1. Patient Protection and Affordable Care Act (PPACA) Better known as ACA

2. Status
The following presentation is an overview of the Affordable Care Act (ACA)
Some forms and specific documentation are in draft form and could change
Implementation in TaxWise is unknown at this time
The presentation will be updated once TW14 is released
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3. Presentation Outline Applicable documents and forms
Three main elements of ACA (Overview)
Three flow charts
Interview flow chart
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4. ACA Documentation and Forms
2014 Pub 4491 – ACA Chapter added. This chapter is also published as Pub 5157 VITA/TCE Affordable Care Act
2014 Pub 4012 – has an ACA Tab added
Form 1095-A and Instructions – Health Insurance Marketplace Statement – Issued by Marketplace 1/31/15
Form 8962 and Instructions – Premium Tax Credit
Form 8965 and Instructions – Healthcare Coverage Exemptions
Changes to Form 1040
Pub 5157 VITA/TCE Affordable Care Act provides a good description of ACA. This document will be part of the initial kit.
The ACA Tab in the 2014 Pub 4012 provides supporting charts and graphs.
Instructions for forms 1095-A, 8962 and 8965 provide detailed information for completing these forms
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5. Line 61 box is checked if everyone on the return has MEC
Line 61 box is checked if everyone on the return has MEC. For taxpayers with Medicare or Medicaid all year, a check in this box is all that is required for ACA.
Line 69 – any net positive PTC (i.e. income at the end of the year resulted in more PTC than was originally claimed) is entered on this line
Line 46 – any net negative PTC (i.e. income that the end of the year resulted in an excess of PTC during the year) is entered on this line.
Line 61 – Any Shared Responsibility Payment is entered on this line.
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6. Three Main Elements 1. Everyone must have Healthcare Insurance
Exemptions are available (Form 8965)
2. Financial Assistance
May be available (Form 8962)
3. No Insurance?
May be penalized
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7. 1. Examples of Acceptable Insurance
Employer Provided
Affordable (does not exceed 9.5% of household income)
Medicare
Medicaid
Purchased via Health Insurance Marketplace
Beginning in 2015 the employer will provide taxpayer with a document called a Summary of Benefits and Coverage showing information about the benefits and coverage.
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8. Exemptions Available Income below income tax filing threshold
Unaffordable (Premium >8.0% household income)
Short coverage gap (No coverage <3 months)
Not lawfully present in US
Unaffordable – Taxpayer who can’t afford coverage because the minimum amount they must pay for the premiums is more than 8.0 percent of their household income.
Short Coverage Gap – Taxpayer who went without coverage for less than three consecutive months during the year
Income Below Income Tax Filing Threshold – Taxpayer whose income is below the minimum threshold for filing a tax return which is dependent on filing status, age, and types/amounts of income.
Not Lawfully Present – Taxpayer who is not a US citizen, US nationals or aliens lawfully present in the US
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9. Exemptions Available (cont.)
Member of a:
Health Care Sharing Ministry
Federal recognized Indian Tribe
Recognized religious sect conscientiously opposed to accepting insurance benefits
Incarcerated
Health Care Sharing Ministry – Taxpayer who is a member of a recognized healthcare sharing ministry
Religious Conscience – Taxpayer who is a member of a religious sect that is recognized as conscientiously opposed to accepting any insurance benefits. The Social Security Administration defines these sects according to the criteria in the law.
Indian Tribes – Taxpayers who are members of a federally recognized Indian tribe or taxpayers who are eligible for services through an Indian care provider.
Incarceration – Taxpayers who are in jail, prison or a similar penal institution or correctional facility.
Additional exemptions are included in Pub 4012 Tab ACA and will be covered in later slides
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10. 2. Financial Assistance May be Available
Premium Tax Credit (PTC) – Refundable Credit
Advance available to help pay premiums
Exchange can estimate PTC at time of purchase
PTC can be paid in advance to insurance company OR applied as refundable credit on federal tax return
Must be reconciled on 2014 tax return
Form 1095-A and Form 8962
Form 1095-A Affordable Insurance Marketplace Statement shows the amount of their premiums and advance credit payments including the premium for the applicable benchmark plans used to compute the credit, the total premium for the coverage of the taxpayer, the advance credit, the SSN and names of all covered and other relevant information.
