ACA Affordable Care Act Information

Marketplace, Obama Care, Affordable Care Act Health Insurance
In this training I explain what Marketplace Health Insurance is, what subsidy is, why the 1095A needs to be entered on the tax-return, the effects both income and policy cost can have on a return, and things to watch for.

PDF of Presentation Here For PowerPoint file click here
Click image for Recording

F drive.google.com/file/d/1KTNjWoQi5YlCbf0zjHAYCRxAT8NA8MHy/view?usp=sharing109Resources used in presentation:

Link to blank Form 1095-A
Understanding the 1095-A itself-- (can be found below( (shown in presentation)
Understanding & Explaining what is Happening to return (found below--as shown in presentation) **Betty Boop's 4 scenarios
What to do when you have multiple 1095-A's--Murdock scenario used in presentation

Practice Scenario:
Paul Bunyan-- How Income and policy costs affect a return
Meet Paul Bunyan Information My notes

The Kemps-- a practice Scenario with Lump Sum Social Security & Marketplace
Kemp's Notes and Tax documents Completed 1040
Note:This is a great scenario for playing around--what if they choose to file MFS? Will that help? What if they make maximum contributions to IRA? Will that help? Play around and see.

healthcare.gov/tax-tool For calculating SLCSP for Column B if you have multiple 1095-A's with overlapping coverage

Understanding & Explaining what is Happening to return
Keeping it Simple: For Scenario 1-4
· Client name is Betty White –Single with NO dependents SSN: 201-00-0000 DOB: 09/05/1999
· Address: 123 Imaginary Lane; Lehigh Acres, FL 33936 Phone: 239-555-5555
· Only income is from one job—has 1 W2 with her, Received all stimulus money entitled to
· No expenses to itemize, no other income at all, no student loan interest payments, etc.
· Has Marketplace Health insurance and has brought in her 1095A (we will use the same 1095A for the first few scenarios)

Scenarios 1-4: (Click Here for PDFs of backup) so you can try entering them
Federal Poverty Level=FPL
1 -- Income under 100% of FPL
2 -- Income over 100% of FPL (credit)
3 -- Income over 100% of FPL (owes)
4 -- Income over 400% of FPL

Enter these in Taxslayer - see handout below to learn how to explain what happens to client in each scenario--click image to open document (4 pages)

Most of the information below can be found in the trainings above

Before you start working with a client with Marketplace, make sure look at Part II-- there cannot be anyone listed in Part II that IS NOT on the tax return. If so, this policy is OUT OF SCOPE and they need to either see a paid tax preparer or try entering themselves on TaxAct or TurboTax (Make sure they go through IRS free efile to ensure the return is free). The return would be out of scope because the policy includes subsidy for people not on the return. **It is OKAY if there are people on the tax return that are not on the policy-- this is in scope.

NEVER add or remove people on this screen

Few Important things to note:
1. In the case of a person who is filing their own tax return, AND is being claimed as a dependent on someone else's return-- the Marketplace policy MUST BE REPORTED ON THE PERSON WHO IS CLAIMING THE DEPENDENT--not the dependent's return.

For example: Mary and John are married, and they have an 18 year old daughter, Candice, who worked part-time last year while in high school. Candice's employer withheld income tax, as shown on her W2 box 2.
Mary and John will claim Candice as a dependent, and report the Marketplace policy that covers Candice on their tax return.
Candice will need to file a tax return in order to get any income tax withholdings back BUT SHE MUST INDICATE ON THE RETURN THAT SHE CAN BE CLAIMED AS A DEPENDENT--Marketplace DOES NOT get entered on her return (dependents on a return are NOT responsible for reporting the policy on their tax return). In the Healthcare section in Taxslayer for Candice, we will answer '"NO-DOES NOT HAVE MARKETPLACE"

2. If a dependent on a tax return has a legal filing requirement, then their income MUST BE included in the Healthcare section of Taxslayer, as Marketplace looks at all family income in calculating allowable subsidy. **We do not enter the dependents W2s or 1099s, but there is a place to enter Dependents' Modified AGI (if filing requirement) *Only include income for dependents whose income is MORE THAN the standard deduction. (Example: If Candice made only $6,000 we don't need to include on parent's return. If Candice's AGI is more than $12,950, then it will need to be included.)

