Navigating Federal Taxes: Considerations for ADAPs
Amy Killelea, NASTAD
Presentation Outline
Premium Tax Credit Reconciliationo Considerations for ADAPs and clients
o Case studies
Individual mandate shared responsibility payment and exemptions
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Advance Premium Tax Credit (APTC) Life Cycle
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Step One: Marketplace Application• Demonstrate financial eligibility for APTC in application to Marketplace• Individuals may apply for advance premium tax credit based on
projected annual incomeDates: November 1 – January 31
Step Two: Report Income Changes • Report changes in income to Marketplace that will impact APTC amount• Report changes in tax household size that will impact APTC amountDates: January 1 – December 31 (tax year)
Step Three: File Your Federal Taxes!• Individuals receiving APTC MUST file federal taxes for year in which they received
the tax credit• IRS will determine if individual received the right amount APTC throughout yearDates: By April 15
Tax Forms Relevant to ADAPs
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Tax Form Description
Form 1095-A Form generated by the Marketplace and sent to anyone receiving APTC
Form 1095-B Form sent by the insurer to the insured verifyingindividual had coverage
Form 1095-C Form sent by employer to the employee verifyingwhether the individual had coverage
Form 8962 Addendum to tax return documenting APTC reconciliation
Form 8965 Addendum to tax return documenting any exception to the requirement to have minimum essential coverage
Putting it Together: Determining if There was an APTC Under or Overpayment
The 1095-A: Tells you how much the individual actually received in APTCs throughout the year (by month)
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Putting it Together: Determining if There was an APTC Under or Overpayment
The Form 8962: Tells you how much the individual should have received in APTCs according to MAGI-based income on tax return and allows for calculation of any overpayment or underpayment
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REFUND OWED TO INDIVIDUAL
LIABILITY OWED TO IRS
Putting it Together: The 1040
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Line 46 on IRS Form
1040 indicates excess
premium tax credits a
person owes to the IRS
Line 69 on IRS Form
1040 indicates net
premium tax credit (i.e.,
amount owed to the
taxpayer as refund)
Repayment Amounts Are Capped
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Income Single filers All other filers
< 200% FPL $300 $600
At least 200% FPL and < 300% PFL
$750 $1,500
At least 300% FPL and < 400% FPL
$1,275 $2,550
400% FPL and greater
N/A N/A
HRSA/HAB Guidance
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HRSA/HAB PCN 14-01
In the event of APTC tax refund to the client
In the event of APTC liability owed to the IRS by the client
Grantees must “vigorously pursue” any excess premium tax credit a client receives from the IRS upon submission of federal tax return
Grantees may cover client tax liabilities associated with an overpayment of the premium tax credit.
Recovered premium tax credit refunds are not considered program income; grantees must use recovered refunds in the Health Insurance Premium and Cost-sharing Assistance service category in the grant year when it’s received
The payment to the IRS must be made from funds available in the year when the tax liability is due
Grantees must develop processes to coordinate payments directly to IRS (payments to clients are prohibited) and may only pay the amount directly attributed to the reconciliation of the premium tax credits
Helpful Tip: include the client’s name, SSN, tax year, and portion of tax liability to which the Ryan White/ADAP payment should be designated
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Premium Tax Credit Reconciliation Case Studies
Case Study One: Ann
When Ann applied for 2016 Marketplace coverage with advance premium tax credits (APTC) in December of 2015, her annual income was $27,000 (230% FPL)o Ann gets $2,136 in APTC/annually
BUT, Ann changed her job mid-way through the year with a reduction in salary and failed to report this to the Marketplaceo When Ann files her taxes, her annual income ends up being $11,000
(95% FPL)• Note: Ann lives in a non-Medicaid expansion state
o Special rule: because Ann was eligible for APTCs when she applied, she is actually owed a refund (her expected contribution is 2% of her annual income)
o Ann is entitled to APTC of $3,191/annually
Ann will get a refund from the IRS in the amount of $1,055
Determining Refund Amount
$1,055
IRS Form 8962
Case Study Two: Carlos (and Sam)
Carlos is an ADAP client. He is married to Sam, who is not living with HIV and, therefore, is not an ADAP client. Carlos and Sam’s annual household income when they applied for 2016 coverage was ~$37,000 (230% FPL).o Carlos and Sam’s tax household (of two) gets $5,511 in
APTC/annually
ADAP assists Carlos with an individual QHP and Sam is able to purchase a separate QHP that just covers him with his allocation of APTC (see CMS presentation on spouses enrolling in separate plans)
At tax time, Carlos and Sam get two separate 1095-As, but they must file their taxes as married filing jointly. ADAP must determine the APTC reconciliation allocation just for Carlos.
1095-As for Separate Plans for Members of Same Tax Household
Carlos and Sam will get separate 1095-As with their monthly APTC amounts
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Carlos’ 1095-A
Sam’s 1095-A
230690
690 230
690
690 230
230
300
300
300
300
Married Filing Jointly for Reconciliation
Putting it together on household 8962 Form
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Total for household: $5,551
Total for household: $7,000
Total for household: $1,449
ADAP determines client’s allocation of refund. In this case, half of $1,449
Case Study Three: Sean
When Sean applied for 2016 Marketplace coverage with advance premium tax credits (APTC) in December of 2015, his annual income was $27,000 (230% FPL)o Sean gets $1,995 in APTC/annually
Sean refuses to file his 2016 taxes
A person is not eligible for APTC if HHS notifies the Marketplace that an individual did not file taxes.
Sean does not immediately lose his APTCs (and he never loses his Marketplace eligibility); with filing extensions, Sean actually has until October 2017 to file his 2016 taxes.
o If he does not file his federal taxes, Sean will be ineligible for APTCs when he goes to re-enroll in a 2018 plan
Things to Keep in Mind for OE5
Make sure to send reminders to clients to file their taxes (It’s not too late! Clients can file federal taxes for 2016 with an extension to be eligible for APTCs for 2018 plan year)
Provide education about the importance of filing federal taxes and reporting income changes throughout the year at the point of enrollment and throughout the benefit year
Develop policies and procedures for how ADAP will approach potential APTC overpayments and underpayments
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Individual Mandate and Exemptions
Individual Mandate and Shared Responsibility Payments
Individuals are required to have minimum essential coverage
Individuals indicate if they had minimum essential coverage throughout the year on line 61 of their federal tax return
If a person did not have coverage, he/she may have to pay a penalty when they file their taxeso For 2016 coverage year, the penalty is $695 or 2.5% of
income over the tax filing threshold, whichever is higher
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Common Exemptions from the Individual Mandate
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Exemption How Granted
Under the tax filing threshold IRS/tax filing
Living in a non-Medicaid expansion state
IRS/tax filing
Uninsured for less than 3 months IRS/tax filing
Plan affordability IRS/tax filing or Marketplace application
Incarceration IRS/tax filing
Certain non-citizens IRS/tax filing
Hardships Marketplace application
Putting it Together at Tax Time
Form 8965
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Resources National Alliance of State & Territorial AIDS Directors (NASTAD),
www.NASTAD.org o Amy Killelea, [email protected]
JSI ACE TA Center, https://careacttarget.org/ace
HRSA/HAB Ryan White HIV/AIDS Program Guidance https://hab.hrsa.gov/program-grants-management/policy-notices-and-program-letters
IRS The Health Insurance Premium Tax, https://www.irs.gov/affordable-care-act/individuals-and-families/premium-tax-credit-claiming-the-credit-and-reconciling-advance-credit-payments
Center on Budget and Policy Priorities, Beyond the Basics, http://www.healthreformbeyondthebasics.org/
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