Supreme Court Upholds the Affordable Care Act Subsidies for Federal Marketplace

The Supreme Court ruled yesterday (June 25) in a 6-3 decision that health insurance subsidies are legal in the 34 states that are using the federal marketplace. Therefore, approximately 6 million people who reside in those states will continue to receive the subsidy for the remainder of 2015 and all future years.

This also means that there will be no changes to the way the Affordable Care Act is administered by the IRS and Health and Human Resources for 2015 and beyond.

For more detail see:

• Supreme Court’s opinion on the King vs. Burwell case
• News release US Department of Health and Human Services Secretary Sylvia M Burwell on the Supreme Court’s ruling
• White House Fact Sheet on the Supreme Court Upholding Critical Part of Affordable Care Act

2014 Health Care Coverage Exemptions, How to Apply for One, and New Exemption Lookup Tool

Individuals who did not have health insurance coverage for all or part of 2014 will not owe an additional tax (penalty) for not having health insurance if they qualify for an exemption. In fact, most individuals who did not have health coverage will qualify for an exemption.

What follows is information on the new exemption lookup tool that was recently added to healthcare.gov, as well as a listing of the exemptions available to individuals for Tax Year 2014 and how to apply for them.

New Exemptions Lookup Tool

To help individuals (who did not have health insurance during 2014) determine what exemption they may qualify for, a new health care coverage exemption tool has been added to healthcare.gov. Once an individual answers a few questions the tool will let them know:

• What exemptions may apply to them
• Details to help them decide whether or not to apply
• Read more

Exemptions Available for 2014 and How to Apply For One

Exemptions that may be applied for when filing a 2014 federal return:

• 2014 health coverage is considered unaffordable
• Individual’s income is below the filing threshold (Form 8965, Part II)
• Individual was a U.S. Citizen living abroad
• Individual not lawfully present in the U.S.
• Read more

Exemptions that must be applied for through the Marketplace:

• Individual was a member of a recognized religious sect whose members object to insurance. See the Members of Recognized Religious Sects or Divisions Exemption Application form on healthcare.gov for more information.
• One of the following Marketplace defined hardship exemptions:
• Individual is homeless
• Individual was evicted in the past 6 months or was facing eviction of foreclosure
• Individual received a shut-off notice from utility company
• Individual recently experienced domestic violence
• Read more

Click here to read the entire CrossLink Tax Update that includes more information on 2014 health care coverage exemptions and the new healthcare.gov Exemption Lookup Tool.

Special Federal Marketplace Enrollment Period and Corrected Form 1095-A

The Centers for Medicare Services (CMS) made two announcements on February 20, 2015 concerning a special enrollment period for individuals who did not have health coverage in 2014 and information concerning the number of individuals (who used the Federal Marketplace) that will be receiving a corrected Form 1095-A in March due to incorrect information contained on the original 1095-A that they received around the end of January.

Special Federal Marketplace Enrollment Period for the Tax Season
For individuals who reside in a state that uses the Federal Marketplace, a special enrollment period will be available to those individuals and their families who did not have health coverage in 2014 and are subject to the shared responsibility payment (penalty) when they file their 2014 federal return.

Qualifying individuals will have the opportunity to purchase health insurance from March 15, 2015 through April 30, 2015 if they reside in a state that uses the Federal Marketplace and:

• Are not currently enrolled in 2015 coverage through the Federal Marketplace;
• Attest that they filed their 2014 federal tax return and paid a fee (penalty) for not having health coverage in 2014; and
• Attest that they first became aware of, or understood the implications of the Shared Responsibility Payment (penalty) after the end of open enrollment (February 15, 2015) in connection with preparing their 2014 federal return.

Individuals who are seeking to take advantage of this special enrollment period can find out if they are eligible by visiting the main get coverage page on healthcare.gov.

For more information on this announcement see the CMS Announces Special Enrollment Period for Tax Season press release on the CMS website.

Corrected Form 1095-A for Certain Individuals
CMS has announced that approximately 20 percent of individuals (800,000) who used the Federal Marketplace to obtain their 2014 health insurance and received an advance premium tax credit will receive a corrected Form 1095-A (Health Insurance Marketplace Statement) in early March. These individuals should also receive a phone call explaining that they will be receiving a corrected form 1095-A and that form should be used to complete Form 8962 (Premium Tax Credit) for their 2014 federal tax return.

