A Webinar Presentation for the January 27, 2016 To access slides of - - PowerPoint PPT Presentation

A Webinar Presentation for the

January 27, 2016

 To access slides of today’s webinar:

www.economicprogressri.org/rihealthcoverageproject

 To ask questions: click on Asks Questions section of

• webinar. If not working, email: Rachel Flum

rflum@economicprogressri.org

2

2015 Tax Season: 5 Key Topics in Today’s Session

1)

Everyone who is eligible must have health insurance for 2015

1) Vast majority of tax filers will simply “check the box” on their return

2)

Know the ABCs of 1095 Forms

3

Type of Health Coverage Federal Tax Form Individual/Family coverage purchased through HSRI (or

• ther exchange/marketplace)

Form 1095-A Medicaid, Medicare or through your job if you work for a small employer (including SHOP coverage thru HSRI): and individual/family coverage purchased directly from a carrier Form 1095-B Through your job if you work for a Large Employer (Generally 50 +) Form 1095-C

2015 Tax Season: 5 Key Topics in Today’s Session…continued

3)

No coverage?

 Penalty applies (unless customer qualifies for an exemption)

4)

Exemptions

 Qualifying reasons and how to get an exemption

5)

Advance Premium Tax Credit (APTC)

 APTC is reconciled at tax time

4

Everyone Must Have Health Insurance



Called “Individual Shared Responsibility” provision

– Sometimes referred to as the Individual Mandate



Applies to all children and adults



For vast majority of tax filers, very simple process

– If taxpayer and dependents had minimum essential coverage for each month of 2015, taxpayer simply checks a box on their federal return – No form needed – No further action required

5

Minimum Essential Coverage



Examples of Minimum Essential Coverage

– Most government-sponsored programs like:

• Medicaid
• CHIP
• Medicare Part A
• Medicare Advantage
• Most TRICARE programs

– Employer sponsored group coverage (including COBRA and retiree coverage) – Individual market coverage (qualified health plans)

• Purchased through HSRI
• Purchased directly from carriers

6

Tax Form 1095 – Shows MEC for 2015



Last Year: Only people who purchased commercial coverage through HSRI received 1095-A



This year:

– 1095-A: Purchased individual/family coverage through HSRI – 1095-B: Covered by Medicaid, Medicare, small employer (including SHOP) or individual/family coverage direct from a carrier – 1095-C: Covered by large employer (50+)



Just because someone receives 1095 doesn’t mean person needs to file tax return – depends on filing rules



Must file a tax return if received tax credits to buy HSRI coverage



May receive more than one form: Parents purchased commercial coverage through HSRI and child/ren in RIte Care; or parent purchased thru an employer and child/ren in RIte Care; several possibilities for 2015

7

1095-A Health Source RI – What to Know



HSRI sent “Watch the Mail” notice on January 15



Will send 1095-A between January 25 and February 1



1095-A shows months of coverage, premium and premium tax credit



Use 1095-A to complete Form 8962 which is filed with tax return



More about 1095-A later in presentation

8

1095-B Medicaid - What to Know



Mailed in batches beginning January 8 – mid-February (over 200,000)

– Cover letter – “Communication Notice” (HealthSource RI letterhead) – 1095-B – FAQ



If other health coverage and Medicaid is “wrap” will not receive Medicaid 1095-B

– RIte Share (employer coverage) – Medicare and Medicaid (1095-B from Medicare)

9

1095-B Medicaid - What to Do



Check for accuracy – especially months of coverage



If information correct – That’s it!

– Keep for records; do not need to file with tax return – Can check the box on tax return – coverage for 12 months



If errors: Call 855-855-6128

– If there is an error, IRS will be notified about the correction and the person will receive a corrected Form 1095-B (done by DHS/Medicaid) – Important: Taxpayer does NOT need to wait for either the original or a corrected Form 1095-B to file if you “…can rely on other information you have about your coverage to complete line 61.” (Source: instructions on page 52 of 2015 Form 1040 – Line 61)

10

Cover Letter for Form 1095-B

11

Note that this information comes from the Medicaid database and that any corrections necessary will be made by DHS/Medicaid staff