Form 8962 used to compute the premium tax credit on the tax return and to reconcile the advance credit payments or credit.
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11. Premium Tax Credit Eligibility
Must buy Health Insurance through Marketplace
Employer coverage NOT eligible
Household income within limits (100% – 400% of government federal poverty guidelines)
Not eligible for coverage in Government Program
Cannot file MFS
Cannot be claimed as a dependent
Taxpayers with household income between 100% and 400% of the federal poverty line are eligible
Not eligible through government programs like Medicaid, Medicare, CHIP or TRICARE
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12. Verification Taxpayer should notify Marketplace
Changes in Household Income
Changes in Household
Marriage or Divorce
Birth or Death
Eligibility for other Programs
Advance payments adjusted
Updates during the year are key so that there isn’t a large difference in the PTC at the end of the year.
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13. 3. No Insurance? May be penalized
If taxpayer or any dependent doesn’t have Minimum Essential Coverage (MEC) and doesn’t have an exemption must:
Must make a Shared Responsibility Payment (SRP) with tax return
Effective January 1, 2014
Key terms are Minimum Essential Coverage (MEC) and Shared Responsibility Payment (SRP)
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14. Documentation and Forms Three Main Elements
1. Everyone must have Healthcare Insurance
Exemptions are available (Form 8965)
2. Financial Assistance?
May be available (Form 8962)
3. No Insurance?
May be penalized
QUESTIONS ?
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15. Three Conditions to Consider – See charts in ACA Tab Pub 4012
Chart A – Taxpayer, Spouse and Dependents had insurance all year
Chart B – Taxpayer, Spouse and Dependents had NO insurance all year
Chart C – Taxpayer, Spouse and Dependents had insurance part of the year
The purpose of chart A is to determine if the taxpayer(s) qualify for the Premium Tax Credit (PTC).
The purpose of chart B is to determine if a Shared Responsibility Payment (SRP) is applicable
The purpose of chart C is to resolve the part year situation
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16. Chart A – Taxpayer, Spouse and Dependents Had Insurance All Year
This chart is a summary of the chart on page ACA-1 of Pub 4012 Tab ACA which has greater detail
Refer to Pub 4012 Tab ACA Page ACA-1 for more detail
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17. ACA Tab Pub 4012 – 2014 Federal Tax Filing Requirements Thresholds
See Pub 4012 ACA Tab page ACA-6 for definition of gross income
See Pub 4012 ACA Tab page ACA-6 for definition of gross income
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18. Chart A – Taxpayer, Spouse and Dependents Had Insurance All Year
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19. Examples – Minimum Essential Coverage – ACA Tab Pub 4012
SEE PUB 4012 TAB ACA PAGE ACA-4 FOR ADDITIONAL QUALIFING COVERAGE
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20. Example – Does Not Qualify for Minimum Essential Coverage – ACA Tab Pub 4012
*In Notice , the IRS announced relief from the individual shared responsibility payment for months in 2014 in which individuals are covered under one of these programs. Information will be made available later about how to claim an exemption for one of these programs on your income tax return.
SEE PUB 4012 ACA TAB PAGE ACA-4 FOR ADDITIONAL NON- QUALIFYING MEC
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21. Minimum Essential Coverage
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22. Form 1095-A
Form 1095-A is to be issued by the Marketplace by 1/31/15. It is required to reconcile PTC for those who have signed up through the marketplace and obtained PTC. If the taxpayer indicates that they have received PTC then the return can not be completed until this form is available.