The original Form 1095-A included the incorrect Second Lowest Cost Silver Plan (SLCSP) Premium amounts. This amount is needed in order to calculate the 2014 Premium Tax Credit on Form 8962, and if it is incorrect, the calculated premium tax credit will also be incorrect.

To find out if an individual is affected, they should do the following:

1. Log in to their account on HealthCare.gov. Once they are logged in, they will see a notice message that will let them know whether they are affected.
2. If their Form 1095-A is affected the individual has not filed their 2014 federal return, they should wait until they receive the corrected Form 1095-A in March. The corrected Form 1095-A can also be accessed via the individual’s account on Healthcare.gov in early March.
3. If their Form 1095-A is affected and the individual needs to file their return now they can do one of the following:
• Look up the Second Lowest Cost Silver Plan Premium amount using the Find 2014 Silver Plan Premium Tool on healthcare.gov.

Or

• Call the Marketplace Call Center at 1-800-318-2596.

For those who have already filed their 2014 federal return (which CMS estimates at 50,000), the Treasury Department and IRS will be providing information soon.

For more information on this announcement see the What Consumers Need to Know about Corrected 1095-As blog posting on the CMS website.

IRS Update: Affordable Care Act and the 2014 Federal Return

As the beginning of the 2014 filing season is upon us, now is the time to emphasize the importance of the Form 1095-A for taxpayers that received an advance premium tax credit (subsidy) in 2014, as well as remind everyone of how the Affordable Care Act will affect all 2014 federal returns.

Importance of Form 1095-A (Health Insurance Marketplace Statement) for Individuals Who Received an Advance Premium Tax Credit (Subsidy)

For individuals who received an advance premium tax credit (subsidy) that reduced their monthly health insurance premiums, it is necessary to have the Form 1095-A in order to complete the Form 8962 (Premium Tax Credit) because it contains the information that is needed to both calculate the premium tax credit and complete the reconciliation of the subsidy with the calculated credit.

Since the filing season begins on January 20, 2015, and a large number of the individuals who received a subsidy will not receive their copy of the Form 1095-A until the first week of February, tax preparers should not complete and file a return of an individual who obtained their health insurance through a Marketplace until they have received a copy of the Form 1095-A – allowing them to complete and include Form 8962 with the return. Read More

All Individual Federal Returns Will Be Affected by the Affordable Care Act

Everyone who files a 2014 federal tax return will be affected in one of the following ways by the Affordable Care Act:

• Most individuals will only have to check the Full Year Coverage box on Form 1040 since they were covered by their employer, government program (such as Medicaid or Medicare), or private insurance purchased outside of Marketplace for all of 2014.
• Taxpayers who obtained their health insurance at the federal or a state marketplace will:
• Receive Form 1095-A (Health Insurance Marketplace Statement) from the federal or state Marketplace around January 31, 2015;
• Complete Form 8962 (Premium Tax Credit) to claim the Premium Tax Credit and, if they received an advance premium tax credit (subsidy), complete the required reconciliation.
• Read More

Click here to read the entire CrossLink Tax Update on how the Affordable Care Act affects 2014 Tax Returns.

IRS Update: Additional Tax (Penalty) for Not Having Health Insurance for 2014

The following is a reminder of how the individual shared responsibility payment (penalty or additional tax) for not having health insurance for all or part of the year will be calculated for 2014, as well as how much it increases in 2015. Read More

The individual shared responsibility payment (penalty) will not apply to an individual who qualifies for an exemption that they either obtained from the Marketplace or requested when filing their 2014 federal return.

It is important to remember that the penalty, as explained below, is based on the individual not having insurance for the entire year. If an individual did not have insurance for only part of the year, then the penalty would be pro-rated based on the number of months they did not have health insurance.

The individual shared responsibility payment for 2014 is the greater of:

• 1% of their modified adjusted gross income that exceeds their personal exemption (doubled for married couples filing jointly), plus the standard deduction for their filing status.