Communication Notice

Dear Johnson Jordon: Here is your form 1095-B for 2015. This is a federal tax form that shows the months that you, or members of your family, had health coverage through Medicaid during the year. This form will help you show that you have met the federal requirement to have health coverage. If you or members of your family had other sources of health coverage in 2015, you may receive other 1095 forms. Please see the attached list of frequently asked questions for more information. The information on this form has been sent to the IRS. You do not need to attach it to your federal tax return, but you should keep it for your records. Please review the form carefully. If you think any of the information on this form is wrong, please call the Department of Human Services at 855-855-6128. You can find out more by visiting the EOHHS website (www.eohhs.ri.gov) and clicking on “Form 1095-B”, or by visiting the IRS website (IRS.gov/aca). Thank you, HSRI Team

12

Part III will be filled out for Medicaid Enrollees (“State of Rhode Island”)

Most Taxpayers Will Simply Check the Box

• n Form 1040

13

Line 61 on From 1040 – Many will just the box

Penalties If No Coverage in 2015



Shared Responsibility Payment (sometimes referred to as the ‘penalty’):

– Greater of 2% of household income above the tax return threshold for the taxpayer’s filing status*, OR – Flat dollar amount of $325 per adult and $162.50 per child (under age 18), limited to a family maximum of $975



Computed on monthly basis (i.e., taxpayer owes 1/12th of annual amount for each month with no coverage or exemption)



Penalty capped at national average premium for a bronze level QHP



If covered for at least one day in the month, law gives credit for full month



Short coverage gap allowed under Exemptions (gap of less than 3 consecutive months):

– Example: You had coverage from 1/1/15-10/31/15 but not for Nov and

• Dec. You may use Form 8965 to apply for the short term coverage gap

(Use code B for the exemption type in Part III of the form)

* About $10,000 for an individual

14

Penalties If No Coverage in 2016



Payment/penalty increase in 2016



Shared Responsibility Payment:

– Greater of 2.5% of household income above the tax return threshold for the taxpayer’s filing status, OR – Flat dollar amount of $695 per adult and $347.50 per child (under age 18), limited to a family maximum of $ 2,085



Importance of understanding 2016 penalty now:

– Open enrollment for 2016 ends 1/31/16 – We need to educate people without coverage today about the 2016 penalty – If current enrollees are thinking of cancelling coverage, remind them of 2016 penalties



After 2016, penalty amounts are based on 2016 amounts adjusted for inflation

15

Exemptions from the penalty



What exemptions are available?



How do I apply for an exemption?

What Exemptions are Available?



Insurance is unaffordable: The lowest-priced coverage available to you would cost more than 8.05% of your household income



You don’t have to file a tax return because your income is too low



You’re uninsured for less than 3 months of the year You qualify for a hardship exemption



You’re a member of the Narragansett Tribe (or other federally recognized tribe) or eligible for services through an Indian Health Services provider



You’re a member of a recognized health care sharing ministry



You’re a member of a recognized religious sect with religious

• bjections to insurance, including Social Security and Medicare



You’re incarcerated (either detained or jailed), and not being held pending disposition of charges



You’re not lawfully present in the U.S.

17

Coverage is Unaffordable



It would cost more than 8.05% of your income in 2015 to buy: – Coverage from your employer or – A bronze plan through HSRI Example: Your household income in 2015 was $15,000.00. The cost of your employer-sponsored coverage was $1,500.00. The lowest-cost Bronze plan available to you was $1,300.00. Because both options exceed 8.05% of your household income ($1,207.50), you are eligible for an exemption from the penalty.

Coverage is Unaffordable



Process:

• If you are applying for an exemption because coverage was

unaffordable in 2015, you must apply thru the tax return; you can only apply for this exemption through HSRI if you did so by the last date coverage was available in 2015

• You can apply for an exemption through HSRI if you think 2016

coverage is unaffordable; this is because exchanges (HSRI) use projected income vs actual income

19

Income Below Threshold



Your income is below the the tax filing threshold.