You might be wondering why Marketplace Health Insurance needs to be reported on the tax return when others don't. This is what I tell my clients(all of which get subsidy IF they have Marketplace):
Marketplace is subsidized health insurance, that means the government pays a part, or all of the cost. Let me give you an example of how it works. I call up Marketplace in Nov/Dec and say I need health insurance. They ask me where I live, how old I am, what policy I want, and how much I THINK I am going to make NEXT year. No one really knows EXACTLY how much they will make in the upcoming, but let's say I project $30,000. Marketplace might say, well the policy you choose is $500 a month, based on your income you can afford to pay $100 a month, and Marketplace will pay the rest (that is called subsidy). Well, no one knows exactly what they are going to make, which is why Marketplace gets reported on a tax return--to reconcile the insurance with income---that is when we learn what you really made for the year and compare it with how much subsidy you received.

Let's pretend I had a great year, worked overtime, got a new job, or got a promotion and made $36,000 instead of $30,000. Well, I made more, so I could have afforded to pay more of my insurance premiums and Marketplace should have paid less, so I will end up owing some subsidy back--this shows up as a tax on my return.
The opposite is also true, say I didn't have such a great year: I lost my job, or my hours were cut, or there was a hurricane, or COVID, I got hurt, etc. I made less than $30,000, say I made $22,000. In this case, Marketplace could have paid more of my subsidy for me, and they will owe me--and this shows up as a refundable credit on my tax return.
And we have some clients that guesstimate their income pretty close because they have a fixed income from Social Security or work a standard shift and they end up breaking even, no one owing anyone on their return.

Income & It's Affect on Subsidy
A lot of clients do not understand how Income affects Marketplace Subsidy--especially when they have to pay some subsidy back.

This is why it is so very important to let them know right away if your income changes--to try to avoid these issues. Once I explain it this way, they have a better understanding of how it works .

Unfortunately, we had several clients in the past that were hit with some very large repayments because they did not understand how the subsidy works.
Sometimes there are unplanned increases in income that can affect them: for example, two of our clients received unforeseen income during the last quarter of the year which put one well over the 400% Poverty level line forcing a total repayment of over $11,000.

We also had some new clients who came in that had taken large distributions from their retirement accounts for various reasons that forced some partial and total repayments of subsidy--they never considered the ramifications on their tax return beyond the income tax and early withdraw penalty. One person took out an extra $15K to have to repay $13K in subsidy.

While its too late to ease the subsidy repayments for these clients, they leave educated in how it works so they can avoid having to make these types of repayments in the future--if they don't drop Marketplace.

Luckily, there are repayment caps based off income level and filing status. See image
*The Income (as % of federal poverty level) is from the printed 8962 Line 5

*Note: whether a taxpayer has crossed the 400% level by a few dollars or thousands of dollars, the percentage will show as 401%. So referencing this table in PUB 4012 page H-23 can be handy because if the taxpayer has crossed the 400% level by just a few dollars or a couple thousand, you may want to consider the following to help them: (it can't hurt to at least try)

There are ways to adjust the income/reduce it

*What if they made an IRA contribution?
*HSA contribution?

These can provide adjustments to income --lowering income and possibly reducing repayment (contributions must be made by tax filing deadline) **do a test run in the system and see if it helps before sending client out to make a contribution. For some situations, a few hundred dollar contribution can lower income enough that the client can go from owing thousands to getting a small refund. It's worth trying it-I have been able to do it for several clients--tell them they are paying themselves and saving money!

Married Filing Separately taxpayers are not entitled to ANY subsidy, and must repay it regardless of income. Fortunately, there is a repayment cap for them as long as their income is under 400% level.
There are 2 exceptions to this rule:

if the taxpayer has been abandoned by their spouse (meaning they have NO IDEA where they are--not that they just left them but they HAVE NO IDEA where they are)
OR they are a victim of domestic violence by their spouse (reported)

There is a check box you can click that will allow the subsidy. Please note-- the taxpayer can only do this for 3 years. My guess for the 3 year limit is because maybe it is expected they will have gotten divorced by then?