Modified Adjusted Gross Income is Adjusted Gross Income plus:

• Tax exempt interest
• Portion of social security income not included in income
• Foreign earned income and the housing cost of individuals who live abroad

Therefore, the penalty begins to be calculated once the modified adjusted gross income exceeds:

• $10,150 for single individuals
• $20,300 for married couples filing jointly

Or

• A flat dollar amount of $95 per adult family member age 18 and older and $47.50 for each dependent under age 18. This amount is capped at $285 for 2014.

One percent (1%) of income will begin to exceed the flat dollar amount when an individual’s Modified Adjusted Gross Income exceeds

• $19,650 for Single individuals
• $39,300 for Married couples with no dependents
• Read more

Put another way, Single individuals subject to a penalty will pay the flat dollar amount when their income is between $10,150 and $19,650. Once their income exceeds $19,650 they will pay 1% of their income.

Married couples subject to the penalty will pay the flat dollar amount when their income exceeds...Read more

Click here to read the entire CrossLink Tax Update that includes further information on the additional penalty for not having health insurance for 2014.

IRS Update: Individual’s 2014 Federal Return and the Affordable Care Act

As we get closer to the beginning of the 2015 filing season, it is important to understand how the Affordable Care Act will impact every individual who files a 2014 federal return. They may be impacted in a small way or major way depending on their health insurance status and where they obtained their health insurance during 2014.

Since the majority of taxpayers will be covered for the entire year by their employer, a government sponsored plan (such as Medicaid or Medicare), or from other qualifying health insurance, they will only need to check the Full Year Coverage Checkbox on Form 1040, line 61.

Taxpayers who purchased their health insurance at the Marketplace (State or Federal Exchange) will need to do the following:

• Taxpayer will receive by mail a Form 1095-A (Health Insurance Marketplace Statement) from the Marketplace. This information return should be received by the taxpayer by January 31, 2015 and will include details needed to complete the premium tax credit and do the reconciliation if they received an advance premium tax credit (subsidy) that helped pay their monthly health insurance premiums during 2014.
• Complete Form 8962 (Premium Tax Credit)
• Calculate the premium tax credit based on their 2014 income and family size.
• Enter the advance premium tax credit (subsidy) information from Form 1095-A, Part III, if applicable.
• Read more

Taxpayers who did not have health insurance for 2014 will do one of the following:

• Complete Form 8965 (Health Coverage Exemptions) to claim an exemption from the health care coverage requirement;

Or

• Have to pay shared responsibility payment (penalty) which will be calculated according to a worksheet in the Form 8965 instructions and entered on Form 1040, line 61.

Click here to read the entire CrossLink Tax Update that includes further information on individual's 2014 federal returns and the Affordable Care Act.

IRS Update: 2015 Employer Shared Responsibility Payment (Penalty) Under the Affordable Care Act

As a reminder, the employer shared responsibility (penalty) portion of the Affordable Care Act will be applied beginning on January 1, 2015. Therefore, all large employers (generally employed 100 or more full-time employees during 2014) are required to offer affordable health insurance to their employees that provides minimum essential coverage. Large employers who fail to do so will be subject to a shared responsibility payment (penalty). Read More

For 2015 there is transitional relief from the penalty for businesses that employed between 50 and 100 full-time equivalent employees during 2014. To be eligible, an employer must meet the following conditions:

• Did not reduce the size of its workforce or overall hours of service of its employees during the period starting on February 9, 2014 and ending on December 31, 2014.
• Did not eliminate or materially reduce the health coverage it offered as of February 9, 2014 during the period beginning on February 9, 2014 and ending on December 31, 2015.
• Read more

If the employer does not meet these conditions, then the definition of a large employer is 50 or more full-time employees during 2014.

Generally, a large employer will be subject to a shared responsibility payment (penalty) for 2015 once at least one full-time employee receives a premium tax credit and:

• Employer does not offer health insurance coverage to at least 70% of their employees – Penalty is calculated as $2,000 x (Total number of full-time employees minus 30) which is prorated for each month that they did not offer coverage;

Or

• Employer offers health insurance coverage that is not affordable or does not meet the minimum value standards – Penalty is $3,000 for each full-time employee who opts out of the employer’s coverage and obtains their health insurance through a Marketplace and is eligible for a premium tax credit.