You do not need to do anything to get this exemption. You may still want to file a tax return to get the Earned Income Tax Credit. You must file a tax return if you received tax credits to help you pay for insurance through HSRI



See the chart below

Hardship Exemptions

You may be eligible for a hardship exemption for months you did not have health insurance if:



You were homeless



You were either evicted in the past 6 months, or else were facing eviction or foreclosure



You received a shut-off notice from a utility company



You recently experienced domestic violence



You recently experienced the death of a close family member



You experienced a disaster causing substantial damage to your property



You filed for bankruptcy in the last 6 months



You had substantial debt related to medical expenses in the last 24 months



You had AmeriCorps coverage

Hardship Exemptions (cont.)



You experienced unexpected increases in necessary expenses due to caring for an ill, disabled, or aging family member



You are claiming a child as a tax dependent who has been denied coverage in Medicaid and RIte Care, and another person is required by court order to give medical support to the child



As a result of an appeals decision, you are eligible for enrollment in a qualified health plan (QHP) through the Marketplace, lower costs on your monthly premiums, or cost-sharing reductions for a time period when you weren’t enrolled in a QHP through the Marketplace



You did not have coverage because you lived in a state that did not expand Medicaid



Your individual insurance plan was cancelled and you believe other Marketplace plans are unaffordable



You experienced another type of hardship in obtaining health insurance

Hardship Exemptions



Hardship exemption applies in the month of the hardship, the month before and the month after



Apply for a hardship exemption by submitting an application through HSRI

Applying for an Exemption



To apply for an exemption based on hardship or membership in a recognized religious sect whose members object to insurance, – Complete and submit the exemption application form in UHIP



If applying based on membership in a federally-recognized tribe, or if eligible for services through an Indian health care provider, incarceration, membership in a health care sharing ministry, – Claim the exemption when you fill out your 2015 federal tax return

• r

– Complete and submit the exemption application form in UHIP

How Do I Apply for an Exemption through HSRI?



Log in to your UHIP account,



Click on “Tasks”,



Click on “Apply for an Exemption” and fill out the Application form.

What is the Premium Tax Credit?

Quick Refresher:



Refundable tax credit



To help eligible individuals and families pay for health insurance



Only available through HSRI



Two payment options: – Get it Now – advance credit payments paid directly to the carrier

• n a monthly basis

– Get it Later – without advance credit payments



Choice is up to enrollee – Enrollee can also take part of it on a monthly basis and get the rest at tax time

26

Premium Tax Credits

APTC versus PTC



Advance Premium Tax Credit = APTC – Taken in advance (during the policy year) to make cost of coverage more affordable; based on estimated income and household size



Premium Tax Credit = PTC – Calculated after policy year is over (during the tax filing process); based on final income and household size



We all know the APTC acronym but the IRS uses PTC when talking about the final tax credit

27

Tax Credit Eligibility

To be eligible the individual must:



Be an Applicable Taxpayer – Income between 100% and 400% FPL (for family size) – Cannot be claimed as a dependent, and – If married, files a joint return



Have a “Coverage Month” – Enrolled in a QHP through HSRI (the “Exchange” or “Marketplace”) – Not eligible for other minimum essential coverage, and – Premiums are paid

28

Tax Credit Key Considerations



Advance credit payments are optional



Reconciling advance credit payments is required



Differences between advance credit payments and final credit are highly likely



Changes in circumstances can affect the PTC amount



A tax return must be filed

– Even if taxpayer is otherwise exempt from filing (for example, because income is below the filling limit)

29

For 2015, Income Limits Based on 2014 Federal Poverty Line (FPL)

100% FPL 400% FPL One Individual $11,670 $46,680 Family of Two $15,730 $62,920 Family of Four $23,850 $95,400 In Rhode Island, an adult with income below 138% FPL ($16,243) is eligible for Medicaid

30

Changes in Circumstances Can Affect the Credit



Changes in circumstances can affect:

– Eligibility for the PTC – even if not previously eligible – Amount of the PTC



Major changes in circumstances:

– Marriage, divorce – Increases or decreases in number of dependents – Change in an individual’s residence – Job or other changes increasing or decreasing income – Loss of other health coverage – Changes in filling status

31

Form 1095-A: The Basics



Issued by HealthSource RI to all QHP enrollees – regardless of whether they received an APTC during the year or not



Sent by January 31st



Shows:

– Documentation of coverage by month and family member – Premiums of coverage selected – Premiums of benchmark plan – Advance payments of PTC (if applicable)



