Utah APA State Conference

Utah APA State Conference
While the Department of Health and Human Services, or “HHS,” is the lead agency for administering the Affordable Care Act, the IRS is responsible for administering the tax provisions included in the Act. Today’s session will provide information about two Affordable Care Act provisions affecting individual taxpayers – the individual shared responsibility provision, or ISRP, and the premium tax credit, or PTC. We will discuss reporting health care coverage, claiming coverage exemptions and making individual shared responsibility payments. We also will talk about claiming the PTC and the requirement for taxpayers to reconcile advance payments of PTC when they file. The session will also include information about health care information reporting Forms 1095 A, B and C. READ STATEMENTS ALOUD: The information contained in this presentation is current as of XXX XX, 2016. Visit IRS.gov for tax forms, instructions, and general filing information. For all the latest information about the tax provisions of the Affordable Care Act, visit IRS.gov/aca. Solicit for Tax Forum Focus group volunteers in New Orleans and Chicago.

Disclaimer The information contained in this presentation is current as of April 6, For the latest information about tax provisions of the Affordable Care Act, visit IRS.gov/aca. READ STATEMENT ALOUD: The information contained in this presentation is current as of April 6, 2016 and it should not be considered official guidance. For the latest information about tax provisions of the Affordable Care Act, visit IRS.gov/aca.

Individuals and Families
The Health Care Law and Taxes for Individuals and Families While the Department of Health and Human Services, or “HHS,” is the lead agency for administering the Affordable Care Act, the IRS is responsible for administering the tax provisions included in the Act. Today’s session will provide information about two Affordable Care Act provisions affecting individual taxpayers – the individual shared responsibility provision, or ISRP, and the premium tax credit, or PTC. We will discuss reporting health care coverage, claiming coverage exemptions and making individual shared responsibility payments. We also will talk about claiming the PTC and the requirement for taxpayers to reconcile advance payments of PTC when they file. The session will also include information about health care information reporting Forms 1095 A, B and C. READ STATEMENTS ALOUD: The information contained in this presentation is current as of XXX XX, 2016. Visit IRS.gov for tax forms, instructions, and general filing information. For all the latest information about the tax provisions of the Affordable Care Act, visit IRS.gov/aca. Solicit for Tax Forum Focus group volunteers in New Orleans and Chicago.

Individual Shared Responsibility
Key tax provision that affects everyone’s federal income tax return is the Affordable Care Act’s Individual Shared Responsibility Provision or ISRP Infographic that we used this year during the filing season Since 2014, everyone claimed on a tax return must: Have qualifying health care coverage (called minimum essential coverage, or MEC); or Claim an exemption from the coverage requirement; or Make a shared responsibility payment Most taxpayers may only need to check a box to report that everyone on the return had coverage all year. Others may need to claim exemptions or report an SRP for months without coverage or an exemption. We will also talk about the health care information forms 1095-A, B and C. All taxpayers who had MEC for a month should receive one of these forms verifying coverage and keep it with their tax records. Report Health Care Coverage Claim Exemption from Coverage Make Shared Responsibility Payment

Reporting Coverage This check box should be familiar to you from the filing season. Form 1040, Line 61 allows the taxpayer to attest to having coverage by using the checkbox indicating a full year of coverage. MEC can be similarly reported on Form 1040-A and Form 1040-EZ. If your client can be claimed as a dependent, do not check the box on this line. Leave the entry space blank. For any month in the year someone on the return doesn’t have coverage or a coverage exemption, your client must make a shared responsibility payment (or SRP) for those months when filing their income tax return. Note about returns where taxpayer did not check the box and everyone on the return had coverage all year, no need to amend the return just to check the box to indicate full year coverage. If the taxpayer checked the box incorrectly, do not amend the return only to uncheck the box. IRS will send a letter and your client will need to respond to the letter. Remind your clients that they will have to report health care coverage every year on their return and they should keep their health insurance coverage documents with their other tax documents. Up next – what minimum essential coverage means, and who may be exempt from the coverage requirement Check box and leave entry space blank if everyone on the return had coverage for the full year

Minimum Essential Coverage
Offered by an employer, COBRA and retiree coverage Purchased through private insurance or Health Insurance Marketplace Provided by government-sponsored programs, including veteran’s coverage, CHIP and most Medicare and Medicaid Internal Revenue Code Section 5000A (f) spells out what types of coverage qualify as Minimum Essential Coverage or MEC. The good news is that the vast majority of people probably have coverage which is considered minimum essential coverage. Examples of minimum essential coverage include: • Health insurance coverage provided by an employer, including COBRA plans and retiree coverage. This category covers most group health plans, both insured and self-insured, provided by employers for the benefit of employees and their dependents. • Health insurance purchased through the Health Insurance Marketplace, the one-stop online health insurance shop where your clients may qualify for financial assistance also known as the premium tax credit. • Coverage provided under a government-sponsored program such as Medicare Parts A and C, most Medicaid coverage, the Children’s Health Insurance Program or CHIP, and health care programs for veterans and active military personnel and their families such as TRICARE. • Health insurance purchased directly from a private insurance company. Minimum essential coverage does not include coverage providing only limited benefits, such as: • Stand-alone vision and dental insurance • Workers' compensation • Accident or disability income insurance • Medicaid plans that provide limited coverage such as only family planning services, or only treatment of emergency medical conditions. U.S. citizens who are residents of a foreign country for an entire year, and residents of U.S. territories, are considered to have minimum essential coverage for the year. If your clients have insurance coverage shown on this slide, they do not need to purchase any other coverage to satisfy the shared responsibility provision. Again - Most individuals in the United States have health coverage today that qualifies as MEC, and will not need to do anything more than check the box on their tax return and make sure they continue to have coverage. For those individuals who do not have coverage, you may refer them to the Health Insurance Marketplace at HealthCare.gov to assess their eligibility for financial assistance and find minimum essential coverage that fits their budget. For more information on the types of coverage that qualify as minimum essential coverage and those that do not, as well as information on certain coverage that may provide limited benefits, visit the MEC page on IRS.gov/aca.

Information Statements
Marketplace - Form 1095-A, Health Insurance Marketplace Statement Insurers - Form 1095-B, Health Coverage Large Employers – Form 1095-C, Employer-Provided Health Insurance Coverage and Offer Information reporting statements about 2015 health coverage were – or should have been - sent to your clients between late January and early April for some or all months of the year for the taxpayer, their spouse and dependents. Forms 1095 include information about the coverage, who was covered, and when during the year. Clients may receive one or more of these forms for the tax year depending on who provides their healthcare coverage, or if they have more than one provider during the year, or if the taxpayer, spouse and dependents have different insurers. Form 1095-A is issued by the Marketplaces to individuals who enrolled in coverage through the Marketplace. The deadline for the Marketplace to provide individuals with Form 1095-A is February 1. If your client or someone on their tax return enrolled in Marketplace coverage, they should receive a Form 1095-A and should wait to file their tax return until they receive that form. Most taxpayers can access their online Market place for their Form 1095-A information. Form 1095-B issued by Health Insurance providers to individuals they cover. Form 1095-C issued by certain large employers to employees showing what coverage was offered to the employee. Employers that offer health coverage referred to as “self-insured coverage” send this form to individuals they cover. The deadline for insurers, other coverage providers, and certain employers to provide Forms 1095-B and 1095-C to covered individuals for tax year 2015 only was extended to March 31, Some taxpayers may not have received a Form 1095-B or Form 1095-C by the time they were ready to file their 2015 tax return. While the information on these forms may assist in preparing a return, they are not required; it is not necessary to wait for Forms 1095-B or 1095-C in order to file. Unlike Forms 1095-B and C, the IRS did not extend the due dates for Health Insurance Marketplaces to issue Forms 1095-A. Taxpayers do not need to send any Form 1095 to the IRS as proof of their health coverage when they file. However, they should keep any documentation with other tax records. The IRS does not issue any of these forms and cannot provide you or your clients with a copy of any of these forms. For tax year 2016, all Forms 1095 A, B and C are expected to be furnished to your clients in early February.

