IRS Health Care Tax Tips

The IRS offers the following tips on Forms 1040, 1040A, and 1040EZ that relate to the health care law:

  • Form 8965, Health Coverage Exemptions: Complete this form to claim a coverage exemption or report a Marketplace-granted coverage exemption. Use the worksheet in the Form 8965 Instructions if you need to calculate the shared responsibility payment.
  • Form 8962, Premium Tax Credit: Complete this form to claim this credit on your tax return and reconcile advance payments of the premium tax credit.
  • Form 1095, Health Care information Forms: If you enrolled in coverage through the Health Insurance Marketplace, you should get Form 1095-A, Health Insurance Marketplace Statement, which will help complete Form 8962. Wait to file until you get this form. Your health coverage provider or your employer may give you a Form 1095-B, Health Coverage, or Form 1095-C, Employer-Provided Health Insurance Offer and Coverage. You do not have to wait to get these forms before your file your tax return.
  • Form 1040:
  1. Line 46: Enter advance payments of the premium tax credit that must be repaid.
  2. Line 61: Report health coverage or enter individual shared responsibility payment.
  3. Line 69: Report net premium tax credit if the allowed premium tax credit is more than advance credit payments paid on your behalf.
  • Form 1040-A
  1. Line 29: Enter advance payments of the premium tax credit that must be repaid.
  2. Line 38: Report health coverage or enter individual shared responsibility payment.
  3. Line 45: Report net premium tax credit if the allowed premium tax credit is more than advance credit payments paid on your behalf.
  • Form 1040-EZ
  1. Line 11: Report health coverage or enter individual shared responsibility payment.
  2. Form 1040EZ cannot be used to report advance payments or to claim the premium tax credit.

For more information about the Affordable Care Act and filing your 2015 income tax return visit IRS.gov/aca. VisitIRS.gov for more information on this topic if you file Form 1040-NR or 1040-NR-EZ.

Premiums Rise Modestly for Silver Plans

Premiums Rise Modestly for Silver PlansHEALTHCARE
Premiums Rise Modestly for Silver Plans
A report by the Robert Wood Johnson Foundation finds that premiums for the lowest-cost silver plans were modest, although there are exceptions in a few states. The same is true for the bulk of rating regions within these states. Large increases tend to be found in rating regions where the 2014 lowest-cost plan left the market, where the 2014 premiums were very low, and in areas without significant insurance market competition. In several cases, such circumstances caused very large increases in the lowest-cost available option in 2015.

On the other hand, premium options for the lowest-cost silver plan fell considerably in markets where new competitors entered or where an existing insurer was priced more competitively. Premium tax credits are tied to the second-lowest-cost silver plan in an individual’s rating area. People who want a more expensive plan must pay the full difference directly, and those who choose a less expensive plan reap the financial benefits.

Here are the numbers for California:

• Number of rating regions: 19
• Percent of population in rating regions with a decrease: 5.1%
• Percent of population in rating regions with a small increase (less than 5%): 57.3%
• Percent of population in rating regions with a moderate increase (5% to 10%): 33.1%
• Percent of population in rating regions with a large increase (more than 10%): 4.5%
• Number of rating regions where lowest-cost insurer changed: four
• Percent of population living where lowest-cost insurer changed: 9.6%

Premiums transparency, comparability of benefits, and actuarial values of plans spurs competition in the exchanges . However, many people must be willing to change plans, and insurers must be willing to take advantage of the lowest premiums. Without plan switching, competitive pressures on insurers will weaken.

In general, Blue Cross plans, which have been dominant in non-group insurance markets, have participated in the exchanges. But they frequently offer more limited network products than before 2014. In larger, particularly urban markets, other commercial plans participate in the marketplaces, and many have priced aggressively.

In 2014, many markets were joined by plans that previously enrolled only Medicaid beneficiaries and were thus structured to be low-cost plans. Co-ops, additional new entrants facilitated by the Affordable Care Act, were surprisingly successful in keeping rates competitive in several areas.

It’s uncertain whether the exchanges will continue to see aggressive pricing and small premium increases. First, the temporary risk corridors and reinsurance provisions in the law will end after 2016, which is expected to cause a small average increase in premiums. Second, it will be hard for insurers to avoid raising their premiums if underlying health care costs begin to grow at historical rates (as opposed to the lower rates seen in recent years). Finally, many insurers have been able to keep rates low with limited provider networks. If consumers prefer broader networks and are willing to pay for them, the market will respond by offering such products, and premiums will increase. States and the federal government could also engage in greater regulation of network adequacy, which could also cause premiums to increase

Key Senate Republicans offer bridge if ACA tax credits fall

Consumers who enrolled in health insurance through HealthCare.gov would not immediately lose tax credits and subsidies if the Supreme Court rules against the Obama administration, Republican Sens. Orrin Hatch of Utah, John Barrasso of Wyoming and Lamar Alexander of Tennessee wrote in the Washington Post. “We would provide financial assistance to help Americans keep the coverage they picked for a transitional period,” the senators wrote. Bloomberg (3/1), The Washington Post (tiered subscription model) (3/1)

Alito hints at compromise ACA ruling

Supreme Court Associate Justice Samuel Alito on Wednesday hinted during arguments on Affordable Care Act tax credits that a ruling against the Obama administration might not immediately invalidate credits. Instead, the court might stay its own ruling to allow a transition phase during which consumers who used HealthCare.gov to enroll in a 2015 health insurance plan could keep their tax credits for the year. Bloomberg (3/4), Kaiser Health News (3/4)

ACA enrollment raises the stakes in Supreme Court case

About 8.6 million people in 37 states used HealthCare.gov to enroll in or renew a 2015 health insurance plan, and the majority of them would lose their premium subsidies if the Supreme Court rules that tax credits are available only through state-run exchanges. More than 85% of HealthCare.gov users qualified for a tax credit, HHS Secretary Sylvia Mathews Burwell said. The New York Times (tiered subscription model) (2/19)

Californians Received an Average of $5,200 Per Household Through Covered California

About 800,000 California households got federal subsidies to make health care more affordable in 2014. The average amount received was more than $5,200 per household per year, or about $436 per month, according to Covered California executive director peter V. Lee. He said, “It’s important for uninsured Californians to know that many people like them received more than $5,200 last year to help them purchase health coverage, and that support is available to many others eligible to sign up before February 15.”