ACA Affordable Care Act Important Information!!!
Please review this excellent handout to make sure you are not accidentally forcing a repayment of subsidy--it's all in how you answer these 2 questions. (Created by: A project of the Center on Budget and Policy Priorities)

For these 2 questions, Remember New York (NY)
No
Yes
and you can easily avoid an accidental forced repayment.

Marketplace Tips for
VITA Volunteers & Clients

No 1095A at appointment time? You can't complete a tax return if the client has Marketplace but doesn't have their form, but we don't send them away, Here is what we do:

You can ask if they have created an online account and know their log in information--let them log in and download the form.
If they don't have an account and they are willing, you can create one right there and print the form.
They don't want to do it online, or you don't have the time or can't let them use your computer: No worries, I keep a stack of blank 1095A's printed out at the office just for this situation. On each form I have the number for Marketplace written (1-800-318-2596) -- I have the client call right then and there and request the information. I generally offer to talk to the Marketplace rep for them once they prove their identity and get me authorized to speak to the rep for them right then-- I get the info over the phone for Part II and III and request that a new Form 1095A be mailed to the client for their records. We usually have it completed by the time all the other data is entered--this year we called a lot and were never on hold more than 10 minutes (usually 4 minutes tops). **You find out the 1095A is missing during intake--continue the process and by the time you are ready to enter it--twala.. you got it!

Here is the link for the 1095A (just print page 2) and complete it with the Marketplace rep over the phone.

**Please note, a hand written 1095A is not acceptable when answering the IRS notice requesting an omitted Form 8962 and 1095A. You must send the printed copy you receive from Marketplace or download from the Marketplace account page.

Marketplace & Self-Employment

If someone is self-employed and purchasing their own health insurance (since they don’t have an employer or don’t qualify for Medicare or other source) they can generally use part of what they spent on the premiums as an expense on the Schedule C See PUB 4012 PAGE E-5. The adjustment carries over to the Schedule 1 Line 17, which carried over to the Form 1040 Line 10—to reduce income before tax is calculated. Which is great!

With Marketplace, because their insurance is subsidized, and the client may not have been entitled to all of the subsidy they received or may have received less subsidy than entitled too, the IRS has said for VITA and TCE programs, that this out of scope (OOS) for VITA/TCE. The client, I see, is left with 3 options:

We do the return without the self-employed insurance adjustment (just leave that expense off of the Schedule C) **to be clear, you still have to enter all the fields from the 1095A in the Healthcare section of Taxslayer data entry.
The client goes to a paid tax preparer
The client does their return themselves using a software that can handle this--I have found TurboTax and TaxAct can--others can't. **go through irs free e-file to access the free version of the 2 software companies mentioned or they will get charged.

When a client has to complete an 8962 after the initial filing, I fax it with the 1095A and Page 2 & 3 of the IRS letter (the one that has the blanks for Taxpayer name, number, number of pages, etc) I use that as the Fax Cover page!
All my clients have had the fax #855-309-9361 associated with their letter, so that is where I fax them all.

Per an IRS rep at that department, it takes about ten (10) days for show in the system that they have received the fax, and up to 16 weeks to process once they receive it. I warn my clients about this because it is a long process and they think once we fax it, it is a quick turn around.

Best # to call 1-866-682-7451 x 568 # is for my Florida clients
This department ROCKS!!!!!!
Quick to answer and VERY VERY HELPFUL!!!!

I recommend the client call 10 days after its faxed just to make sure they received the fax on their end, since it is a long process (I had one out of over 30 that said it went through on my end, but they said they never received--so better safe than sorry)

Beyond the Basics-Health Reform is another great project by the Center on Budget and Policy Priorities that have very helpful resources.
http://www.healthreformbeyondthebasics.org/home/for-tax-preparers/

marketplace