Form 8965 Health Coverage Exemptions
If your client or anyone on their tax return qualifies for a coverage exemption or the Marketplace granted a coverage exemption, you claim or report it on the return by filing Form 8965, Health Coverage Exemptions, when you file. Taxpayers can claim most exemptions when they file. However, they must apply for certain exemptions in advance through the Health Insurance Marketplace, Your client may be exempt if: The minimum amount they must pay for the annual premiums is more than 8.13 percent of their household income They had a gap in coverage for less than three consecutive months They qualify for an exemption for one of several other reasons, including having a hardship that prevents them from obtaining coverage, or belonging to a group explicitly exempt from the requirement I’d like to emphasize that the IRS accepts requests for an exemption from coverage only on a Form 8965 filed with an income tax return. IRS does not grant a coverage exemption by phone or correspondence in advance. Some exemptions can be granted only by the Marketplace – specifically, the exemptions for Members of a recognized religious sect conscientiously opposed to accepting insurance benefits and for certain hardships as defined by HHS. Exemption applications are available online and should be submitted as soon as possible. Individuals granted an exemption by a Marketplace will receive an Exemption Certificate Number, or ECN, that they must report to the IRS on Form 8965 when they file their income tax return. Taxpayers who are not required to file an income tax return because their income is below the filing threshold are exempt from the ISRP. Taxpayers do not need to file a tax return solely to report health care coverage or to claim an exemption if they are not otherwise required to file. However, if they are not required to file a tax return but choose to file, you should claim the coverage exemption and file Form 8965, Health Coverage Exemptions, when you file the tax return. Only one Form 8965 should be filed for the household and will be used to claim all individual and household coverage exemptions on the return. You can use our Interactive Tax Assistant tool, Am I Eligible for a Coverage Exemption or Required to Make an Individual Shared Responsibility Payment? to determine if your client is eligible for a coverage exemption. It’s on IRS.gov - search I-T-A. Recent data indicates that some taxpayers were eligible for an exemption that they did not claim and made an SRP that they did not owe. Common missed exemptions are: • The exemption for Gross or Household income below the filing threshold. • The exemption for individuals who are considered to be not lawfully present for purposes of the ACA (e.g. DACA or Dream Act). • The exemption for short (less than 3 full months) coverage gaps. Claim most exemptions at time of filing Report Marketplace granted exemptions

Making an Individual Shared Responsibility Payment
Taxpayers will owe an ISRP for anyone on the return who did not have: MEC for every month of the year or Coverage exemption for any month without MEC Use Form 8965, Health Coverage Exemptions, worksheet to calculate ISRP So now that we have discussed Health Coverage exemptions, when would an individual need to make a payment? If, for any month, a taxpayer (or any of their dependents claimed on the return) did not have MEC or qualify for a coverage exemption, he or she will need to make a shared responsibility payment or SRP when filing their tax return. The SRP amount due is reported on Form 1040, line 61 in the “Other Taxes” section, Form 1040A – Line 38 in “Tax, Credits and Payments” section, and Form 1040-EZ – Line 11 in the “Payments, Credit and Tax” section. Next, we’ll get into how the payment is calculated. In general, the annual payment amount is the greater of two amounts: a percentage of your client’s household income or a flat dollar amount. For 2016 and subsequent years, the percentage amount will be 2.5 percent of household income. For 2016, the flat dollar amount will be $695 per adult (maximum of $2,085 for a family). After 2016, the amounts may increase with cost-of living adjustment. These figures are halved if the individual without coverage is under 18 as of the beginning of the month. (If asked – 2015 percentage amount was 2 percent of household income. And the flat dollar amount ($325 per adult) was limited to maximum of $975 per household.) Taxpayers must know their household income and applicable income tax return filing threshold to calculate the SRP amount owed. See the Filing Requirement Threshold information on IRS.gov/aca. Taxpayers can use the worksheets in the Instructions to Form 8965 to figure the SRP amount due. The SRP is capped at the national average premium for a bronze level health plan available through the Marketplace. Your client will owe 1/12th of the annual payment for each month anyone on the return does not have either coverage or a coverage exemption. Check HealthCare.gov later this year for the 2016 amount. The payment computation, to put it as simply as possible, is the greater of a percentage of income or a flat dollar amount, but no more than the national average premium for bronze level coverage. Using tax preparation software simplifies the calculation of the shared responsibility payment and completion of Form 8965 to report and claim exemptions. If your client did not have coverage and their income was below the tax filing threshold for their filing status, they qualify for a coverage exemption. Taxpayers do not have to file a tax return solely to claim this exemption. However, if they do file a return, file Form 8965, Health Coverage Exemptions, claim a coverage exemption and they should not make a payment with their return. Some taxpayers may miscalculate their SRP for the following reasons: • Adding in dependent MAGI when it was not required (e.g. must have income above the filing threshold) • Not limiting the SRP calculation to the National Average Bronze plan limit, the correct percentage of income or the maximum flat dollar amount Some returns were “silent” on the coverage requirement and may owe a shared responsibility payment. The IRS will be corresponding with taxpayers who did not report coverage, and exemption, or an SRP on their return. Dependents who did not claim their own personal exemption should not have reported an SRP on their return, even if they did not have coverage. The person claiming their exemption is responsible for reporting coverage, exemptions, or an SRP on their behalf. For more information about determining the amount see IRS.gov/aca - Calculating the Payment page. You can also use the Individual Shared Responsibility Payment Estimator tool from the Taxpayer Advocate Service which can help you estimate the amount your client may have to pay. If your client owes an SRP, the law prohibits the IRS from using liens or levies to collect any SRP. If taxpayers owe the SRP, the IRS may offset that liability with any tax refund that may be due to them.

ISRP Common Errors Eligible for coverage exemption - did not claim
Income below filing threshold Not lawfully present Coverage gap Miscalculated SRP SRP on dependent returns The vast majority of filers were able to check the box on Line 61 of Form 1040 stating that they had insurance coverage for the full year. Many taxpayers claimed exemptions using Form The vast majority of exemptions were claimed directly from the IRS using Form 8965 (Parts 2 & 3) Far fewer exemptions were reported in Part 1 using an ECN from the Marketplace The top 5 most common exemptions claimed on 2014 tax returns were: Gross or Household Income below the Filing Threshold (Part 2 of Form 8965) Code G – Certain Hardships (description) Code C – Non-citizens and citizens living abroad Code A – Unaffordable Coverage (>8% of HHI) Code B – Short Coverage Gaps A small percentage of filers reported an SRP for not having coverage or an exemption. IRS did observe some SRP errors during the filing season Some taxpayers were eligible for an exemption that they did not claim and made an SRP that they should not have owed: • Exemption for Gross or Household income below the filing threshold • Exemption for individuals who were not lawfully present (e.g. DACA or Dream Act) • Short coverage gaps of up to 2 months Some taxpayers miscalculated their SRP for the following reasons: • Adding in dependent MAGI when it was not required (e.g. must have income above the filing threshold) • Not limiting the SRP calculation to: • the National Average Bronze plan limit • the correct percentage of income (1% for 2014) or • The maximum flat dollar amount (3X the adult rate of $95) Some returns were “silent” on the coverage requirement and may owe a shared responsibility payment. The IRS will be corresponding with taxpayers who did not report coverage, and exemption, or an SRP on their return. Dependents who did not claim their own exemption should not have reported an SRP on their return, even if they did not have coverage. The person claiming their exemption is responsible for reporting coverage, exemptions, or an SRP on their behalf.