The total amount of premium help  — known as the federal Advanced Premium Tax Credit (APTC) — was $3.2 billion paid to health insurance companies on behalf of those who enrolled in private coverage through Covered California in 2014. The consumers themselves paid $1.1 billion toward those policies in 2014, meaning that for every dollar a subsidized consumer spent on premiums, the federal government paid another $3.

The data released Monday are reflected on new Health Insurance Marketplace Statements being mailed this week by Covered California. Known as Internal Revenue Service (IRS) Form 1095-A, the two-page statement (www.CoveredCA.com/news/pdfs/sample-1095-A.pdf) will show the amount of Advanced Premium Tax Credit each household received on a month-by-month basis in 2014. Similar to other tax documents, like a W-2 or 1099, the 1095-A will be used by consumers when they file their federal tax returns this year to ensure the subsidy they received is appropriate.

Consumers need to use this information when they file their taxes for 2014, Lee said. For many consumers, their tax credit will need to be adjusted, because their income is different than what they estimated it would be for 2014. As a result, consumers will see their tax credit adjusted upward or downward in their tax return based on their actual income as reported to the IRS for 2014.

Under the Affordable Care Act, the amount of tax credit reducing the consumer’s monthly health insurance premium payment is based on an estimate of their income made when they purchase their insurance. Consumers pay their share of the premium to the insurance company, and the federal government pays a portion on their behalf, based on their estimated income in the year ahead. The amount paid by the government is called the Advanced Premium Tax Credit, because it is paid in advance but reconciled as a tax credit at tax time based on the consumer’s official income as reported to the IRS. Consumers can elect to wait to get the entire tax credit at the end of the year, but almost all consumers took their premium tax credit in advance.

Many tax preparers and commercial tax software products are ready to accept information from Form 1095-A. Consumers may be able to get free software or in-person help filing their taxes and can learn more at www.irs.gov/freefile or www.irs.gov/VITA.

The period to sign up for coverage for 2015 continues for the next three weeks until February 15.  In addition to premium help, many consumers also benefited from cost-sharing reductions that lowered their out-of-pocket costs when they visited the doctor, Lee said.

In 2014, more than 60% of consumers who received subsidized coverage through Covered California qualified for cost-sharing reductions, which reduced their out-of-pocket health care expenses. Lee said that in 2014, the value of the out-of-pocket discounts per household amounted to about $1,200 per year.

Small businesses slow to embrace SHOP exchanges

Small businesses are not flocking to health insurance exchanges set up under the Affordable Care Act in the same way individual consumers are, brokers and business owners say. Though certain small businesses can get tax credits for offering employees coverage through the Small Business Health Options Program, some say choices are too limited and the credits are too low. The Wall Street Journal (tiered subscription model) (1/7)

Most ACA plan enrollees qualify for tax credit

About 87% of people who have enrolled in or actively renewed a 2015 health insurance plan through the federally run exchange qualify for a tax credit, according to HHS data. Those credits may be in jeopardy depending on the outcome of a legal challenge to be decided by the Supreme Court. The New York Times (tiered subscription model)/The Upshot blog (12/31)

Many Are Unaware of ACA Penalties, Exemptions, and Tax Credits

Forty-eight percent of Americans don’t know that they have to report their health insurance status on their upcoming 2014 tax returns, according to the Intuit TurboTax Health Survey. Under the Affordable Care Act, 2015 will be the first year that Americans must prove they have qualifying insurance when filing 2014 taxes, or face a tax penalty. While 62% are aware that the uninsured will be required to pay a penalty, 87% do not realize that the deadline to avoid a tax penalty for 2014 has passed. Health insurance purchased during the current open enrollment period, which extends through Feb. 15, 2015, will apply to returns filed in April 2016.

Fifty-six percent of those without health insurance don’t know that uninsured individuals who meet certain criteria may qualify for an exemption from the Affordable Care Act tax penalty. Forty-five percent don’t know about the premium tax credits, which are designed to make health insurance less expensive for low-to-moderate income families. Free resources are available atTurboTaxHealth.com.

The ACA Helps Create the Most Complicated Tax Seasons Ever

IRS Chairman John Koskinen said the 2015 tax filing season, “will be one of the most complicated filing seasons we’ve ever had.” Speaking at a recent tax conference in Washington, D.C., Koskinen said that the primary things that will affect the new tax are ACA provisions and Congress’ potential to extend tax breaks set to expire at the end of the year. Internet retailers are spared from legislation requiring them to collect sales taxes on purchases made by online shoppers in different states — at least for now. A bill in the House of Representatives that would have supported provisions in The Marketplace Fairness Act, which passed through the Senate, is now on hold and reportedly won’t be moved forward by House Speaker, John Boehner. However, parts of the bill that legislators on both sides of the aisle agree on could be added to separate legislation. For more information, visitwww.wolterskluwer.com.

Last Updated 10/28/2020

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