Click here to read the entire CrossLink Tax Update that includes further information on the 2015 Employer Shared Responsibility Payment (Penalty) under the Affordable Care Act.

IRS Update: Changes to Small Business Health Care Tax Credit

Since 2010, the Small Business Health Care tax credit has been available to eligible small businesses that offer health insurance and have 25 or fewer employees. The purpose of this credit is to help small businesses pay for the premiums on health insurance for their employees.

The following changes have been made to this credit for tax years beginning in 2014:

• The maximum credit has increased to 50% of health insurance premiums paid.
• To be eligible for the credit, the small employer must purchase their health insurance through a Small Business Health Options Program (SHOP) offered through a health insurance exchange (marketplace).
• Read more

The credit will work with the new changes as follows:

• Credit is available to employers with 25 or fewer full-time equivalent employees whose average annual salaries are not more than $50,000.
• Credit is calculated on a sliding scale with a maximum credit of 50% of the employer's contribution toward their employees' health insurance premiums.
• Read more

An eligible employer claims the credit by completing Form 8941 (Credit for Small Employer Health Insurance Premiums) and including it with their federal return.

Click here to read the entire CrossLink Tax Update that includes further information on changes to the Small Business Health Care tax credit.

Health Insurance Sign-up Date to Avoid Penalty Extended

The last day to sign up for health insurance and avoid an additional tax penalty has been extended to coincide with the open enrollment end date of March 31, 2014.  This was announced by the Obama administration on October 28, 2013.

Before this change, a person had to enroll by February 15, 2014 in order to ensure that their insurance went into effect before March 31, 2014 and avoid the possibility of being subject to a penalty for not having insurance for at least nine months out of the year under the Affordable Care Act.

IRS Update: Affordable Care Act: Employer Minimum Value Standard for Employer Health Insurance Plans

One of the requirements of the Affordable Care Act for a health insurance plan an employer offers their employees is that it meets the minimum value standard. If an employer plan fails to meet the minimum value standard, a large employer (50 or more full time employees) will be assessed a penalty.

The minimum value standard is met if the employer's plan pays 60% or more of the plan's share of the total allowed costs of the benefits provided under the plan.

Minimum value is calculated by dividing the anticipated covered medical spending of essential health benefits (EHB) coverage (for the population covered by a typical self-insured group health plan) by the total anticipated allowed charges for EHB coverage for a typical self-insured group health plan population. Read More

Click here to read the entire CrossLink Tax Update about the Employer Minimum Value Standard for Employer Health Insurance Plans.

Note: Modernized e-File (MeF) Scheduled Downtime - June 2013

This is a reminder that due to the current budget situation, the IRS plans to be closed on June 14, July 5, July 22 and August 30. The MeF system (Production and ATS) will not be available from 10:00 pm ET of the prior day until 9:00 am ET of the following day on these dates. For example, when the closure falls on a Friday, the system will be unavailable from 10:00 pm ET on Thursday until 9:00 am ET on Saturday.

MeF Production & ATS Downtime:
Shutdown is scheduled to begin on Thursday, June 13, 2013 at 10:00 pm ET and end at 9:00 am ET on Saturday, June 15, 2013.

IRS Update: Small Business Health Care Tax Credit

This is a reminder that the small business health care tax credit is available to businesses with 25 or fewer employees and who offer health insurance to their employees. Eligible small employers may claim this credit when they file their 2012 Federal return using Form 8941 (Credit for Small Employer Health Insurance Premiums).

This credit has been available since 2010 and its purpose is to help eligible small businesses pay for their health insurance premiums for their employees.

Here is how the credit works:

• The credit is available to employers with 25 or fewer full-time equivalent employees whose average annual salaries are not more than $50,000.
• The credit is calculated on a sliding scale with a maximum credit of 35% of the employer’s contribution toward their employees’ health insurance premiums.
• Read more

Click here to read the entire CrossLink Tax Update that includes further information on the Small Business Health Care Tax Credit.