Health Insurance Marketplace
Provides information at HealthCare.gov or state Marketplace website Enrolls individuals in health coverage Offers financial assistance Issues Form 1095-A, Health Insurance Marketplace Statement Before I talk about the premium tax credit, I want to briefly discuss the Health Insurance Marketplace The Department of Health and Human Services, or “HHS,” is the lead agency for administering the Affordable Care Act, and the IRS is responsible for administering the tax provisions included in the Act. HHS is responsible for enrolling individuals for health care coverage through the Health Insurance Marketplaces, and helping individuals get the appropriate financial assistance, including advance payments of the premium tax credit. Federally facilitated or state based Health Insurance Marketplaces offer health insurance coverage, determine financial assistance and issue 1095-A information statements. The Health Insurance Marketplace sends this form to individuals who enrolled in coverage through the Marketplace in early February of the year after the coverage year. The form includes information about the coverage, who was covered and when, and the applicable benchmark plan premium used to compute the premium tax credit for the covered individuals (called the second lowest cost silver plan premium). If your client is expecting to receive a Form 1095-A, you should wait to file the client’s income tax return until you receive that form. If your client expects a form and does not get one, you should contact the Marketplace. The IRS does not issue and cannot provide you with your client’s Form 1095-A. The Marketplace is the main source for health insurance options under the ACA, certain exemptions from the individual shared responsibility provision, and the only source for advance payments of the premium tax credit. Health Care.gov and IRS.gov/aca have more information including websites and phone numbers about health insurance coverage and costs including how to enroll in Marketplace coverage. For the 2017 coverage year: Open Season for Health Insurance Marketplace coverage begins on November 1, 2016 and ends on January 31, 2017. Bottom line – if your client, spouse or their dependent did not enroll in a Marketplace health plan – the client is not eligible for a premium tax credit. If the client did enroll, ask for the Form 1095-A the Marketplace sent to the client. Most taxpayers can access their online Market place for their 1095-A information.

Premium Tax Credit Refundable tax credit Buy Marketplace coverage
Have Form 1095-A from Marketplace to file File Form 8962 to reconcile any advance payments and claim the PTC To be eligible, an individual or a family member of the individual (includes spouse if filing jointly and dependents) must have enrolled in insurance through a federal or state Health Insurance Marketplace. It helps eligible individuals and families with the cost of purchasing health insurance from the Marketplace. Their household income (I’ll talk more about household income later) must be between 100 and 400 percent of the federal poverty line for the family size, but there are exceptions for certain taxpayers under 100 percent. Essentially, the credit reduces a person’s out-of-pocket costs incurred for health insurance premiums – that’s why we call it the “premium” tax credit. The credit amount is based on a sliding scale, with bigger credit amounts available to those with lower incomes. Other factors that affect the credit amount include which family members enroll, whether any enrolled family members are eligible for other health coverage, the cost of available insurance coverage, the premiums for the plan enrolled in, family size, and where they live. The majority of eligible individual purchasing insurance through the Marketplace choose to have advance payments of the estimated credit paid directly to the insurance company (APTC). If they don’t choose APTC, they can pay all the premiums and get the full benefit of the credit when filing the tax return. Advance payments of the estimated amount of the credit are made directly by the Marketplace to the insurer during the year. The advance payments of the premium tax credit lower the cost of health insurance premiums the individual must pay each month. Eligible individuals may choose to have the full amount for which they are eligible, or a lesser amount, of the advance credit payments provided directly to the insurance company. Getting advance payments of the anticipated credit is done through an application process at the Marketplace. The amount of the advance credit payment is based on the person’s estimated household income for the upcoming year, along with other factors such as projected family size, address of the taxpayer and his or her enrolled family members at the time the Marketplace application is completed and who in the family is eligible for other non-Marketplace coverage for the months the family member is enrolled in the Marketplace coverage. Advance credit payments are likely to differ from the credit amount, which is based on actual household information (household income, family size, etc.) when the tax return is filed. For this reason, the advance credit payment amount must be reconciled against the actual credit amount on the tax return for the year of coverage. It’s imperative that an individual report any change in circumstances to the Marketplace when they happen so that the advance payments of the premium tax credit can be adjusted as appropriate to minimize the effect on the difference between the advance credit payments and the actual premium tax credit for the year (the difference affects the amount of refund or tax due at tax filing time). Taxpayers can also choose to forego advance credit payments and get all of the benefit of the premium tax credit at the time of filing a tax return. Because the premium tax credit is claimed on the federal income tax return that is filed in the year the following the year of coverage, foregoing advance credit payments means the taxpayer will, in effect, get a reimbursement of a portion of the insurance premiums the taxpayer already paid for a plan they purchased in the Marketplace.. Taxpayers, including those who get advance credit payments, must claim the credit by filing a federal income tax return. Taxpayers who get APTC must file a tax return to reconcile the APTC to the credit computed on the return even if not otherwise required to file a tax return. The premium tax credit can reduce a person’s federal tax liability and lower a balance due, or it may create or increase the amount of a refund. Because the premium tax credit is refundable, an individual who has little or no income tax liability can still receive the full benefit of the credit as a refund. Note: The premium tax credit is not considered income for any federal or federally funded public benefit program. If an individual’s actual allowable credit is more than the advance credit payments, the difference will be added to the individual’s refund or subtracted from the balance due. On the other hand, individuals whose advance credit payments are more than their premium tax credit will owe the excess as an addition to their tax, subject to a repayment cap if their income is below 400 percent of the federal poverty line. There are two lines on Form 1040 for the premium tax credit. Line 46 is where a person reports excess advance credit payment repayments and line 69 is where a person claims the premium tax credit amounts that exceed APTC (called Net premium tax credit). If a person receives the benefit of advance payments of the premium tax credit, the amount of advance payments made on the taxpayer’s behalf during the year must be reconciled with the actual premium tax credit allowed on the income tax return for that year. Your clients must file a tax return to reconcile advance credit payments even if they would not otherwise be required to file a tax return for the year. Filing a tax return without including Form 8962 will delay the refund and prevent your client from receiving advance credit payments in future years.

