1. Low-Income Taxpayer Issues under the Affordable Care Act
Elizabeth A. Hay
Harlem Community Law Office
The Legal Aid Society
11/30/2018

2. Introduction
The Affordable Care Act is all about taxes – most provisions are contained in amendments to the Internal Revenue Code.
Purpose is to increase health care coverage not raise revenue.
Issues we are likely to see may not be tax problems per se, but collateral consequences of implementation.
The Legal Aid Society
11/30/2018

3. Issues in 2013
Exchange opens October 1, 2013 and IRS is authorized to share information from prior tax year with exchange for individuals applying for coverage and premium tax credit.
Verification issues may arise if information from prior year is incorrect due to identity theft or returns with incorrect filing status, income, dependents, etc.
The Legal Aid Society
11/30/2018

4. Major provisions in 2014
Individual and employer “shared responsibility” for health insurance coverage
Health insurance premium tax credit available to help taxpayers with income between 100% & 400% of FPL pay for health insurance
The Legal Aid Society
11/30/2018

5. Individual responsibility for health care coverage
Unless exempt individuals must have minimum essential coverage in 2014
Taxpayer responsible for coverage of child claimed as dependent unless child has other coverage
Failure to obtain coverage either through employer or exchange (including gov’t benefits) will result in liability for tax penalty which is calculated based on income and will increase over time (with exceptions for hardship)
Individuals do not have to report coverage or make payment for failure to obtain coverage until they file 2014 tax return in 2015.
The Legal Aid Society
11/30/2018

6. Exempt Individuals
Members of religious sects recognized as conscientiously opposed to insurance
Health care sharing ministry
Indian tribes
No filing requirement
Short coverage gap (<3 months)
Hardship (certified by Exchange)
Unaffordable coverage options (>8% of income)
Incarceration
Not lawfully present
The Legal Aid Society
11/30/2018

7. Premium Tax Credit Apply for credit through Exchange
Amount of credit depends on income and household size
Can obtain advance credit which is paid directly to insurer, or claim with tax return at end of year
Important to report changes in income/household composition to adjust credit
Reconciliation with tax return – if entitled to larger credit will be given refund; if received overpayment of advance credit will owe excess.
The Legal Aid Society
11/30/2018

8. Recovery of tax penalties/excess premium tax credit
IRS may offset refunds to recover tax penalty for failure to obtain minimum essential coverage or excess premium tax credit, but may not impose lien or levy
Not clear whether IRS will examine returns with respect to premium tax credit, but information it receives from employers, 1099’s issued for other compensation, insurers, gov’t agencies, etc. may result in changes to income reported on return or other items affecting amount of credit.
The Legal Aid Society
11/30/2018

9. Employer Responsibility
Certain employers must offer full time employees health coverage or shared responsibility payment may apply.
Enforcement of employer health insurance mandate delayed until 2015 along with reporting requirements.
The Legal Aid Society
11/30/2018

10. Collateral consequences?
Employers may shift workforce to part-time to avoid shared responsibility provision of ACA, thus shifting burden for coverage to individuals and decreasing income
Lapses in coverage due to inability to pay individual portion of health insurance even with premium tax credit, given high cost of housing, unstable income, fluid household composition
The Legal Aid Society
11/30/2018