It is possible to have multiple Form 1095-As
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23. Form 1095-A Part II of Form 1095-A allows for all household members
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25. Chart A – Taxpayer, Spouse and Dependents Had Insurance All Year
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26. Requirements to obtain Premium Tax Credit (PTC)
Refundable Credit
Must buy Health Insurance through Marketplace
Household income within 100%–400% of government federal poverty guidelines
Exchange will send Form 1095-A to taxpayer by 1/31/15 to allow reconciliation on tax return – Form 8962
Form 1095-A Affordable Insurance Marketplace Statement shows the amount of their premiums and advance credit payments including the premium for the applicable benchmark plans used to compute the credit, the total premium for the coverage of the taxpayer, the advance credit, the SSN and names of all covered and other relevant information.
Form 8962 used to compute the premium tax credit on the tax return and to reconcile the advance credit payments or credit.
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27. Premium Tax Credit Available 100% – 400% Poverty Guidelines – Pub 4012 Tab ACA
400% of federal poverty guidelines is a hard limit. Any amount over 400% results in no Premium Tax Credit. This could present a problem when taxpayers start the year assuming a total household income that qualifies for an advance payment of PTC only to find out at the end of the year their household income has exceeded 400% of FPG. This would mean that the advance PTC would have to be listed as an expense on the 2014 tax return. Note there are actually two additional Federal Poverty Lines for Alaska and Hawaii.
There are three Federal Poverty Levels; Alaska, Hawaii and other 48 states and DC
Separate tables available in Pub 4012 Tab ACA Page ACA-8 for Alaska and Hawaii
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28. Income Limits Based on 2013 FPL
One Individual
$11,490 (100% FPL) – $45,960 (400% FPL)
Family of two
$15,510 (100% FPL) – $62,040 (400% FPL)
Family of four
$23,550 (100% FPL) – $94,200 (400% FPL)
Examples of income ranges for various filing categories.
Example – Based on 2013 FPL, family of four could have household income up to and including $94,200 and still be eligible for PTC
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29. Affordable Percentage Calculation Example
John is single and had household income of $28,725
FPL for single: $11,490 – 100%
$28,725/$11,490 = 250%
Simple example to demonstrate PTC
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30. Expected Premium Contribution
Graph shows a representation of information included in the chart included on page ACA-10 of the Pub 4012 Tab ACA
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31. Affordable Percentage Calculation Example
John is single and had household income of $28,725
FPL for single: $11,490 – 100%
$28,725/$11,490 = 250% (.0805)
Benchmark premium plan – $5,200
$28,725 x = $2,312 (John Paid)
$5,200 - $2,312 = $2,888 PTC
The number comes from the previous slide. The number could also be determined from page ACA-8 of Pub 4012 Tab ACA
The Benchmark premium plan number comes from Form 1095-A
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32. Calculation of Credit Credit claimed on Form 8962
Need Benchmark Plan Premium for area
Form 1095-A
Need Household Income + Federal Poverty Line (FPL) for area
Affordable percentage table value
For purposes of the Premium Tax Credit, taxpayers’ household income is their modified adjusted gross income plus that of every other individual in their family for whom they can properly claim a personal exemption deduction and who is required to file a federal income tax return. Modified adjusted gross income is the adjusted income on the federal income tax return plus any excluded foreign income, nontaxable social security benefits (including tier 1 railroad retirement benefits), and tax-exempt interest received or accrued during the taxable year. It does not include Supplemental Security Income (SSI)
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33. Household Income for PTC
Modified adjusted gross income plus that of every other individual in their family for whom they can properly claim a personal exemption deduction and who is required to file a federal income tax return PLUS
Any excluded foreign income, nontaxable SS (including tier 1 RRR) and tax-exempt interest received or accrued during the taxable year.
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34. Different Definitions of MAGI
Modified Adjusted Gross Income is AGI Plus:
Form 8965 (Exemptions/SRP)
Form 8962 (PTC)
Foreign earned income
Tax-exempt interest
Foreign housing exclusion or any foreign housing deduction claimed
Foreign earned income
Tax-exempt interest
Social Security benefits not included in income
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35. Form 8962 (Draft)
TW14 should calculate all of this information except for line 2b
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36. Part 2 line 11 assumes same amount of PTC for each month and that a shared policy is not applicable.
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37. Form 8962 (cont.)