PTC Eligibility Must meet all of the following requirements:
Income between % of Federal Poverty Line Taxpayer, spouse, or dependent must enroll in Marketplace coverage for a month that the enrollee is not eligible for coverage through employer or government plan Cannot be claimed as a dependent by another person Not file as Married Filing Separately Now we’ll take a look at who is eligible for the credit. To get the premium tax credit, your client must meet all of the following: • Your client, spouse or a dependent enrolls in a qualified health plan at the Marketplace for one or more months in which the enrollee is not eligible for other minimum essential coverage through an employer or government plan (to enroll in a Marketplace plan, an individual must be a U.S. citizen or lawfully present and cannot be incarcerated) • Has household income between 100 and 400 % of the Federal Poverty Line based on family size, with some exceptions for individuals under 100% • If married, not file as MFS (with some exceptions) • Cannot be claimed as a dependent, and • Pay or have someone else pay the premiums by the due date of the tax return for the year of coverage for one or more of those same months. Generally, to be eligible for a premium tax credit, the taxpayer’s household income must be at least 100% of the FPL. However, individuals whose household incomes are estimated by the Marketplace to be 100% or higher and who receive the benefit of advance payments of the premium tax credit but then have household income that falls below 100% of the FPL for the year, typically because of a change in circumstances, will still be allowed the premium tax credit as long as they meet the other requirements for getting a credit. In addition, individuals below 100% of the FPL who have at least one family member who is an alien lawfully present in the United States but not eligible for Medicaid who enrolls in a qualified health plan through a Marketplace are allowed a credit , as long as they meet the other requirements for getting a credit. A key point to remember is that: Many people already have, or are eligible for, qualifying non-Marketplace health insurance coverage (called minimum essential coverage), such as coverage through their current employers. A premium tax credit is allowed only for months in which an individual is both enrolled in Marketplace coverage and not eligible to enroll in certain non-Marketplace coverage such as employer coverage, Medicaid, or Medicare. Thus, if an individual is eligible to enroll in employer coverage or is actually enrolled in the coverage, a premium tax credit is not allowed for that individual’s Marketplace coverage for the months he or she is eligible or actually enrolled (see the instruction for Form 8962 for more information on when an individual is considered eligible for employer coverage). In addition, a small number of taxpayers may be eligible for the Health Coverage Tax Credit and PTC. While Marketplace coverage is qualified for the HCTC for tax years 2014 and 2015 , it does not for 2016 and beyond. This means that your eligible clients cannot claim the HCTC for months they are enrolled in 2016 Marketplace insurance but may claim PTC and must reconcile any 2016 APTC. See IRS.gov/HCTC for specific information about the HCTC. MFS - A married individual cannot get a premium tax credit if he or she uses the Married Filing Separately status unless the individual is a victim of domestic abuse or spousal abandonment and cannot file a joint return because of the abuse or abandonment. More information about the use of MFS status is available on the IRS website. Also, if they qualify, married individuals may claim the premium tax credit using the Head of Household filing status because for tax purposes they are treated as unmarried. Married individuals who use the MFS status but who are not victims or spousal abuse or abandonment are not allowed a premium tax credit and must repay the advance credit payments made on their behalf, subject to a repayment cap. Generally, if the spouses do not file jointly, each spouse must reconcile one-half of the total advance credit payments made on their behalf. The federal poverty line amounts that are in effect on the first day of the open enrollment period are used to determine eligibility for and the amount of advance payments of the premium tax credit for the entire coverage year (including special enrollment periods). Consequently, those same FPL amounts are used to compute the premium tax credit claimed on the tax return for the year of coverage.. For example, the 2015 federal poverty line table was used to determine the amount of APTC for which an individual was eligible in 2016 and the premium tax credit for which an individual was allowed on his or her 2015 tax return filed in For the 2017 coverage year, the Market place opens on November 1, 2016 and runs through January 31, The FPL amounts published in January of 2016 will be used for 2017 APTC and PTC.

Advance Payments of PTC (APTC)
Determined by Marketplace based on estimated household income and family size Paid directly to insurance company on the taxpayer’s behalf MUST file tax return with Form 8962 to reconcile When they enrolled in Marketplace coverage, your clients probably chose to have advance payments of the premium tax credit sent directly to their insurers. As part of the enrollment process, the Marketplace makes the determination whether or not an applicant is eligible for advance payments of the premium tax credit. But it’s your client who chooses whether to get the benefit of advance credit payments and, if so, how much. Advance credit payments made to the insurance company directly are based on an estimate of the credit that your client will claim on their federal income tax return. When advance credit payments are made to the insurer, your client may still need to make monthly premium payments to the insurer for the difference between the monthly amount charged by the insurer and the amount of the advance credit payment. Remind your clients that there are several important considerations involved with the choice to receive the benefit of advance credit payments: • Advance credit payments are optional. • Advance credit payments must be reconciled with the actual credit allowed when they file their tax return • Differences between advance credit payments and the actual premium tax credit allowed are likely. • Changes in circumstance can affect the differences. • They must file a tax return to reconcile these differences and to claim the credit even if not otherwise required to file. Taxpayers will complete the Form 8962, Premium Tax Credit, to reconcile advance payments of PTC and to claim the PTC. If you find during the reconciliation process that the actual premium tax credit is less than advance credit payments, the difference, subject to certain caps, is additional tax that will reduce your client’s refund or add to the balance due. For single filers, the excess advance credit repayment caps are $300 (household income below 200 percent of the FPL), $750 (household income below 300 percent of the FPL), and $1,250 (household income below 400 percent of the FPL). For all other filers in these ranges, the caps are double the amount for single filers: $600, $1,500, and $2,500. For taxable years beginning in 2016, the cap numbers are $300, $750, and $1,275 for single filers and $600, $1,500, and $2,550 for all other filers. A taxpayer with excess advance credit payments must repay the lesser of the excess or the repayment cap that applies to the taxpayer. Important Message: Advance payments are “renewed” in the Fall by the Marketplace for the upcoming calendar year as part of their annual re-enrollment and income verification process. Therefore, taxpayers who received the benefit of advance credit payments in 2015 who have not yet filed their 2015 returns or have not yet reconciled their 2015 advance credit payments should do so now to ensure that there is no disruption in advance credit payments at the beginning of Taxpayers who have not filed and reconciled by the date on which the Marketplace reenrollment period begins (including those that filed extensions) may not have their eligibility for advance payments of the PTC in 2017 determined for a period of time after they have filed their tax return with Form 8962, which may be as late as December. Taxpayers must file a tax return to reconcile any advance credit payments made on their behalf in 2015 to maintain eligibility for future advance credit payments. If they do not file, they will not be eligible for advance payments of the premium tax credit in The IRS sent letters to taxpayers who filed a 2015 tax return without reconciling their 2015 advance credit payments, The IRS has instructions about what your clients need to do to resolve this issue, which may include submitting Forms 1095-A and 8962, so we can process the return. The letter asks taxpayers to respond within 30 days of the date of the letter to substantially increase their chances of avoiding a gap in receiving the benefit of advance credit payments for Marketplace health insurance coverage in 2017. Last year, the IRS sent Letters 5591, 5591A, and 5596 to taxpayers who received the benefit of advance credit payments in 2014, but had not yet filed their 2014 tax return, to remind them of the requirement to file their 2014 federal tax return along with Form 8962, Premium Tax Credit. The letter encourages taxpayers to file within 30 days of the date of the letter to substantially increase their chances of avoiding a gap in receiving the benefit of advance credit payments for Marketplace health insurance coverage in For more information, see Understanding Your Letter 5591, 5591A, and 5596.

Premium Tax Credit Letters for TY 2015
12 C Letter requests information to reconcile Advance Payments of the Premium Tax Credit File to protect 2017 APTC 5858 Letter to extension filers with 2015 APTC 5862 Letter to taxpayers with 2015 APTC Taxpayers who filed their TY 2015 returns and were required to reconcile advance payments of the premium tax credit but failed to do so when they filed their income tax return, may receive a 12C - premium tax credit - letter from the IRS. They should reply to the letter promptly to avoid further delays in their refund. The IRS is also sending Letter 5858 or Letter 5860 to taxpayers who have not yet filed their 2015 tax return and whose Form 1095-A, Health Insurance Marketplace Statement, shows that advance payments of the premium tax credit were made to their health insurance company to reduce premium costs in If you receive this letter, you need to file your 2015 federal tax return with Form 8962, Premium Tax Credit, to reconcile these advance payments as soon as possible in order to protect your eligibility for assistance with paying for your or your family’s Marketplace health insurance coverage in 2017. Taxpayers who don’t reconcile APTC won’t be eligible for advance payments of the premium tax credit or cost-sharing reductions to help pay for their Marketplace health insurance coverage for the following calendar year.

