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ACA (Obamacare)
ImpactOn Individuals
Chapter 31
Premium Tax Credit
(PTC)
2
Draft Form 8962
3
PTC Eligibility1) Purchase coverage on an
Exchange.
• In CA: “Covered California”
• 36 Other States: The Federal Exchange
• Any individual in your tax family purchases coverage on Exchange.
3-6
4
2) Have household income that falls between 100 percent and 400 percent of the federal poverty line for the family size.
5
Household Size 100% 133% 150% 200% 300% 400%
1 $11,490 $15,282 $17,235 $22,980 $34,470 $45,960
2 15,510 20,628 23,265 31,020 46,530 62,040
3 19,530 25,975 29,295 39,060 58,590 78,120
4 23,550 31,322 35,325 47,100 70,650 94,200
5 27,570 36,668 41,355 55,140 82,710 110,280
6 31,590 42,015 47,385 63,180 94,770 126,360
7 35,610 47,361 53,415 71,220 106,830 142,440
8 39,630 52,708 59,445 79,260 118,890 158,520
For each additional
person, add$4,020 $5,347 $6,030 $8,040 $12,060 $16,080
2014 FLP Levels
6
Individual Market
Medicaid/Medical
PTCHI < 400% of FPL
HI > 100% of FPL
The Exchange
7
3) Are not able to get affordable coverage through an eligible employer health plan that provides minimum value.
8
But if an individual enrolls in the employer health insurance, then
no PTC even if it is unaffordable or lacks
minimum value9
An employer-sponsored plan is “affordable” to taxpayer, spouse, and
dependents if employee cost
for self-only coverage does not exceed 9.5% of your household income.
10
4)Are not eligible for coverage through a government program, like Medicaid, Medi-Cal, Medicare, CHIP or TRICARE.
11
California Medicaid (Medi-Cal) Eligibility
HI % of FPL• Generally: 133%
• Children under 19: 261%
• Pregnant Women: 208%
12
MEC Eligibility Relief
Notice 2014-71 prevents a pregnant woman from losing eligibility for the PTC as a result of the pregnancy, merely because she is eligible for, but DOES NOT enroll in, the Medicaid or CHIP coverage:
13
No Similar ReliefFor a Child’sEligibility for
Medicaid
14
5) Cannot be claimed as a dependent by another person.
15
6) Do not file a Married Filing Separately (MFS) tax return with an exception for victims of domestic abuse and spousal abandonment who are allowed to claim the PTC using the MFS filing status.
16
Draft Form 8962
17
Three Possibilities
• PTC ($0 APTC) = Credit
• PTC > APTC = Net Credit
• APTC > PTC = Repay
18
Refund
PTC > APTC = Form 1040 Line 69
19
APTC > PTC =
Form 1040 Line 46
Repay
20
Family of Three Facts
• H and W both age 35• CA ZIP 94506• One dependent child
(age 10) • File MFJ• Purchase a bronze plan
via Covered California21
NoAdvance
PTC
22
PP
$19,530 100% of FPL
$39,060 200%
$58,590 300%
$78,120 400%MAGI
P
$4,848 PTC
$7,954 PTC
$2,460 PTC
H&W’s MAGI
Is $78,121
24
P
PP
$19,530 100% of FPL
$39,060 200%
$58,590 300%
$78,120 400%
P
$4,848 PTC
$7,954 PTC
$2,460 PTC $0 PTC $78,121 400.0005%
Contribute $1to deductible
IRA by unextended due
date of Form 1040
26
$78,121 400.0005$0 PTC
P
PP
$19,530 100% of FPL
$39,060 200%
$58,590 300%
$78,120 400%
P
$4,848 PTC
$7,954 PTC
$2,460 PTC
PTC $2,460
Two Married Adults age 64MAGI $62,041
PTC = $0
(SLCSP $20,000)28
Two Married Adults age 64MAGI $62,039
PTC = $14,000
(SLCSP $20,000)29
Back to Family of Three
• H and W both age 35• CA ZIP 94506• One dependent child
(age 10) • File MFJ• Purchase a bronze plan
via Covered California30
New Facts:The Exchange Estimated their MAGI at $39,060
APTC$7,954
(Form 1095-A)31
P
PP
$19,530 100% of FPL
$39,060 200%
$58,590 300%
$78,120 400%
P
$4,848 PTC
$7,954 APTC
$2,460 PTC $0 PTC $78,121 400.0005%
Repay $7,954
Contribute $1to deductible IRA
PTC $2,460But….
