ACA and TaxSlayer for 2016 December, 2016

What’s New for TY2016 New Tools Earlier Issuance of 1095-B/C Forms Increase in Shared Responsibility Payments Change in Marketplace Exemptions

TaxSlayer Changes in the way ACA data is input Changes in style and verbiage Need to learn how to enter unusual scenarios in TS No Affordability worksheet or Market Coverage Affordability worksheet in TaxSlayer Use Bogart calculator instead

1095 – A, B, and C Forms 1095-A, B, and C (all must be provided by 1/31) Only certain employers are required to issue 1095C 1095C may also include data on employer offered coverage UPDATE: Forms 1095-B and C don’t need to be mailed until 3/31/17 this year only.

Shared Responsibility Payments Shared Responsibility Payments Increases 2.5% of income over the filing threshold or $695 per adult and $347.50 per child (under 18), limited to $2,085 for 2016 2017 Marketplace enrollment is 11/1/16 – 1/31/17 with special enrollment periods

SRP Common Errors Eligible for coverage exemption – did not claim Income below threshold Not lawfully present Coverage Gap Miscalculated SRP SRP on Dependent Returns

Exemptions New this year Exemption Code H – Member of a tax household born, adopted, or died during the year Marketplace will no longer be granting cetificates for certain exemptions. Lifetime ECN’s granted in 2014 and 2015 are still valid. These exemptions are claimed directly from the IRS on Part 3 of Form 8965 New marketplace Exemptions: Coverage considered unaffordable based on projected income Unable to renew existing coverage Certain Medicaid programs that are not minimum essential coverage

IRS Exemptions Members of a health care sharing ministry D Members of an Indian tribe or eligible for services through an Indian health care provider or the Indian Health Service E Incarceration F As of September 1, 2016, these exemptions will not be available from the marketplace. “Evergreen” exemptions can still be used. If someone already has an Exemption Certificate Number, use it.

Assigning Returns/ Training Required Detailed person-by-person triage early Assign to apprentice, experienced or master counselor Apprentice full coverage or full market exemption all year (95% of returns last year) Reviewer: experienced or master Experienced one or more exemption needed, SRP, PTC Reviewer: master Master complex affordability exemption, large SRP, large excess PTC

Resources P4491 – rewritten 2015 (not much new for 2016) P4491 – practice exercises at the end (also as separate P5157A) P4012 – how-to with TaxSlayer Forms and instructions: 8965, 8962 P974 Flowchart – One Support NTTC workbook – ACA exercises Bogart affordability calculator: http://cotaxaide.org/tools/ www.coveredca.com in California

TaxSlayer Questions Did you or your family have health insurance at any time in 2016? Did you purchase health insurance via HealthCare.gov or a State Marketplace? Verify Your Household Members Months Insured Did you receive an exemption certificate from a marketplace, or qualify for exemptions due to circumstances?

Here’s where Exemptions are triggered

TaxSlayer – Exemptions Only check this if the gross income exemption – and not the household income exemption -- applies [Currently, if you check this box, you will still be required to enter an exemption on the next screen.] Gross income for Line 7 All income received in the form of money, goods, property and services that is not exempt from tax, including any income sources outside the U.S. or from the sale of your main home (even if you can exclude part or all of it) Include only the taxable portion of Social Security benefits Include income or gains but not expenses or losses from Schedules C, D and F Do not include income of any dependents

TaxSlayer – Exemptions TaxSlayer is designed to automatically calculate household income below filing requirement. Currently, the calculation isn’t accurate because it doesn’t include income of dependents with a filing requirement. Links go to Marketplace tools

TaxSlayer – Exemptions Note: These exemptions aren’t correct. Careful: Know the exemption rules. TaxSlayer doesn’t stop you from making errors. Ex. Short coverage gap can be claimed for an unlimited number of months.

Affordability Exemption Takes you to Healthcare.gov to determine Bronze and Silver But not much use for California! Instead, go to: http://www.coveredca.com/apply/

Affordability Exemption NOTE: Nothing between these two pages to help determine affordability. Recommendation: Use the Bogart Affordability for all cases: A, G, threshold https://cotaxaide.org/tools/ACA%20Affordability%20Calculator.html

Income Below Filing Threshold Household income for Line 7 and SRP Adjusted Gross Income (AGI) Tax-Exempt Interest Excluded Foreign Income Form 1040, Line 37 Form 1040, Line 8b Form 2555, Lines 45, 50 Dependent Income Only if the dependent has a filing requirement Gross income for Line 7 All income received in the form of money, goods, property and services that is not exempt from tax, including any income sources outside the U.S. or from the sale of your main home (even if you can exclude part or all of it) Include only the taxable portion of Social Security benefits Include income or gains but not expenses or losses from Schedules C, D and F Do not include income of any dependents