Report Changes in Circumstances to Marketplace
Report to the Marketplace when they happen Examples of changes include: Family size or filing status Increase/decrease in household income Gain/loss of health care coverage or eligibility Moving to another address Because of the need to reconcile advance credit payments with the premium tax credit and the fact that the difference between the amount of the advance payments and the credit can be substantial, it is important that your clients understand how changes in circumstances during the year can affect their premium tax credit and the difference between it and the advance credit payments made on their behalf. Changes in circumstances can directly affect eligibility for the premium tax credit, the amount of advance credit payments, and the amount of the premium tax credit. However, the Marketplace cannot adjust the amount of your client’s advance credit payments unless your client informs the Marketplace of the change. For example, if your client underestimated his or her projected annual income during Marketplace enrollment and does not update the income information with the Marketplace, when the client files his or her tax return for the year of coverage it is likely that the advance credit payments made on the client’s behalf will be more than the premium tax credit the client is allowed. In that case, the client will owe taxes or have a smaller refund as a result of the excess advance credit payments. Advance payments of PTC made to your client’s insurance company are based on an estimate of the credit that your client will claim on his or her federal income tax return. The Marketplace estimates the credit by using information about family composition, projected household income and certain information your client provided when the client submitted a Marketplace application for health coverage. The better the original estimate and the faster the taxpayer adjusts that estimate if there are changes to the original estimate, the more likely the amount of the advance credit payments will be closer to the amount of the client’s actual premium tax credit computed at the time of filing. Reporting changes to the Marketplace promptly will allow the Marketplace to adjust your client’s advance credit payments, helping prevent large differences between the amount of advance payments of the premium tax credit and the premium tax credit allowed. This adjustment will help your client avoid getting a smaller refund or owing money that he or she did not expect to owe on the federal tax return. The greater the change from the information used to compute advance credit payments (and the longer the time taken to report it) the greater the likelihood of a significant difference will be between the amount of the advance credit payments and the allowable credit. It’s similar to making changes to withholding and estimated tax payments when a taxpayer has a change during the year in one of the factors used to compute the taxpayer’s tax liability, such as his or her income or the number of personal exemptions the taxpayer will claim. Individuals purchasing health insurance at the Marketplace should report changes to the Marketplace either online or by phone to adjust the amount of their advance credit payments. Look at the slide for some examples of major changes in circumstance. These changes may also open the door for a Marketplace special enrollment period that permits health care plan changes throughout the year. In most cases, the special enrollment period for Marketplace coverage is open for 60 days from the date of the life event. A more comprehensive list is available on IRS.gov/aca and on the HealthCare.gov site.

How to Reconcile Advance Payments or Claim PTC
Based on actual annual household income and family size reported on the tax return Claimed on tax return using Form 8962 Need Form 1095-A from Marketplace Reconciles APTC Results in either a refundable credit or repayment of excess advance payments PTC is based on actual information (household income, family size, etc.). APTC is based on projected information. When your client purchased health coverage from the Marketplace, the client may have chosen to receive the benefit of advance payments of the premium tax credit, which are sent directly to the insurer to lower monthly insurance premiums. At that time, the Marketplace estimated the premium tax credit your client would be able to claim for the year of coverage based on information your client provided, including expected household income and family size for the year. A client who chose to receive the benefit of advance credit payments must file a federal income tax return to reconcile the advance credit payments and the premium tax credit the client is allowed, even if otherwise not required to file. The process is similar to comparing your client’s tax withholding with actual tax liability. If your client or anyone claimed as a personal exemption on his or her tax return enrolled in health coverage through the Health Insurance Marketplace, the client y should receive Form 1095-A, Health Insurance Marketplace Statement from their Marketplace form by early February of the year after the year of coverage. You need the information from Form 1095-A to accurately determine the premium tax credit the client is allowed and to reconcile any advance credit payments made on behalf of the client with the premium tax credit. Taxpayers may not realize that they have Marketplace health care coverage and you may need to ask if they – or anyone on their return - received this form. PTC is claimed on tax return using Form PTC and APTC must be reconciled on tax return using Form 8962 and you need Form 1095-A from Marketplace Reconciliation results in either a refundable credit or excess APTC. If your client received the benefit of advance credit payments, he or she must file a federal tax return and reconcile the advance credit payments with the actual premium tax credit computed on the return. Failing to file a tax return to reconcile advance payments will prevent your client from receiving the benefit of advance credit payments in future years. As we discussed earlier, Form 1095-A – Health Insurance marketplace Statement I – is issued by the federally facilitated or a state based Marketplace. Your client’s Marketplace must provide Form 1095-A, by early February of the year following the year of coverage showing the individuals who were enrolled, the premiums for the plan or plans an individual and his or her family members enrolled in (enrollment premiums), the premium for the second lowest cost silver plan that applies to the enrolled family members who are not eligible for other health coverage and the advance credit payments made for coverage of the eligible individuals. The concept is similar to Form 1099-INT and W-2 reporting, whereby one copy of the form is filed with the IRS and another copy is provided to the individual. Do not attach Form 1095-A to the tax return - keep it with the client’s tax records. A taxpayer will receive the 1095-A for health care coverage information return by early February 2017, and must use this information to compute the premium tax credit on the 2016 tax return and to reconcile the advance credit payments made on that person’s behalf with the amount of the premium tax credit. An individual who does not receive the Form 1095-A from a Marketplace should contact the Marketplace or go their online Marketplace account. The IRS does not issue and cannot provide your client with a copy. You will need this information about your client and enter information from the Form 1095-A onto the Form 8962. You will use IRS Form 8962, Premium Tax Credit (PTC) to reconcile the advance credit payments and the premium tax credit and to compute the amount the credit the client may claim. If the client’s advance credit payments are in excess of the amount of the client’s premium tax credit, based on the client’s actual income, the client must repay some or all of the excess on his or her return for the year of coverage. Complete Form 8962, Premium Tax Credit to claim the premium tax credit and reconcile advance credit payments with the premium tax credit your client is eligible to claim on his or her return. If the advance credit payments are less than the allowed premium tax credit, your client will get the difference as a higher refund or lower tax due. If the advance credit payments that were paid to the health insurance company were more than the actual credit, your client must increase his or her tax liability by all or a portion of the difference. The completed Form 8962 must be filed with the federal income tax return. If your client enrolled in coverage through the Marketplace but didn’t get the benefit of advance credit payments during the year, he or she will get all of the benefit of the premium tax credit when claiming the credit on his or her tax return.

Form 8962 – Premium Tax Credit
File Form 8962 with tax return to : claim the premium tax credit and reconcile APTC Form 8962 (Premium Tax Credit) is used to claim the premium tax credit and to reconcile advance credit payments with the premium tax credit allowed. Form 8962 is used to calculate the premium tax credit amount, which is based on a sliding scale with greater credit amounts generally available to those with lower incomes. The amount of the premium tax credit is based on factors such as household income, family size, which family members enroll in Marketplace coverage, whether the enrolled family members are eligible for non-Marketplace health coverage, the cost of available Marketplace coverage, and the premiums for the plan enrolled in. The result of the premium tax credit calculation on Form 8962 and reconciliation of advance credit payments is reported on Form 1040. Accordingly, there are 2 lines for the premium tax credit on the Form 1040 (after reconciling the advance payments of PTC with allowed credit amount): Line 69 for claiming a net premium tax credit and Line 46 for the repayment of excess advance payments of the premium tax credit The IRS has also made modifications to the Form 1040 series so that the taxpayer can electronically file Form 8962 with Form 1040-A and Form 1040-NR. The PTC cannot be claimed on the F1040-EZ or 1040 PR. Important reminder: If your client received the benefit of advance credit payments, he or she MUST file a form 8962 to reconcile those payments, even if your client’s income is below the filing threshold and is otherwise not required to file a tax return. If your client, or anyone claimed as a personal exemption on the client’s tax return, received the benefit of advance payments, which are shown on lines of Form 1095-A, the client must file a tax return, and file Form 8962, even if they are not otherwise required to file a return. Filing the tax return without reconciling your client’s advance credit payments will delay your client’s refund and may affect his or her ability to qualify for future advance credit payments.