$2,312
$2,888
$2,888
Information from 1095-A would be entered into TW14 which should calculate any net PTC as a result of the reconciliation and enter the result on Form 1040
$5,000
$5,200
$?????
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38. Net Premium Tax Credit Form 1040 $2,888 <$2,888
If there is a net positive PTC it will be entered on Line 69 of the 1040
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39. Repayment of Excess Advance Net Premium Tax Credit
$2,888
>$2,888
If there is an excess PTC then the excess will have to be paid back on the tax return subject to the limitations on the next slide
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40. Repayment of Excess Advance Net Premium Tax Credit
TW14 should apply the limitation and enter any excess advance payment on line 46 of Form 1040 (Tax and Credit section)
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41. Form 8962 Continued – See ACA Tab in Pub 4012 for Worksheet
See Pub 4012 Tab ACA for a flow chart where a Shared Policy may be applicable
Examples of a shared policy would be:
You or an individual in your family was enrolled in a qualified health plan by someone outside your tax family
2) You or an individual in your tax family enrolled someone outside you tax family in a qualified health plan.
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42. Form 8962 Continued – See ACA Tab in Pub 4012 for Worksheet
See Pub 4012 Tab ACA page ACA -12 for a flow chart for calculation for year of marriage eligibility
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43. Chart A Summary – Taxpayer who had Insurance All Year
If Taxpayer had insurance that qualified as minimum essential coverage and insurance was purchased through the Marketplace, then there is the potential to qualify for Premium Tax Credit
Premium Tax Credit is calculated on Form with information provided by the Marketplace on Form 1095-A
QUESTIONS – ?
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44. Chart B – Taxpayer, Spouse and Dependents Had No Insurance All Year
This is a summary chart. Pub 4012 Tab ACA page ACA-2 has greater detail.
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45. Form 8965
Part 1 of Form 8965 is used to enter Health Coverage Exemptions issued by the Marketplace. An Exemption Certificate Number is required.
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46. Form 8965 Part I Marketplace-Granted Exemptions
These are the coverage exemptions that must by issued by the Marketplace. There are many other exemptions that are lumped into [You are experiencing circumstances that prevent you from obtaining coverage under a qualified health plan] as shown on the next two slides.
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49. This document is available to the taxpayer to allow them to apply for an exemption based on hardship.
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51. Form 8965 Part II Taxpayer Selected Exemptions
Form 8965 Part II – The taxpayer can claim these two exemption on their own without Marketplace approval.
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52. Form 8965 Part III Exemptions Claimed on the Return
Form 8965 Part III – Exemption delineated on the next slide may be claimed by the taxpayer by entering an applicable code as shown on the next slide
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53. Form 8965 Part III Exemptions Claimed by the Taxpayer
Exemption H only available in 2014
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54. Form 8965 Part III Exemptions From The Marketplace or on Tax Return
Form 8965 Part III – These exemptions can be granted by either the Marketplace or the Taxpayer
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55. Chart B – Taxpayer, Spouse and Dependents Had No Insurance All Year
This is a summary chart. Pub 4012 Tab ACA page ACA-2 has greater detail.
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56. Shared Responsibility Payments for TY 2014
Greater of:
1% Household Income above filing threshold for filing status
$95.00/adult + $47.50/dependent child capped at $ for family
Computed amount is capped at an amount equal to the national average premium for a bronze level health plan (included in Pub 4012 Tab ACA Page ACA-10)
Payments reported in payments section of Form 1040
Shared responsibility payment calculation
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57. Shared Responsibility Payment Example
Single individual with $40K income and no insurance all year
Filing threshold is $10,150
$40,000 - $10,150 = $29,850
$29,850 x 1% = $298.50
Flat dollar amount $95
Owes larger amount of $ which is less than capped national average for bronze level coverage ($2,448)
The amount is capped at the national average premium for bronze level coverage for 2014
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58. Be Aware of Increased Shared Responsibility Payment in Future
Note the increase SRP for future years.
