Individuals liable for the Code Sec. 5000A shared responsibility payment will make their payments when they file their 2014 returns, William Smits, senior manager, IRS Wage & Investment Division, National ACA Outreach Coordinator for Individual Tax Provisions, reminded practitioners during a webcast sponsored by the American Institute of Certified Public Accountants (AICPA) on November 13. Smits said that the Service will work with individuals who need to make a shared responsibility payment in 2015.
Minimum Essential Coverage
Effective January 1, 2014, the Patient Protection and Affordable Care Act (PPACA) generally requires individuals and their dependents, unless exempt, to carry minimum essential health coverage or make a shared responsibility payment. “Everyone must address minimum essential coverage on their 2014 return. Most individuals in the U.S. have coverage that qualifies as minimum essential coverage,” Smits explained. This includes most employer-provided coverage and government coverage, such as Medicare and Medicaid. However, specialized coverage, such as vision and dental coverage or accident and disability coverage, is not minimum essential coverage, he said.
Individuals with minimum essential coverage for 2014 will check a box on their Form 1040 (Line 61), Smits said. Individuals without minimum essential coverage and who are liable for a shared responsibility payment, unless exempt, will make their payment when they file their 2014 returns in 2015.
“Individual shared responsibility payment calculations are based on the greater of a flat-dollar amount or a percentage of income,” Smits explained. “The flat-dollar amount for 2014 is $95 but increases to $395 for 2015 and to $695 for 2016. The maximum flat-dollar amount for a family cannot exceed three times the adult flat-dollar amount.” For 2014, the percentage figure is one percent of household income.
“We will work with taxpayers who owe a shared responsibility payment,” Smits said. The IRS does not have statutory authority to use its lien or levy power, he explained.
Individuals claiming an exemption from the requirement to carry minimum essential health coverage must file Form 8965, Health Coverage Exemptions, with their income tax return. Smits explained there are nine main exemptions: religious conscience; health care ministry; members of federally recognized Native American nations; individuals whose income is below the minimum return filing threshold; individuals with a short coverage gap; hardship cases; affordability cases; incarcerated individuals; and individuals not lawfully present in the U.S.
“Some exemptions are obtained through the Marketplaces, some through the filing process and some either way,” Smits explained. The exemptions for members of federally recognized Native American nations, members of health care sharing ministries and individuals who are incarcerated are available either from the Marketplace or claiming the exemption as part of filing a federal income tax return. The exemptions for lack of affordable coverage, a short coverage gap, certain hardships, household income below the filing threshold and individuals who are not lawfully present in the U.S. may be claimed only as part of filing a federal income tax return.
Premium Assistance Credit
Individuals who obtain coverage through the Health Insurance Marketplace may qualify for the Code Sec. 36B premium assistance tax credit. “The Department of Health and Human Services (HHS) is the agency for helping individuals enroll in the Marketplaces and obtaining financial assistance,” Smits said. Advance payments of the credit may be made to the insurer. Individuals who receive advance payments of the Code Sec. 36B credit must reconcile their payments using Form 8962, Premium Tax Credit. Form 8962 will be filed with the individual’s federal income tax return.
Marketplaces will provide individuals enrolled in a qualified plan with annual information statements (Form 1095-A, Health Insurance Marketplace Statement). Taxpayers will use Form 1095-A to complete Form 8962. Forms 1095-A must be provided to enrollees by January 31 of the year following the year of coverage. “The process is very similar to 1099 reporting,” Andrew Waters, tax law specialist, IRS Media and Publications Division, said.