PTC Common Errors Did not reconcile APTC
Claimed PTC but failed to attach Form 8962 Form 1095-A data not correctly reported Transposed digits Miscalculated Monthly PTC Allowed Miscalculated Repayment Amount of Excess APTC Did not reconcile APTC – must use Form 8962, Part 2, Lines 11 or (Column F) and reconcile any APTC even if your client otherwise has no obligation to file a tax return. If your clients were required to reconcile advance payments of the premium tax credit but failed to do so when they filed, they probably received a 12C - premium tax credit - letter from the IRS. IRS sent this letter because the Health Insurance Marketplace notified us that they made advance payments of the premium tax credit to your client’s health insurance company to reduce their premium costs in 2015 and they didn’t include the Form 8962, Premium Tax Credit, to reconcile the advance payments that were paid on their behalf when they filed. If they don’t reconcile, they won’t be eligible for advance payments of the premium tax credit or cost-sharing reductions to help pay for Marketplace health insurance coverage for future years. Do not file a Form 1040X, Amended U.S. Individual Income Tax Return. After we receive the requested information, we’ll use it to process the original tax return. Claimed PTC but failed to attach Form 8962 – If your clients claim PTC they must file Form 8962 Form 1095-A data not correctly reported - on Form 8962, Part 2, Lines 11 or (Columns A and B) - Taxpayers did not transcribe information to the Form 8962 accurately Transposed digits Miscalculated Monthly PTC Allowed – on Form 8962, Part 2, Lines 11 or (Column E) Taxpayers did not accurately calculate the annual PTC (Line 11) or the monthly PTC (Line 12) Miscalculated Repayment Amount of Excess APTC – on Form 8962, Part 3, Lines 28 & 29 Be mindful of the calculation and the repayment caps. In addition – if the Marketplace issues corrected Form A , it may affect your client’s return. If the return has not yet been filed, you should use this new form when completing the tax return. If your client has already filed his or her tax return, you will need to determine the effect that the changes on the corrected form might have on the return. Some changes may not affect the tax return or require any action on your client’s part, while others will. Compare the corrected Form 1095-A to the original form to determine whether the Form 1095-A change will require the client to file an amended return.

Employer Shared Responsibility Provisions
While the Department of Health and Human Services, or “HHS,” is the lead agency for administering the Affordable Care Act, the IRS is responsible for administering the tax provisions included in the Act. Today’s session will provide information about two Affordable Care Act provisions affecting individual taxpayers – the individual shared responsibility provision, or ISRP, and the premium tax credit, or PTC. We will discuss reporting health care coverage, claiming coverage exemptions and making individual shared responsibility payments. We also will talk about claiming the PTC and the requirement for taxpayers to reconcile advance payments of PTC when they file. The session will also include information about health care information reporting Forms 1095 A, B and C. READ STATEMENTS ALOUD: The information contained in this presentation is current as of XXX XX, 2016. Visit IRS.gov for tax forms, instructions, and general filing information. For all the latest information about the tax provisions of the Affordable Care Act, visit IRS.gov/aca. Solicit for Tax Forum Focus group volunteers in New Orleans and Chicago.

What Employers Need to Know
Fewer than 50 full-time employees (including full-time equivalent employees) – §4980H does not apply Applicable Large Employer (ALE) status Employer tax provisions for ALEs: Employer Shared Responsibility Provisions (§4980H) Information Reporting (§6056) Employers that offer self-insured plans: Information Reporting (§6055) OK, let’s jump right in by reviewing what employers need to know. For purposes of the Affordable Care Act, an employer needs to know if it is an Applicable Large Employer, or what we refer to as an “ALE”. Generally, an ALE is an employer that employs on average 50 or more full time employees including full time equivalent employees in the preceding calendar year. In a later slide, we will describe how an employer determines its number of full-time employees including the number of full-time equivalents. For now, as an introductory matter, we wanted to note that the vast majority of businesses fall below the ALE threshold – that is, fewer than 50 full-time employees, including full-time equivalents. If they are below the threshold, they are not an ALE. As shown on the slide, there are two ACA provisions that only apply to ALEs. Those provisions are: Section 4980H - the employer shared responsibility provision, and Section 6056 which requires ALEs to file an information return with the IRS and furnish a copy to its full-time employees reporting information about coverage offered to full-time employees. Whether or not the employer is an ALE, if the employer provides self-insured health coverage, the Section 6055 information reporting provision applies and the employer is required to file and furnish information returns reporting coverage for enrolled individuals. The next slide is about the employer shared responsibility provisions.

Employer Shared Responsibility Provisions
ALEs must Offer health coverage to their full-time (FT) employees (and their dependents), or Potentially be subject to an employer shared responsibility payment Under the employer shared responsibility provisions, an ALE will owe a payment under section 4980H(a) if it does not offer coverage to its full-time employees (and their dependents) and at least one full-time employee receives a premium tax credit. In addition, an ALE will owe a payment under section 4980H(b) if it offers coverage to its full-time employees (and their dependents) but at least one full-time employee receive a premium tax credit, which could happen if the coverage offered is not affordable or does not provide minimum value, or a particular full-time employee is not offered coverage. For section 4980H, the term “dependent” means a child of an employee who has not attained age 26 but does not include a foster child or step-child. In addition, a spouse is not a dependent for purposes of the employer shared responsibility provisions, which means that when an employer makes an offer of coverage to employee and dependents, it does not have to offer coverage to the spouse. Later in this presentation, we will discuss how an employer identifies its full-time employees and define what it means for coverage to be affordable and provide minimum value. We will also explain in more detail when the employer shared responsibility payment applies and how it is calculated. Generally, the employer shared responsibility provisions are effective beginning in 2015. For 2015, there is an important transition rule available for ALEs with 50 to 99 full-time employees (including full-time equivalent employees). For those employers, no assessable payments will apply for 2015 (or the portion of the 2015 plan year ending in 2016 for employers with non-calendar year plans) as long as those employers meet two conditions that I’ll address later in Slide 13. However, even though the employer shared responsibility provisions don’t apply, the employer is still required to file the required information returns. Our next slide provides information on determining ALE status.

Determining ALE Status
Number of employees and their hours of service in preceding year determines ALE status for the current year Definition of full-time employee Definition of full-time equivalent employee Seasonal worker exception Common ownership and controlled groups Transition rule for 2015 ALE determination As I mentioned earlier, an employer determines whether it’s subject to the employer shared responsibility provisions by looking at its employees for the previous calendar year, and computing if the employer had 50 or more full-time employees, including full-time equivalent employees. Whether an employer is an ALE is determined separately for each calendar year. To determine whether an employer is an ALE for a particular calendar year, the employer uses information about the number of employees it employs and those employees’ hours of service during the prior calendar year. For example, an employer will use employment information from 2015 to determine if it’s an ALE for 2016. Employers should already have done a computation to determine ALE status for 2015 by reviewing their employees for 2014. An employer is an ALE if it has a combination of 50 or more full-time and full-time-equivalent employees in the previous calendar year. It is an average over all 12 months. However, for 2015, rather than being required to use the full twelve months of 2014 to determine ALE status, an employer may measure during any consecutive six-month period during 2014. For purposes of determining ALE status, a full-time employee for any calendar month is an employee who has on average 30 hours of service per week during that month. In a few minutes, we will discuss more details on the definition of full-time employee that applies for other purposes. An employer determines its number of full-time-equivalent employees by totaling the number of hours of service of all non-full-time employees for the month (but no more than 120 hours per employee), and dividing that total number of hours of service by 120. One of the questions we are often asked is when an employer counts its employees to determine ALE status, how does it handle seasonal workers? The employer must look at all of its employees when determining ALE status, including seasonal workers. A seasonal worker is an employee who performs labor or services on a seasonal basis as defined by the Department of Labor. This includes retail workers employed exclusively during holiday seasons. Although the employer must look at all of its employees when counting heads for ALE status, the employer shared responsibility provisions include an exception for how to count seasonal employees. The employer shared responsibility provisions also describe the exception for counting seasonal workers. If the employer had more than 50 full-time and full-time-equivalent employees for 120 days or less and the excess over 50 were seasonal workers, the seasonal workers can be excluded from the count – as a result, the employer will not be an ALE. This exception sounds complicated but the regulations include examples for counting seasonal workers. On July 31, 2015, the President signed into law H.R.3236 Surface Transportation and Veterans Health Care Choice Improvement Act of This act provides that an employee will not be counted toward the 50-employee threshold for a month in which the employee received medical care through the military, including Tricare or Veterans’ coverage. This is solely for the purpose of determining whether an employer is an “applicable large employer” subject to the section 4980H employer shared responsibility provisions. Another important rule to note is the aggregation rule that applies to entities with common ownership. Under a longstanding provision that also applies for other tax and employee benefit purposes, companies with a common owner or that are otherwise related, generally are combined and treated as a single employer for purposes of determining ALE status. See section 414 (b),(c), (m) or (o) of the Code. If the combined number of full-time and full-time-equivalent employees for the group is large enough to meet the ALE definition, then each company in the group is called an ALE member, and is considered to be an ALE, even if separately they wouldn’t be. You should note that although companies with a common owner or that are otherwise related generally are combined and treated as a single employer for determining ALE status, potential liability under the employer shared responsibility provisions is determined separately for each ALE member. We’ll walk through an example in a few minutes. As a final point on this slide, it’s important to note that the definition of an ALE applies to all employers, including tax-exempt organizations that are employers, as well as government entity employers, including tribal employers.