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59. Shared Responsibility Payment Entered on 1040 Ln 61
TW14 should enter the SRP on 1040 line 61
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60. Chart B Summary – Taxpayer Had No Insurance All Year
If the taxpayer qualifies for exemption – Form 8965 must be completed
If taxpayer does not qualify for exemption, then shared responsibility payment may be required to be submitted on 2014 Form 1040.
QUESTIONS – ??????
Taxpayer refers to the taxpayers tax family.
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61. Chart C – Taxpayer, Spouse and Dependents Had Insurance Part of the Year
This is a summary chart. See Pub 4012 Tab ACA Page ACA-3 for greater detail.
See Pub 4012 Tab ACA Page ACA-3 for more detail
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62. Chart C Continued – Taxpayer, Spouse and Dependents Had Insurance Part of the Year
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63. SRP Partial Year Minimum Essential Coverage
Refer to ACA Tab Pub 4012
Worksheet for partial year coverage (ACA-9)
2014 National Average Bronze Plan Premium Table (ACA-10)
2014 Federal Tax Filing Requirement Thresholds (ACA-6)
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64. Calculation based on Pub 4012 Tab ACA page ACA 9 worksheet.
816
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68. Part Year Coverage QUESTIONS????
Chart C – Summary
Part Year Coverage QUESTIONS????
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69. Intake/Interview & Quality Review Sheet – Form 13614-C
The Intake/Interview & Quality Review Sheet is going to be key to completion of the tax return. It is important that information be distributed in advance to taxpayers so they know what to bring with them to allow preparation of their return. Proper preparation of this information will allow screening of returns so that more complicated returns are routed to experienced counselors.
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72. Counselor Interview Flow Chart
This represents an overall flow chart with normal tax return preparation represented on the left and Special processing represented on the right.
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73. Counselor Interview Flow Chart Prepare Return in Normal Manner
Asking the correct questions can result in no special processing required and the return can be prepared in the normal manner
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74. Health Insurance Interview Questions
Did you, your spouse and all dependents have Medicare or Medicaid all or part of the year?
If only part of the year what months were covered?
Did you, your spouse and all dependents have health insurance that meets the Minimum Essential Coverage all or part of the year?
The requirement for this information from taxpayers needs to be communicated in advance.
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75. Counselor Interview Flow Chart Special Processing Required
Special processing will require additional effort.
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76. Health Insurance Interview Questions
Did you, your spouse and all dependents purchase health insurance through the Marketplace?
If yes, Form 1095-A is required
Did you, your spouse and all dependents qualify for an exemption for all or part of the year?
If yes, provide exemption certificate number(s) or exemption code(s) received from the IRS or Marketplace
Additional questions will be required if taxpayer had PTC or if exemptions are required.
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77. Information to be distributed to taxpayers in advance
What health care information do I need to bring with me this year to support tax preparation?
Bring health insurance coverage information for you, your spouse and all dependents
If you don’t have full year coverage, bring information on monthly coverage
If you purchased health insurance through the Marketplace/Exchange you must bring Form 1095-A with you. You should receive this form by 1/31/15.
Bring any health care exemptions received from the IRS or the Marketplace.
It is going to be important to get out information that will be needed to prepare tax returns to taxpayers in advance
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78. Counselor Interview Flow Chart – Questions?
This flow chart should help to take into account ACA requirements in the preparation of tax returns
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79. Keys to Preparation of Tax Returns for TY14
Understand Pub 4012 ACA Tab
Understand Pub 5157
Understand Tax Law/Forms
1095-A
8962
8965
Shared Responsibility Payment
Interview Questions (How to work with taxpayer)
Quality Review
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80. Terms that have meaning in ACA
PPACA
– Patient Protection and Affordable Care Act
ACA
– Affordable Care Act
PTC
– Premium Tax Credit
ISRP
– Individual Shared Responsibility Provision
SRP
– Shared Responsibility Payment
FPL
– Federal Poverty Line
Form 1095-A
– Health Insurance Marketplace Statement
Form 8962
– Premium Tax Credit
Form 8965
– Health Care Coverage Exemption
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81. ACA
QUESTIONS????
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