The Affordable Care Act includes the individual shared responsibility provision which requires you and each member of your family to have basic health insurance coverage (also known as minimum essential coverage), or qualify for an exemption from the responsibility to have minimum essential coverage, or make an individual shared responsibility payment when you file your federal income tax return. If you are not required to file a tax return and don’t want to file a return, you do not need to file a return solely to report your coverage.
What is minimum essential coverage? This is a health care plan or arrangement specifically indentified in the law as minimum essential coverage, including:
- Employer-sponsored coverage under a group health plan (including self insured plans).
- Specified government-sponsored programs, such as Medicare Part A, Medicare Advantage, most Medicaid programs, Children’s Health Insurance Program (CHIP), most TRICARE programs (for eligible active and retired service members), and comprehensive health care coverage of veterans.
- Individual market coverage, such as a qualified health planpurchased through the Marketplace or individual health coveragepurchased directly from an insurance company.
- Grandfathered heath plans (in general, certain plans that existedbefore the ACA was passed).
- Other plans or programs that the Department of Health andHuman Services (HHS) recognizes as minimum essential coveragefor the purpose of the ACA.
Qualifying exemptions from health coverage. A taxpayer is exemptfrom having to carry minimum essential coverage if:
- The amount he or she would have paid for the lowest costemployer-sponsored coverage available or for coverage through the Marketplace is more than 8% of his household income for the year.
- He or she went without minimum essential coverage for less thanthree consecutive months during the year.
- His or her household income is below the taxpayer’s minimumthreshold to file a return.
- He or she was neither a U.S. citizen, U.S. national, nor an alienlawfully present in the U.S.
- He or she was in jail, prison, or similar penal institution orcorrectional facility after the disposition of charges.
Individual shared responsibility payments. A taxpayer will need to make an individual shared responsibility payment (SRP) when filing the federal income tax return if: anyone in the household does not have minimum essential coverage; and does not qualify for a coverage exemption.
For 2014, the annual SRP amount is the greater of:
a. 1% of the household income that is above the tax return filing
threshold for the taxpayer’s filing status; or
b. The family’s flat dollar mount, which is $95 per adult and $47.50
per child (under age 18), limited to a family maximum of $285.
Premium tax credit and advance payments. Taxpayers who bought a qualified health plan from a State-based or Federally facilitated Health Insurance Marketplace (Marketplace) may be eligible for a premium tax credit.
In general, taxpayers are allowed a premium tax credit if:
- The taxpayer, spouse (if filing a joint return), or dependents were enrolled at some time during the year in one or more qualified health plans offered through the Marketplace, and one or more of them was not eligible for other minimum essential coverage during the months they were enrolled in the qualified health plan through the Marketplace;
- The taxpayer’s income is at least 100% but not more than 400% of the federal poverty line (FPL) for the taxpayer’s family size.
- The taxpayer cannot be claimed as a dependant on another return.
The ACA has placed many requirements on taxpayers but the requirements do not stop there. As your tax professional I am required to conduct sufficient due diligence to determine your coverage is sufficient to not warrant the penalty assessment. Your return will require additional time and computation with the possibility of more than six new tax forms added to the filing for 2014. Without question, return preparation time will be increased as well as time to consider the aspects of how the ACA will impact you.
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