Common Owner ALE For all of 2015 & 2016, Corp A owns 100% of Corp B and Corp C Number of 2015 FT employees: Corp A – None Corp B – 40 Corp C – 60 Total – 100 Corp A + B + C is an ALE for 2016 Corps B & C are each an ALE member Our next example is about common ownership. We have Corporations A, B and C. For all of 2015 and 2016, Corporation A owns 100 percent of all classes of stock of Corporation B and Corporation C. Corporation A has no employees at any time in For every calendar month in 2015, Corporation B has 40 full-time employees and Corporation C has 60 full-time employees. Corporations A, B, and C are considered to be a controlled group of corporations under section 414 of the Code. Both Corporation A and Corporation B individually do not meet the applicable large employer threshold. Corporation C does. Due to the application of aggregation rules for controlled groups, because Corporations A, B and C have a combined total of 50 or more full-time employees during 2015, Corporations A, B, and C, are considered to be an ALE for 2016. Corporations B and C are each considered to be an ALE member for Corporation A is not an ALE member for 2016 because it does not have any employees. Under the definition of an ALE member in the employer shared responsibility provisions, an ALE member doesn’t include an employer with no employees or employees with no hours of service for the calendar year. Because Corporation A is not an ALE member, it has no information reporting responsibilities.

Defining a Full-Time Employee
FT = 30 hrs/week or 130 hrs/month Two measurement methods Monthly Look-back Defining an hour of service Hour for which paid or entitled to be paid Special rules Our next slide is about determining who is a full-time employee. In addition to the definition of ALE, another important concept under the employer shared responsibility provisions is how an employer identifies its “full-time employees.” For context, the full-time employee definition is central to 4980H. An employer must identify its full-time employees in order to determine its ALE status, determine to whom it needs to offer coverage to avoid a potential assessable payment, and provide a basis for the IRS’s calculation of assessable payments. For purposes of the employer shared responsibility provision, a full-time employee is, with respect to a calendar month, an employee employed on average at least 30 hours of service per week, or 130 hours of service per month. The employer shared responsibility provisions provide that 130 hours of service in a calendar month is treated as the monthly equivalent of at least 30 hours of service per week. We’ll talk more about hours of service in a few minutes. What methods can an employer use to determine who is a full-time employee? As you can see from the slide, there are two measurement methods: First, the monthly measurement method, and second The look-back measurement method Under the monthly measurement method, the employer determines whether an employee is a full-time employee on a month-by-month basis by looking at whether the employee has at least 130 hours of service for each month. For the look-back measurement method, employers may determine the status of an employee as a full-time employee during what is referred to as the “stability period”, which is based upon the hours of service of the employee in the preceding period. This is referred to as the measurement period. Keep in mind that the look-back measurement method may not be used to determine full-time employee status for purposes of the ALE status determination. These methods reflect minimum standards for identifying full-time employees and relate to whether the employer might owe an assessable payment, rather than setting the limits on an employer’s ability to offer coverage to a broader group of employees. An employer can always offer coverage to more than just its full-time employees. Now that we know that an employee with 130 hours of service in a month is a full-time employee, what is an hour of service? Basically, an hour of service is each hour for which an employee is paid – or is entitled to be paid – for the performance of duties for the employer or for a period of time during which no duties are performed including due to holiday, vacation, illness and other types of leave. An hour of service for this purpose does not include: An hour of bona fide volunteer service for a government entity or tax-exempt entity (for example, volunteer firefighters); An hour of work performed as part of the Federal Work Study program or a comparable state or local work study program; An hour for which compensation is not U.S. source income; and An hour worked for a religious order when work is performed under a vow of poverty. There are other special hours of service issues that continue to be considered, and the preamble to the final regulations provides for employers to use a reasonable method of crediting hours of service for: Adjunct faculty, Commissioned salespeople, Airline employees with layover hours, and Employees with on-call hours.

ESRP Liability Liability exists if employer:
Does not offer coverage to at least 95% of FT employees (and their dependents) and at least one FT employee receives the PTC OR Does offer to 95% of FT employees (and their dependents), but at least one FT employee receives the PTC because, for that full-time employee, coverage was not offered unaffordable, or did not provide minimum value Here we have information about determining whether an ALE member will be subject to an employer shared responsibility payment. In the first example the employer does not offer employer-sponsored minimum essential coverage -- also known as MEC -- to at least 95 percent of its full time employees and their dependents, and at least one full-time employee received the premium tax credit. In that case, the employer is liable for an employer shared responsibility payment. In this example, the employer may be offering coverage to some full time employees and their dependents, but less than 95 percent, or it may not be offering any coverage. The key here is that the coverage is offered to less than 95 percent of the full time employees and their dependents. For 2015 the applicable percentage is reduced to 70 percent. In the second example the employer does offer employer-sponsored minimum essential coverage to at least 95 percent of its full-time employees and their dependents, but, despite that, at least one full-time employee receives the premium tax credit, because: Coverage was not offered to the full-time employee who received the premium tax credit (for example, one of the 5 percent); or Coverage the employer offered was unaffordable, or Coverage the employer offered did not provide minimum value. Which example applies determines how the payment will be calculated – that is, the payment calculation for the first scenario is significantly different than the payment calculation for the second scenario. We will explain the calculation in a moment, but first, we are going to talk about what the terms “unaffordable” and “minimum value” mean.

