Webinar Q&A: Helping Clients Understand Tax Filing and Health Coverage, 2017

Webinar Q&A: Helping Clients Understand Tax Filing and Health Coverage, 2017

February 22, 2017
ACE TA Center
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The following questions and answers came from the February 22, 2017 ACE TA Center webinar, Helping Clients Understand Tax Filing and Health Coverage.

Questions

  1. What do you do when clients go on and off an employer health plan during the year or are not offered an employer plan that's affordable, if their employer plan isn't what they need, but that wouldn't allow them to be eligible for tax credits through the marketplace?
  2. If an individual, in a non-Medicaid expansion state, doesn't show any income on their Marketplace application, and therefore would be ineligible to get tax credits, would they also get a 1095-A?
  3. What about clients whose Marketplace application was accepted when they had an income above 100% of the federal poverty level (FPL), but their final 2016 income dropped below 100% FPL? Is there any pay back or penalty?
  4. My married clients often ask whether they should file taxes jointly or separately. Do you have any suggestions of what I should tell them?
  5. Does filing married cause recoupment payment issues if only one of the couple is on ADAP?
  6. If an individual received medical coverage through the Marketplace and had Medicaid, but did not file taxes in 2015, are they not eligible for insurance in 2017?
  7. If a client had foreclosure during the year, but did not request an exemption for not having coverage through the Marketplace, can they still claim an exemption through the IRS?
  8. Have there been any changes to the way the individual mandate is being enforced for this tax year?

Answers

Anchor1. What do you do when clients go on and off an employer health plan during the year or are not offered an employer plan that's affordable, if their employer plan isn't what they need, but that wouldn't allow them to be eligible for tax credits through the marketplace?

To be eligible for Advance Premium Tax Credits (APTCs), a person must not be enrolled in employer sponsored coverage or have access to “affordable” employer sponsored coverage that meets a minimum value standard. The federal government defines what is affordable. For the months that someone was enrolled in or eligible for affordable employer sponsored coverage, s/he is not eligible for APTCs. Affordability is defined as costing less than 9.5% of income.

Client education about eligibility and changes in health insurance circumstances is really important throughout the year. Ryan White HIV/AIDS Program (RWHAP) Part B AIDS Drug Assistance Program (ADAP) funds can be used to fund premium and cost-sharing assistance for the purchase and maintenance of private health insurance. Details of this policy can be found in Policy Clarification Notice (PCN) 13-05 at https://hab.hrsa.gov/program-grants-management/policy-notices-and-program-letters

ADAP funds are administered by the state so we recommend checking with your state’s ADAP program to find out what they fund. Find the national directory of ADAP coordinators in this link.

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Anchor2. If an individual, in a non-Medicaid expansion state, doesn't show any income on their Marketplace application, and therefore would be ineligible to get tax credits, would they also get a 1095-A?

Anyone who was enrolled in a Qualified Health Plan through a state or federally facilitated Marketplace will receive a Form1095-A (individuals who enrolled in an off-Marketplace plan will not receive the Form 1095-A). However, if an individual did not receive APTCs, there is no need to go through the reconciliation process and the Form 1095-A will just be used for proof of coverage. For example: in a non-Medicaid expansion state, if a person with an income below 100% of the federal poverty level (FPL) enrolled in an unsubsidized Marketplace plan, they would not be eligible for APTCs. They are not eligible for premium tax credits of any kind, because they don't meet that income threshold. There is no reconciliation process for that person.

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Anchor3. What about clients whose Marketplace application was accepted when they had an income above 100% of the federal poverty level (FPL), but their final 2016 income dropped below 100% FPL? Is there any pay back or penalty?

There is not a payback or penalty in this circumstance. If a person applies for Marketplace coverage with income over 100% FPL and receives APTCs throughout the year, but their income drops below 100% FPL according to their federal tax return, that person may actually be owed a refund. This is an important consumer protection.

Note that the case study with Charlene (part of this webinar) explores this scenario.

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4. My married clients often ask whether they should file taxes jointly or separately. Do you have any suggestions of what I should tell them?
Married clients must file their taxes jointly to be eligible for APTCs (except in very limited circumstances). That is a requirement for APTC eligibility. There are very limited exceptions to that rule. The general rule of thumb is that if you've got a married client and they're receiving APTCs, then they have to file jointly. They don't have the option to file separately.

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5. Does filing married cause recoupment payment issues if only one of the couple is on ADAP?
It does. In fact, if you put the couple's forms (1095s, or 8962, and their 1040s) together, you can figure out which pieces of the premium tax credit reconciliation, overpayment, underpayment, accrues to the client. In many cases, ADAPs are funding health coverage for an individual ADAP client. In these cases the spouse may be on their own separate plan to make it easier to administer ADAP premium assistance. ADAPs are working with clients for best practices on this issue. Case managers and clients should check with their ADAP for state specific information.

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6. If an individual received medical coverage through the Marketplace and had Medicaid, but did not file taxes in 2015, are they not eligible for insurance in 2017?
Individuals must have reconciled previous years' premium tax credits through filing federal taxes to be eligible for continued support during the next plan year. Case managers should encourage clients to file their 2016 taxes as soon as possible before open enrollment for the 2018 plan year.
Here’s an example: let's say someone had Marketplace coverage for 2015. Then in 2016 they didn't have Marketplace coverage because they became eligible for Medicaid.
Even though that person moved off the Marketplace plan and onto Medicaid, they still had to file their 2015 taxes to reconcile the premium tax credits they received in 2015 (by April 15th of 2016).

Now let’s say that in 2017 they are ready to apply for a Marketplace plan again. They can apply for a Marketplace plan, but because they did not file their 2015 taxes in 2016, they are not eligible for premium tax credits to help them pay for the insurance. They would need to file and reconcile their 2015 taxes before being eligible for these premium tax credits.

The chart below demonstrates this scenario:

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7. If a client had foreclosure during the year, but did not request an exemption for not having coverage through the Marketplace, can they still claim an exemption through the IRS?
This would be a good time to help your client use the HealthCare.gov exemption tool (https://www.healthcare.gov/tax-tool/). It will tell you whether the exemption has to be awarded by the Marketplace, or whether it can be claimed on the client’s tax form.

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8. Have there been any changes to the way the individual mandate is being enforced for this tax year?
No, the individual mandate remains enforced. In fact, the IRS said recently that individuals should file their tax returns as they normally would and specifically, they should continue to indicate on their tax return, on line 61, whether they were insured last year, or whether they were exempt from the requirement to have health coverage, and whether they owe a penalty for not having coverage. Nothing in terms of the individual mandate enforcement or the requirements has changed, so people can continue as they did last year in terms of that requirement.

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