33
PP
$19,530 100% of FPL
$39,060 200%
$58,590 300%
$78,120 400%MAGI
P
$7,954 APTC
$2,460 PTC
Repay $5,494?
No RepaymentLimit
AGI not Less Than 400%
35
PP
$19,530 100% of FPL
$39,060 200%
$58,590 300%
$78,120 400%MAGI
P
$7,954 APTC
$2,460 PTC
Repay $5,494
Contribute $2 (not $1)
to deductible IRA
PTC $2,460Plus $2,500 Limit
37
RepaymentLimit of $2,500
38
PP
$19,530 100% of FPL
$39,060 200%
$58,590 300%
$78,119 400%MAGI
P
$7,954 APTC
$2,460 PTC
Repay $5,494$2,500
$2 IRA Contribution Saves $5,454
($7,954 - $2,500)
40
What if $5,001 is Contributed to IRA reducing actual HI to
$73,120(374% of FPL)
41
Answer:
No Change from $2 Contribution
42
Repayment = $2,500
43
PTC $3,468APTC (Form 1095-A) -$7,954Excess APTC -$4,486
Repayment Limit is $2,500
Save $5,454 ($7,954 - $2,500)
Bigger PTC, but Smaller Excess APTC by Same Amount
44
New Facts:The Exchange Estimated their MAGI at $39,060
APTC$7,954
(Form 1095-A)45
H&W’s MAGI
is $88,121
($10,001 over 400% of FPL)
46
P
PP
$19,530 100% of FPL
$39,060 200%
$58,590 300%
$78,120 400%
P
$4,848 PTC
$7,954 PTC
$2,460 PTC $0 PTC $88,121
Repay $7,954
Now, a $10,002 IRA contribution
reduces HI to $78,119
(slightly below400%)
48
$10,002 IRA Contribution Saves $5,454
($7,954 - $2,500)
49
PP
$19,530 100% of FPL
$39,060 200%
$58,590 300%
$78,119 400%MAGI
P
$7,954 APTC
$2,460 PTC
Repay $2,500
New Facts:The Exchange Estimated their MAGI at $39,060
APTC$7,954
(Form 1095-A)51
H&W’s MAGI
is $58,590
(300% of FPL)52
P
PP
$19,530 100% of FPL
$39,060 200%
$58,590 300%
$78,120 400%
P
$4,848 PTC
$7,954 APTC
$2,460 PTC
Repay $3,106
Or $2,500
$1,500 RepaymentLimit
If AGI Less Than 300%
54
Contribute $1to deductible IRA
Save $1,000
Repayment Limited to $1,500
55
$1,500 RepaymentLimit
If AGI Less Than 300%
56
Print Out Two Tables For IRA
Planning
57
Household Size 100% 133% 150% 200% 300% 400%
1 $11,490 $15,282 $17,235 $22,980 $34,470 $45,960
2 15,510 20,628 23,265 31,020 46,530 62,040
3 19,530 25,975 29,295 39,060 58,590 78,120
4 23,550 31,322 35,325 47,100 70,650 94,200
5 27,570 36,668 41,355 55,140 82,710 110,280
6 31,590 42,015 47,385 63,180 94,770 126,360
7 35,610 47,361 53,415 71,220 106,830 142,440
8 39,630 52,708 59,445 79,260 118,890 158,520
For each additional
person, add$4,020 $5,347 $6,030 $8,040 $12,060 $16,080
2014 FPL Levels
58
59
Draft Form 8962
Reconcile PTC and APTC
on Form 898260
PTC = 1) SLCSP* minus
contribution amount, or
2) If less, the premium paid*
*Exchange Provides on Form 1095-A61
Family of Three Facts
• H and W both age 35• CA ZIP 94506• One dependent child
(age 10) • File MFJ• Purchase a bronze plan
via Covered California62
• MAGI Projected in 2013 by Exchange is $58,590 (300% of FPL)
• Actual MAGI for 1014: $39,060 (200% of FPL)
63
CA ZIP 94506 For 35 Year Old Parents with
Child Age 10; AnnualLow 2nd
Lowest3rd.