Generally, one form per tax household, per health plan – If more than one health plan selected, more than one 1095 will be generated



No 1095 Form required for Catastrophic plans for 2015



Once distributed, copy of 1095-A will be in enrollee’s online account in their notices tab and can be downloaded

32

Form 1095-A: The Basics (continued)



IRS gets a copy



Not available early if enrollee calls in mid-January and asks for one because they want to file their taxes



HSRI mailed a “Watch the Mail” letter to all enrollees on 1/15/16 (English and Spanish; sent by language preference)



“Watch the Mail” letter explains what Form 1095-A is and the importance of waiting for it before beginning the 2015 federal tax filing process



Did you know….

– Low and moderate income filers typically file very early in the tax season to obtain refunds – Refunds are typically $2,000-$3,000 (largest check of the year) – February is peak filing season and 2/15 is a very heavy filing day

33

“Watch the Mail” Letter (Sent 1/15/16)

34

What to do with Form 1095-A

Summary Overview:



Step 1: Collect all of your tax information, including Form 1095-A



Step 2: Use information on 1095-A and final tax data from Form 1040 to complete Form 8962

– Tax filer cannot simply attach the 1095-A to his filing…s/he must use the information to reconcile the advance premium tax credit – Form 8962 uses final income and the actual size of the tax household to determine the actual, final tax credit earned and then compares it to the advance premium tax credit paid



Step 3: 4 outcomes possible on federal tax return

Let’s look at each step in more detail…

35

What to do with Form 1095-A (Step 1)

Step 1



Check to make sure 1095-A looks right – Are coverage months correct? – Are covered individuals correct? – Does monthly premium look right?

Important! It will not be an exact match. If enrollee compares information on 1095-A to monthly bills, there will be a small difference between 1095-A premiums and invoiced premiums because 1095-A displays only the “essential health benefits” (EHB) portion of the rates If monthly difference is more than $3, contact HSRI

36

Form 1095-A (Step 1 - continued)

Step 1



If Form 1095-A data has incorrect information for coverage months or family members covered, enrollee should contact HSRI



If enrollee thinks monthly premium as shown is wrong (other than small difference for required EHB-only reporting), enrollee should contact HSRI For Tax-Related Questions Only: Call HSRI at 855 408 1344



Assuming Form 1095-A looks good, enrollee should proceed to Step 2 and utilize the 1095-A information to complete Form 8962 Let’s take a quick look at Form 1095-A…

37

Form 1095-A: Part I and II

38

New!

Form 1095-A: Part III

39

Form 1095-A Correction Process



If enrollee believes the information on Form 1095-A is incorrect, s/he should call HSRI at 1-855-408-1344



1-855-408-1344 is for tax-related inquiries and specially trained staff will research any form data that the customer believes is incorrect (this number is in the “Watch the Mail” letter and will be provided in the cover letter to Form 1095-A).



It is likely that 1095-A calls will take time to research and may not be finalized while the enrollee is on the phone

– When possible, please help establish this expectation – We will research as quickly as possible and call enrollee when research is completed



If form is incorrect, an amended Form 1095-A will be provided to the enrollee and the IRS will receive a copy as well



To protect privacy of enrollee, calls from tax preparers cannot be accepted

40

Using Form 1095-A to Complete Form 8962 (Step 2)

Step 2



Enrollee (or more likely, the enrollee’s tax preparer) utilizes the 1095-A information and data from Form 1040 to complete Form 8962



Important!

– If an enrollee received an APTC or wants to claim a credit, s/he cannot use Form 1040EZ

Let’s take a quick look at Form 8962…

41

Form 8962: Premium Tax Credit (PTC)

42

Form 8962



Part 1: Annual and Monthly Contribution Amount



Part 2: PTC Claim and Reconciliation



Part 3: Repayment of Excess of Advance Payment



Part 4: Shared Policy Allocations



Part 5: Alternative Calculation for Marriage

43

4 Outcomes with Form 8962



APTC = PTC

– Net change to taxpayer is 0 – Unlikely - even a good estimation is likely to be off by a little



APTC > PTC

– Taxpayer must pay back the excess tax credit (subject to repayment limits noted in future slides) – Excess amount reduces a refund or is added as an amount due



APTC < PTC

– Taxpayer receives amount of credit either through a larger refund or as an

• ffset against any amount otherwise due



APTC not requested but taxpayer is owed a PTC

– Taxpayer receives amount of credit either through a larger refund or as an

• ffset against any amount otherwise due

44

APTC > PTC (Too much credit given) An Example

Advance payments: $4,000 Calculation of PTC: $3,000 Difference: $1,000 Repayment amount: $1,000* *Amount from Form 8962 that would be entered on Form 1040 Remember: A tax return must be filed to reconcile advance credit payments regardless of any other filing requirements

45

Is there a limit to amount taxpayer can owe the IRS?