Definition of Affordability and Minimum Value
Affordable if employee’s share of lowest cost self-only coverage does not exceed 9.56% (as adjusted) of household income Three employer “safe harbors” Minimum value Covers at least 60% total cost of benefits Before we discuss potential payment amounts, let’s define “affordability” and “minimum value.” Affordability is determined with respect to the employee’s household income. For 2015, if an employee’s share of the premium for employer-provided lowest cost self-only coverage would cost the employee more than 9.56 percent of that employee’s annual household income, the coverage is not considered affordable for that employee. Note that the 9.56 percent figure is adjusted annually; it is 9.66 percent for 2016. Household income generally includes income of the filer, spouse, and all dependents on the filer’s tax return who are required to file a tax return. If an employer offers multiple health care coverage options, the affordability test applies to the lowest-cost self-only minimum essential coverage option available to the employee that also meets the minimum value requirement. Because employers are not likely to know the “household income” of their employees, the employer shared responsibility provisions provide three safe harbors for affordability. The safe harbor methods are optional. An employer may choose to use one or more of these safe harbors for all of its employees, or any reasonable category of employees, provided it does so on a uniform and consistent basis for all employees in a category. Reasonable categories generally include specified job categories, nature of compensation (for example, salaried or hourly), geographic location, and similar bona fide business criteria. The first one is the “Form W-2 wage” safe harbor. For 2015, if the employee’s required contribution for the calendar year for the lowest cost self-only coverage that provides minimum value is not greater than 9.56 percent of the employee’s Form W-2 Box 1 wages for the year, the coverage is considered to be affordable for purposes of the employer shared responsibility provisions. The next one is the “rate-of-pay” safe harbor. In general, this is based on the employee’s rate of pay at the beginning of the coverage period, but assumes 130 hours of service for the month, regardless of actual hours of service. The third one is the “federal poverty level” safe harbor, which provides the coverage is affordable if it does not exceed 9.56 percent of the federal poverty level for a single individual. Of course, the employer shared responsibility provisions contain a lot more detail about these safe harbors. Now let’s move to “minimum value.” How does an employer know whether the coverage it offers provides minimum value? A plan provides minimum value if it covers at least 60 percent of the total allowed cost of benefits that are expected to be incurred under the plan. Generally, in order to provide minimum value, a plan must also provide substantial coverage of in-patient and hospital services. The Department of Health and Human Services has created a minimum value calculator. By entering certain information about the plan, such as deductibles and co-pays, into the calculator, employers can get a determination as to whether the plan provides minimum value. The minimum value calculator is on the Health and Human Services website at CMS.gov/CCIIO. Next, I’ll talk about the amount of the employer shared responsibility payment.

Employer Shared Responsibility Payment
Offer to less than 95% Payment of 1/12 of $2,080 per FT employee, above 30 threshold (per month) Offer to at least 95% Payment of 1/12 of $3,120 per PTC-receiving FT employee, (per month), subject to limitation Here we have the methods used to calculate an employer shared responsibility payment. As you can see, the employer shared responsibility payment is not a fixed amount, but is based on the number of full-time employees and calculated on a monthly basis. The first bullet shows the payment if an employer does not offer minimum essential coverage to at least 95 percent (70% for 2015) of its full-time employees and their dependents, and at least one full-time employee gets a premium tax credit by virtue of having purchased coverage through a Health Insurance Marketplace. In this case, for the 2015 tax year, the assessable payment is $2,080 for each full-time employee, but, by statute, the first 30 full-time employees are excluded from the calculation. On a monthly basis, that’s $ per month, per full-time employee. Note that the amount will be indexed annually and will be $2,160 for 2016). Before moving on to the second bullet, I want to mention one form of transition relief that applies to the first bullet. For 2015, employers with 100 or more full-time employees, including full-time equivalent employees - plus, for an employer with a non-calendar plan year, the portion of the 2015 plan year in an employer’s assessable payment will be reduced by 80 full-time employees, rather than 30. Now, back to the slide. The second bullet shows the calculation when the employer does offer coverage to at least 95 percent (70% for 2015) of its full-time employees and their dependents but the coverage is either not affordable or does not provide minimum value. In this case, the annual payment for 2015 is $3,120, but it is not calculated based on all full-time employees, rather it is based only on the number of full-time employees who received a premium tax credit. The monthly amount is $260 for each month each full-time employee received a premium tax credit. As with the amount set out in the first bullet, the amount will be indexed annually and will be $3,240 for 2016. Note that the amount of the employer shared responsibility payment, described in the second bullet, cannot exceed the amount calculated using the method shown in the first bullet – as if coverage was not offered. Also, as I mentioned before, each ALE member is liable for its section 4980H assessable payment and is not liable for the payment of any other entity in a controlled group of entities.

ESRP Assessment and Payment
Employer will not make a payment with a return IRS will determine amount and notify employer Employer will have opportunity to respond before assessment IRS will send a notice and demand after assessment It’s important to note that employers will not report or include an employer shared responsibility payment with any return they may file. So, how will an employer know if it owes an employer shared responsibility payment? The IRS will determine whether any of the employer’s full-time employees received a premium tax credit and, if so, it will correspond with the employer to inform it of a potential liability. The employer will be given an opportunity to respond before any assessment or notice and demand for payment is made. The employer will not be contacted by the IRS for a given calendar year until after their employees’ individual income tax returns are due for that year, which would show any premium tax credits that the employees receive. If it’s determined that an employer is liable for an employer shared responsibility payment after the employer has responded to the initial IRS contact, the IRS will send a notice and demand for payment. That notice will instruct the employer how to make the payment.

Information Reporting Requirements for ALEs
Requires ALEs to file an information return to report health care coverage offered to the employer’s full-time employees for the calendar year Applies to employers who are subject to the employer shared responsibility provisions (§4980H) Information is used to (1) administer the employer shared responsibility provisions (§4980H) and (2) determine an employee’s eligibility for the premium tax credit Now that we have completed our discussion of the employer shared responsibility provisions we are going to spend a minute on the information reporting requirements that apply to ALEs. This slide shows the general information on the forms. If an employer is an ALE it is also subject to section 6056 of the Code. That section is entitled “Certain Employers Required to Report on Health Insurance Coverage” and requires ALE members to comply with certain information reporting. In general, every ALE member is required to file an information return with the IRS and furnish a copy of the employee statement to each employee who was a full-time employee for at least one month in the calendar year. , the information reported will be used for two purposes. First, to administer the employer shared responsibility provision; and Second, to assist in determining whether an employee and his or her dependents are eligible for a premium tax credit. Employers that are not ALEs are not subject to the information reporting requirements and are not required to file information returns with the IRS or furnish a statement to any of their employees. For more information regarding ALEs information return reporting requirements you can download the March 30, 2016 webinar titled Applicable Large Employers Information Return Requirements (IRC 6056) for Tax Year 2015.

Due Dates Timely and accurate information returns must be filed by the due dates for 2016 information returns January 31, 2017 to recipients February 28, 2017, to IRS if filed on paper March 31, 2017, to IRS if filed electronically We mentioned that insurers, other coverage providers, and some employers are required to file and furnish information returns under the ACA. Let´s talk about the due dates for the 2016 information returns. Forms 1095-B and 1095-C should be furnished to the recipients by January 31, 2017 and filed with the IRS by February 27 if filed by paper and March 31, 2017 if filed electronically. If you are unable to meet the March 31, 2017, due date for furnishing returns, furnish the returns as soon as possible. Anyone may file these returns electronically. However, if you are filing 250 or more, you are required to file electronically. Generally, you must file timely and accurate information returns. If the returns are not accurate or timely, you may be subject to penalties.

IRS Affordable Care Act Resources
IRS.gov/aca IRS.gov/TaxPros Publication 974 – Premium Tax Credit Instructions for all Form AIR Homepage 6056 Information Reporting Overview Now that we have completed our discussion of the employer shared responsibility provisions we are going to spend a minute on the information reporting requirements that apply to ALEs. This slide shows the general information on the forms. If an employer is an ALE it is also subject to section 6056 of the Code. That section is entitled “Certain Employers Required to Report on Health Insurance Coverage” and requires ALE members to comply with certain information reporting. In general, every ALE member is required to file an information return with the IRS and furnish a copy of the employee statement to each employee who was a full-time employee for at least one month in the calendar year. , the information reported will be used for two purposes. First, to administer the employer shared responsibility provision; and Second, to assist in determining whether an employee and his or her dependents are eligible for a premium tax credit. Employers that are not ALEs are not subject to the information reporting requirements and are not required to file information returns with the IRS or furnish a statement to any of their employees. For more information regarding ALEs information return reporting requirements you can download the March 30, 2016 webinar titled Applicable Large Employers Information Return Requirements (IRC 6056) for Tax Year 2015.

Utah APA State Conference

Similar presentations

Presentation on theme: "Utah APA State Conference"— Presentation transcript:

Similar presentations

About project

Feedback

Log in

Auth with social network:

Utah APA State Conference

Similar presentations

Presentation on theme: "Utah APA State Conference"— Presentation transcript:

Similar presentations

About project

Feedback