBPP)
http://www.healthreformbeyondthebasics.org/home/for-tax-preparers/
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Affordable Care Act
Questions?
Comments…
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2014 Regional Meeting
101

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