In most cases, yes



Individuals and families with final incomes below 400% FPL are protected by repayment caps



If income is at or above 400% FPL, no repayment caps

– Full APTC paid during policy year is subject to reconciliation

46

What are Repayment Caps?

FPL of Tax Filer Individual Family Less than 200% $ 300 $ 600 At least 200% - But less than 300% $ 750 $ 1, 500 At least 300% - But less than 400% $1,250 $ 2,500 400% or more No Cap No Cap

47

Repayment Caps - Example



Taxpayer is an Individual



Taxpayer FPL (from tax return): 350%



Total advance premium tax credits (APTC): $2,952



Total premium tax credit (PTC): $1,062



Difference: $1,890



Cap for Individual at 350% FPL: $1,250



Amount owed: $1,250



Amount owed is deducted from any refund or added to any tax liability

48

For Help Filing Taxes



HSRI assisters/representatives cannot provide tax preparation assistance



HSRI assisters/representatives cannot provide tax advice



Encourage enrollees to work with qualified, experienced tax preparation professionals

– Many enrollees will have an existing relationship with a tax preparer – Recommend that enrollees ask family and friends for a trusted referral – Tax prep software will cover ACA requirements



Enrollees are encouraged to select a tax preparer carefully

– Qualified tax preparers should be familiar with health insurance tax credits, the shared responsibility payment and exemptions

49

Free Tax Return Preparation for Qualifying Taxpayers



Volunteer Income Tax Assistance (VITA) program offers free tax help to people who generally make $53,000 or less, persons with disabilities, the elderly and limited English speaking taxpayers who need assistance in preparing their own tax returns

– IRS-certified volunteers provide free basic income tax return preparation with electronic filing to qualified individuals.



In addition to VITA, Tax Counseling for the Elderly (TCE) program

• ffers free tax help for all taxpayers, particularly those who are 60

years of age and older



VITA and TCE help not available late January (1/19 is the first day that the IRS will accept electronic returns)



List of VITA and TCE sites in RI will be available online soon

– http://irs.treasury.gov/freetaxprep/ (and HSRI Website) – Call 800 906 9887 for list of sites

50

Paid Sources of Tax Preparation



Certified Public Accountants (CPAs) who do taxes



Retail tax prep firms (examples include: H&R Block, Jackson Hewitt, Liberty Tax – there are others)



Independent tax preparers



Tax Prep Software

51

RIREACH: Help for Consumers & Advocates

52

• RIREACH specialists available to help with:
• Form 1095-A
• Form 1095-B
• Form 1095-C
• Form 8962
• Form 8965
• Exemptions from individual mandate
• Support for both consumers and advocates/enrollers/helpers
• RIREACH can answer general questions, pursue corrections to forms,

and help apply for exemptions

• RIREACH does NOT provide tax advice

1-855-RIREACH (747-3224)

Excellent Resources



https://www.healthcare.gov/taxes/



http://www.irs.gov/Affordable-Care-Act



http://www.healthreformbeyondthebasics.org/home/for-tax-preparers/



http://economicprogressri.org/RIHealthCoverageProject



http://healthcarerightsri.org/resource-hub/2015-taxes-and-healthcare/



http://healthsourceri.com/get-help-tax-season/

HSRI has a special section on the website called, “Get Help During Tax Season” – available now

53

RI Health Coverage Project –Stay Informed



Health Coverage Project www.economicprogressri.org/rihealthcoverageproject



Project Manager: Rachel Flum, 456-2751 rflum@economicprogressri.org



Policy Director: Linda Katz, 456-4634 lkatz@economicprogressri.org

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