ACA - 2018 Healthcare Information
Beginning in 2014-15, Tax Preparers have been assigned by the government the responsibility of assisting taxpayers with the Affordable Care Act requirements to report health insurance coverage. As part of this preparation, we may have to ask sensitive questions that appear to be more 'personal' than usual. The accountants' responsibility is enforced by the IRS as a $500 fine per return for failure to perform due diligence in obtaining this information. Each of the preparers in our office has undergone extensive education in the ACA arena in preparation for meeting the requirements of the 2017 & 2018 tax filing season. That being said, here are some of the major provisions of the ACA:
Beginning in January 2014, each person in the US was required to obtain Minimum Essential Coverage (MEC). We have the responsibility to obtain information to insure that every individual listed on your return has had either:
- Minimum Essential Coverage for all 12 months of 2018
- Qualifies for an Exemption (more later)
- Is assessed an Individual Shared Responsibility Payment (penalty)
What is Minimum Essential Coverage?
Employer Sponsored coverage, including COBRA
Coverage purchased in the Exchange (or Marketplace)
Medicare and Medicaid
Childrens' Health Insurance Program (CHIP)
Veterans Administration (TRICARE)
Employer Based Coverage
If your family has been covered all year by an employer-sponsored plan, please bring insurance cards or documentation from your employer that shows the name of each covered dependent. We will make copies for our records. NOTE: [IF you have Employer Based Coverage -- information below regarding 'Exchange', Premium Tax Credit, and Shared Responsibility Payments DO NOT apply to you].
If you have purchased insurance through www.Healthcare.gov (the Exchange OR Marketplace), you may have received a Premium Tax Credit (PTC) based on your estimated income and family size. You will also receive a Form 1095-A issued by the Exchange which is due to be mailed by 1/31/19. This form is mandatory for us to prepare your return. It will report who was covered under the policy, the total cost of your insurance and the amount of the credit applied.
When your return is prepared, we will compare your actual income to what you reported, and make adjustments to the credit that you received. If you were due more PTC than what you used all year, it will be returned to you in additional refund. OR if it is the opposite, you could have a tax liability.
Please note that we must have insurance information for each person listed on your return. That means each taxpayer and also for each dependent. This might include a child that you claim as a dependent but is covered by another persons health insurance, like a different parent, ex-spouse, other family member, etc. You will need proof of that persons' insurance as well. So if the other parent purchased through the Exchange, they need to provide you with a copy of the 1095-A they received. You will have to prove that they have coverage or you will be assessed the penalty for that person. If the insurance was employer sponsored, we would need to make a copy of the health insurance card with that persons name on it.
Know your Household Income
Part of reconciling your PTC credit is reporting your 'household income'. This means the income of anyone in your household that is required to file a return. In most cases, a dependent is not required to file a return unless their earned income is more than $6,350 in 2017, or if they have unearned income (interest, dividends or other investment income) of more than $1,000. So if your child earned less than $6,350 from their part time job, they should file a return to get their withholding back, but their income will not be considered 'household income' for ACA purposes. Because we need to determine this, it is mandatory that you know the exact income of anyone you claim on your tax return.
Exemptions and How to Get Them
If you didn't have coverage for all of 2018, here are some reasons that might qualify you for an exemption from the penalty:
- You are uninsured for 3 consecutive months or less (having 1 day of coverage in a month counts) *
- You don't have to file a tax return because your income is below the filing limit for your filing status *
- The lowest priced coverage available would still be more than 8% of your modified household income *
- You are a member of a federally recognized tribe or eligible for services through an Indian Health Services provider **
- You are a member of a federally recognized health care sharing ministry **
- You are a member of a recognized religious sect with religious objections to insurance, including Social Security and Medicare **
- You are incarcerated (convicted, not pending a trial or determination) **
- You are NOT lawfully present in the US
- Or you qualify for a hardship exemption such as: ***
- You were homeless
- You were evicted in the past 6 months or were facing eviction or foreclosure
- You received a shut-off notice from a utility company
- You recently experienced domestic violence
- You recently experienced the death of a close family member
- You experienced a fire, flood, or other natural or human-caused disaster that caused substantial damage to your property
- You filed for bankruptcy in the last 6 months
- You had medical expenses you couldn't pay in the last 24 months that resulted in substantial debt
- You experienced unexpected increases in necessary expenses due to caring for an ill, disabled, or aging family member
Hardship exemptions are usually provided for the month before the hardship, the months of the hardship, and the month after the hardship. You can qualify for multiple hardships that dovetail each other. The Marketplace may provide the exemption for additional months after the hardship, including up to a full calendar year.
*We can apply for these exemptions when we prepare your tax returns using a new series of IRS Forms. Please alert us then you call to schedule your appointment that we will need additional time to do this.
**For other than hardship exemptions, find your specific exemption form on this page: https://www.healthcare.gov/fees-exemptions/apply-for-exemption/
***Hardship exemptions must be applied for through the Exchange, which is currently taking 30-60 days or more. Certain documentation must accompany your application. Apply here: https://marketplace.cms.gov/applications-and-forms/hardship-exemption.pdf
The Marketplace will mail you a notice of the exemption eligibility result. If you're granted an exemption, the Marketplace notice will include your unique exemption certificate number (ECN). You'll need your ECN when you file your federal taxes for the year you do not have coverage or you will have to be assessed the Shared Responsibility Payment (penalty). If you have applied but have not yet received your ECN, we are now able to file your return with an exemption status of 'pending'.
Shared Responsibility Payment
If you have NOT had coverage and there is not an exemption that applies to you, then you will have a Shared Responsiblity Payment (penalty). We will calculate this for you, it will either reduce your refund or increase the amount that you will owe. For 2018, the penalty is the greater of $695 per adult and $347.50 per dependent under the age of 18 on your return, with a maximum of $2,085 -- OR 2.5% of your modified adjusted gross income. There are a multitude of calculations built into what looks like a simple calculation, too many to explain here.
With the addition of this new role as Health Care Coverage reporter, there are many new forms and educational requirements in order for us to accurately prepare your return. Depending on your exact situation, there might be 5 or more new worksheets and a whole series of ACA related tax forms that will be part of your 2018 tax return.
Our preparation fees are based on numerous factors: time spent educating ourselves on tax law changes including ACA, tax forms completed, and additional research required depending on your particular situation. Your tax preparation fee will most likely be increased due to these factors. It is estimated that for certain circumstances, it will take us longer to complete the new ACA requirements than to prepare your tax return prior to the Affordable Care Act. Fee increases range from $25 flat rate to much more depending on ACA research and additional forms depending on your individual circumstances.