Lowest
Bronze $8,376
Silver $10,140 $10,414
Purchased
Gross premium cost is driven by (1) coverage family size,
(2) age, and (3) location64
SLCSP Annual Prem. $10,414
Exchange’s ComputationOf APTC
65
SLCSP Annual Prem. $10,414
Annual Contrib. Amt.* - $5,566APTC $4,848
*Tax Family HI of $58,590 x .0950 = $5,566
Exchange’s ComputationOf APTC
66
Form 1095-A
67
Form 1095-A Part III
MonthlyPremium Amount
Annual Premium Amount 68
Form 1095-A Part III
MonthlySLCSP
For Coverage
Family
AnnualSLCSP 69
Form 1095-A Part III
MonthlyAPTC
AnnualAPTC
70
Part 1Lines 1 through 8:
Eligibilityand
Contribution Amount71
Draft Form 8962
72
x
73
Draft Form 8962
74
Number of Exemptions =
Tax Family SizeWhich Drives
Household Income
75
Draft Form 8962
3
76
Draft Form 8962
3
Line 3 = Household Income
Household Income = Modified AGI of Taxpayer
and Dependents 77
Draft Form 8962
3Line 2a: Your Modified AGI
AGI + excluded foreign earned income + tax exempt interest +
excluded social security benefits78
3
Line 2b: Dependents Mod. AGI
79
So child’s part-time job only increases tax family HI if the
child is required to file Form 1040
80
Draft Form 8962
3$39,060 0Household Income: $39,060
81
3$39,060 0Household Income: $39,060
Line 4 = 100% of FPL
82
83
3$39,060 0Household Income: $39,060
x100% of FPL $19,530
84
3$39,060 0Household Income: $39,060
x100% of FPL $19,530Line 5: HI as % of FPL 200%
85
3$39,060 0Household Income: $39,060
x100% of FPL $19,530Line 5: HI as % of FPL 200%
86
3$39,060 0Household Income: $39,060
x100% of FPL $19,530Line 5: HI as % of FPL 200%Is Line 5 less < 400%?
87
3$39,060 0Household Income: $39,060
x100% of FPL $19,530Line 5: HI as % of FPL 200%
If Yes Continue to Line 7
88
3$39,060 0Household Income: $39,060
x100% of FPL $19,530Line 5: HI as % of FPL 200%
If NO: No PTC and Pay Back APTC For ALL Individuls “in your tax family”
89
3$39,060 0Household Income: $39,060
x100% of FPL $19,530Line 5: HI as % of FPL 200%
What if the % is under 100%?
90
Two Ways to Can Get PTC if Under 100% of FPL:
1)Marketplace estimated HI
between 100% and 400%
of FPL + APTC, but
Actual % is Below 100%
91
2)
“Alien lawfully present” and not Eligible
For Medicaid/Medi-Cal
92
3$39,060 0Household Income: $39,060
x100% of FPL $19,530Line 5: HI as % of FPL 200%
x
93
3$39,060 0Household Income: $39,060
x100% of FPL $19,530Line 5: HI as % of FPL 200%
x
“Applicable Figure” x HI on Line 594
Form 8962 Page 6Line 7 Applicable Figure
LL.0630
Higher HI % of FPL=
Higher Applicable Figure
95
3$39,060 0Household Income: $39,060
x100% of FPL $19,530Line 5: HI as % of FPL 200%
x200%
.0630
96
3$39,060 0Household Income: $39,060
x100% of FPL $19,530
Line 5: HI as % of FPL 200%x
200%
.0630÷ 12 = $205 $39,060 x .0630 = $2,460
98
Part 2Reconcile PTC
with APTC
99
Shared Policy or Married During Year
100
x
101
Are Forms 1095-A Monthly Amounts the Same?