Affordability: Marketplace Coverage If there is no employer coverage offer, consider the affordability of marketplace coverage You’ll need to determine the LCBP (and SLCSP only if income shows eligibility for PTC) Find these values at http://www.coveredca.com

Marketplace Coverage Affordability Worksheet Info Needed

Affordability Lowest-cost premium would have to cost more than 8.13% of household income Start by determining Household Income –AGI from line 37 + Tax-Exempt Interest line 8B + excluded Foreign Income + Dependent Income if the dependent had a filing requirement Eligibility for employee coverage If not eligible for employee coverage does the LCBP (after PTC’s) for all non-exempt members of the taxpayer’s family cost more than 8.13% of household income

IRS Exemptions: Affordability Exemption Insurance is considered unaffordable Lowest-cost premium would have cost more than 8.13% of household income A Start by determining household income Then determine the lowest-cost premium available to each person Adjusted Gross Income (AGI) Tax-Exempt Interest Excluded Foreign Income Line 37 IRS Form 1040 Line 8b Lines 45 and 50 IRS Form 2555 Household Income Any pre-tax deduction for ESI premiums Dependent Income Only if the dependent has a filing requirement If eligible for employer-sponsored insurance: As an employee: the lowest-cost self-only plan costs more than 8.13% of household income (Code A) As a member of the employee’s family: the lowest-cost family plan costs more than 8.13% of household income (Code A) If not eligible for an offer of employer-sponsored insurance: Lowest cost bronze plan (after PTCs) for all non-exempt members of the taxpayer’s family costs more than 8.13% of household income (Code A)

In General (But you still have to do the math)

The Last Resort…Marketplace Exemptions If no other IRS exemption applies, consider helping a client apply for a Marketplace exemption Application must be mailed and takes time for processing Write “Pending” if approval has not yet been received. Useful for: Religious conscience exemption (available only through the Marketplace) Hardship exemptions For exemptions that must be approved by the Marketplace, the FFM is processing exemptions for all states except Connecticut. Should I Make a Referral to Complete a Hardship Application? A referral to a health care assister is one option but it causes additional delay Consider helping the client complete the hardship application at your tax site No special health care knowledge is needed. Application requires: Name and contact info Dependents Documentation of exemption Taxpayer’s signature Hardship application @ https://www.healthcare.gov/exemption-form-instructions/

Scenario 1 Mary is employed and did not take her employer’s offer because she didn’t want an HMO (the only offer). She went to the marketplace to get insurance and found out it was pretty expensive –they would not give her APTC. So, she does not have insurance. Her AGI is $40,000 (no MAGI adjustments needed). What do you do? flowchart Start chart 1 Go to chart 2

Interview questions: Any easy exemption? How much would the employer coverage have cost? Say, $250 per month Say, $300 per month 8.13% of $40,000 is $3,252 0r $271 a month

Mary and John Interview determined: John (dob 6/6/1960) and Mary (dob 7/7/1965) have one dependent Jimmy (8/8/1990) who is not in school and has no job/income. Zip code 60647. Interview determined: No coverage No easy exemption No employer offer Not eligible for government coverage Dependent has no income or need to file No education benefits are being claimed LCBP: $794 SLCSP:$1,030 Affordability does not apply Total Tax and SRP with Jimmy: $5,699

John and Mary continued What if they don’t claim Jimmy? LCBP: $510 SLCSP: $662 Affordability does not apply Total tax and SRP without Jimmy: $5,611 ($88 savings) Alt 2: Jimmy is eligible for Medicaid LCBP: 794 LCSP: 662 Exemption applies to all Total tax (no SRP) $3,614

John and Mary cont’d Alt.3 Alt.4 Mary has an offer of self-only coverage from her employer that would have cost $400 per month and a family offer to cover John and Jimmy of $750 per month. 8.13% of $55,000 = 4,471.50 or $372.63/month Alt.4 Employer’s offer would cover Jimmy but not John. For John only : LCBP 283.58 SLCSP 367.93

Resources http://www.healthreformbeyondthebasics.org/aca-tax-webinar-ty2016-exemptions/ (Center on Budget and Policy Priorities) OneSupport-Tax Training-NTTC Webinars-NTTC TRS Webinars November 30 and December 2, 2016 (Sue’s ACA presentation starts at minute 19)