IRS Examinations - Cuyahoga EITC Coalition

IRS Examinations - Cuyahoga EITC Coalition

Affordable Care Act Premium Tax Credit 1 Definitions Affordable Care Act o A combination of laws passed to expand health care coverage options while lowering the cost of health care and requiring many Americans to obtain health insurance. The Marketplace o Online or over the phone 1. health coverage options 2. compare health insurance plans based 3. choose a plan; and purchase coverage. 2 Step 1 Intake and Interview Form Did the Taxpayer, Spouse, and all dependents

have Minimum Essential Coverage (MEC)? The Taxpayer answers: o Yes: Check yes on line 61 of the 1040, move to step 6 o No: Move on to step 2 In TaxWise 3 Wait, What is MEC? 4 MEC Does Not Include 5 Step 2 Is this tax payer exempt from coverage gap fees?

6 More Exemptions 7 TaxWise Form 8965 Part 1 = Exemptions obtained through the marketplace Part 2= Everyone will answer 8 TaxWise Form 8965 Cont. Part 3 = All other exemptions. 9 Shared Responsibility Payment

The greater of: o 1% of household income above the filing threshold, or o Flat dollar amount $95 per adult, $47.5 per child Max of $285 for a family o But capped at the cost of the national average premium for a bronze level health plan available through the marketplace. 10 Filing Thresholds Filing Status Age Must file if gross income exceeds Single Under 65

$10,150 65+ $11,700 Under 65 $13,050 65+ $14,600 Under 65 (both spouses) $20,300 65+ (one spouse)

$21,500 65+ (both spouses) $22,700 Married Filing Separately Any age $3,950 Qualifying Widow(er) Under 65 $16,350 65+

$17,550 Head of Household Married Filing Jointly 11 Shared Responsibility Payment The greater of: o 1% of household income above the filing threshold, or o Flat dollar amount $95 per adult, $47.5 per child Max of $28 o But capped at the cost of the national average premium for a bronze level health plan available through the marketplace. Example: o Joy is single with no dependents. Joys household income is $30,450. Her filing threshold is $10,150.

1. $30,450-10,150 = $20,300 2. $20,300 * 1% = $203 12 2014 National Average Bronze Plan Premium Number of months without MEC or exemption Family Size 1 2 3 4 5+

1 204 408 612 816 1,020 2 408 816 1,224

1,836 2,448 3 612 1,224 1,836 2,448 3,060 4 816 1,632

2,448 3,264 4,080 5 1,020 2,040 3,060 4,080 5,100 6

1,224 2,448 3,672 4,896 6,120 7 1,428 2,856 4,284 5,712 7,140

8 1,632 3,264 4,896 6,528 8,160 9 1,836 3,672 5,508

7,344 9,180 10 2,040 4,080 6,120 8,160 10,200 11 2,244 4,488

6,732 8,976 13 11,220 Shared Responsibility Payment The greater of: o 1% of household income above the filing threshold, or o Flat dollar amount $95 per adult, $47.5 per child Max of $28 o But capped at the cost of the national average premium for a bronze level health plan available through the marketplace. Example: o Joy is single with no dependents. o Her flat dollar fee is $95, her 1% of household income fee is $203.

o Her annual national average premium for bronze level coverage for 2014 is $2,448 14 Back to Taxpayers with Coverage Did the taxpayer purchase MEC through the marketplace? o Yes figure the premium tax credit o No you are done Premium Tax Credit (PTC) o Helps pay for coverage purchased through the marketplace in the form of a refundable tax credit. o Must file a joint return if married o Must be between 100%-400% of the federal poverty level o Taxpayer claiming PTC cannot be a dependent Advanced Premium Tax Credit (APTC) o When health insurance was purchased, a projection of 2014 family size

and income was made and the APTC was paid in advance to the health insurance company. o This helps lower the taxpayers monthly payment 15 Federal Poverty Lines Use the taxpayers Modified adjusted gross income (MAGI) to determine eligibility 16 MAGI Modified adjusted gross income is adjusted gross income (AGI) + excluded foreign income + nontaxable social security + tax-exempt interest + MAGI 17

Form 8962 in TaxWise 18 APTC If there is no advancement of the PTC or only part of the PTC is claimed in advance, the remainder can be claimed as a refund on the tax return. If excess PTC is claimed in advance, it must be paid back. APTC Repayment Limits Income (as % of Fed Poverty Line) Single filing status All other filings statuses Less than 200%

$300 $600 200% to 299% $750 $1,500 300% to 399% $1,250 $2,500 400% and above No limit No limit

19 Form 8962 Cont. 20 Outline of Steps 1. Do you have full year MEC? 1. 2. Yes Move to step 4 No Move to step 2 2. Are you exempt from purchasing coverage? 1. 2. Yes complete form 8965 No Move to step 3

3. Figure the Shared Responsibility Payment 1. That is the last step for taxpayers without coverage 4. Did the taxpayer purchase MEC through the Marketplace? 1. 2. Yes Move to step 5 No Done 5. Figure the Premium Tax Credit Form 8962 1. That is the last step for taxpayers with MEC 21 For more training

http://eitcoutreach.org/aca/webinar 22

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