x
102
Form 1095-A Part III
All Part III Columns are filled-in with the
same amount each month
103
Form 8982 Monthly Calculation
104
Are Forms 1095-A Monthly Amounts the Samex
x
105
Are Forms 1095-A Monthly Amounts the Same
8,376
xx
106
Form 1095-A Part III
107
Are Forms 1095-A Monthly Amounts the Same
8,376 10,414
xx
108
Form 1095-A Part III
109
Are Forms 1095-A Monthly Amounts the Same
8,376 10,414 $2,460
xx
110
Are Forms 1095-A Monthly Amounts the Same
8,376 10,414 $2,460 7,954
xx
111
Are Forms 1095-A Monthly Amounts the Same
8,376 10,414 $2,460 7,954 7,954
xx
112
Are Forms 1095-A Monthly Amounts the Same
8,376 10,414 $2,460 7,954 7,954 4,848
x
113
Form 1095-A Part III
114
PTC = $7,954APTC = $4,848
L 24 Exceeds L 25: Net PTC = $3,106
115
2014 Form 1040PTC > APTC =
Net refundable credit on Form 1040 Line 69
$3,106
116
SLCSP Annual Prem. $10,414
Annual Contrib. Amt.* - $2,460PTC $7,954APTC (Form 1095-A) -$4,848Net PTC $3,106
*$39,060 x .0630 = $2,460
Summary
117
Form 1095-A
118
The Monthly SLCSP
On Form 1095-AMay Not
Be Correct Due to Coverage Family
Changes ora Move
119
120
The SLCSP Is Based Upon
the Coverage Family
Here, coverage family of three
121
What if our Tax Family of Three
Becomesa
Coverage Family of
One?122
Modified Facts:Same as above except, midyear,
H&W are covered by H’s employer insurance, so H&W’s Exchange
insurance is canceled July 1 but Child (C) is not covered by the
employer policy so C keeps his/her individual Marketplace Policy
Exchange Projected HI $58,590Actual HI of $39,060
123
The SLCSP Is Based Upon
the Coverage Family
of 1
124
Exchange Reports Coverage Family on
Form 1095-A, Part IIBeginning and Ending Dates
125
July through December
1) The monthly SLCSP shrinks from $868 to $177—based upon coverage family of ONE.
2) Projected tax family of three HI of $58,590 drives the monthly contribution amount: $404/mo.
126
Here, the Exchange was aware of the change because H&W’s Exchange coverage was canceled.
129
Form 1095-A Part III
$404$868JanThruJune
JulyThruDec.
$130
MonthlyPremium
$698
MonthlySLCSP
MonthlyAPTC
$177 $0
130
What if an employee with a new 2014 job and a tax family of 3
declines “affordable” (self-only) coverage, and purchases family coverage on the exchange, in
order to get the premium credit but does not tell the Exchange or IRS on Form 8962 about the
employer coverage.
131
Will the exchange or IRS know that none of the members of the family
qualified for the APTC or the PTC?
No Form 1095-B or C for2014
132
W-2 will suggest no employer coverage
because it was declined
133
Draft Form 1095-C
134
135
Optional Form
In 2014
And Only ALEsIn 2015+
136
New FactsNo
AdvancePTC
137
H&W & C’s MAGI
Was Projected at $1,000,000 but they
purchased family health insurance on the
exchange
Family Net Worth $10 Mil. 138
Are they eligible for the PTC?
What will Form 1095-A Look
Like?139
Form 1095-A Part IIINeither their premiums nor
their SLCSP are based upon HI.But no APTC
140
Form 1095-A Part III
141
Form 1095-A Part III
142
They unexpectedly have a $950,000 IRC
sec. 1231 loss dropping
2014 MAGI to $39,060
143
SLCSP Annual Prem. $10,414
Annual Contrib. Amt.* - $2,460PTC $7,954APTC (Form 1095-A) -$0Net Refundable PTC $7,954
*$39,060 x .0630 = $2,460
Form 8982 Summary
144
Part 3Repayment of Excess APTC
145
Part 4:Shared
Policy Allocation
146
147
One Insurance Policy:
Two Tax Families and two coverage
families (of 3 and 1)
148
Premium $15,000
Gary’s SLCSP is $12,000 (for 3)
Jim’s SLCSP is $6,000 (for 1)
149
Gary
Jim’s SSN
.67
150
Part 5:Alternate
Calculation For Year of Marriage
151
Allows the couple to use ½ their HI in pre-marriage
months
152
Rev. Proc. 2014-41 (July 25, 2014)
Self-Employed Health Insurance
Deduction and PTC
3-52
153
Guidance on and examples of the
calculation methods a taxpayer may use to resolve the circular
relationship between the IRC sec. 162(l)
deduction and the PTC. 154
Cost-sharing subsidies lower deductibles and the total out-of-pocket costs under the plan:
• HI must not exceed 250% of federal poverty level.
• Must purchase a silver plan.
155