Tax Responsibilities with the ACA & Resolving Information Form 1095 Conflicts

Important Introductory Note: There are no special or specific due diligence requirements related to Affordable Care Act issues or specifically to Form 1095 information returns.

Our Planning document represents best practices for Tax Preparers and their Clients to gather necessary information to prepare 2015 tax returns, including information that may be helpful to demonstrate compliance with the ACA health coverage provision. General requirements on filing a complete and accurate tax return continue to apply. Tax Preparers are expected to resolve conflicting or contradictory statements from their clients during the return preparation process, as they do today.

Extensions: Due to the extensions for furnishing health care information forms (Notice 2016-04), some individual taxpayers may not receive a Form 1095-B, Health Coverage, or Form 1095-C, Employer Provided Health Insurance Offer and Coverage, by the time they are ready to file their 2015 tax return. While the information on these forms may assist in preparing a return, they are not required. Like last year, taxpayers can prepare and file their returns using other information about their health coverage. Individuals do not have to wait for their Form 1095-B or 1095-C in order to file.

Resolving conflicting information between Form 1095-A and Form 1095-B: In certain circumstances, some of which we have listed below, a client’s Form 1095-B may contain information that appears contradictory to their Form 1095-A, Health Insurance Marketplace Statement. In those situations, the preparer will need to ask clients about their specific circumstances to determine whether a client is eligible for the premium tax credit. Examples:

1. Reporting errors: If the issuer has reported information incorrectly on Form 1095-A or 1095-B, the client should contact the issuer of the form and ask for a correction. Because the issuer               also reports this information to the IRS, discrepancies should be resolved at the earliest opportunity.

2. Same month changes in coverage: If a client has coverage for at least one day during a month with one provider and switches coverage to another provider that takes effect later in the                     same month, both providers will report coverage provided during that month. This situation does not affect the client’s potential eligibility for the premium tax credit.

3. Retroactive eligibility determinations: A client may be retroactively determined to be eligible for government-sponsored insurance (Medicaid, for example). The client may receive both a               Form 1095-A and a Form 1095-B for an overlapping period. Although this may appear to be contradictory information, the client’s eligibility for the premium tax credit does not change                     until the first day of the first calendar month beginning after the date of the approval.

4. Eligibility for Medicaid or Medicare while enrolled in Marketplace coverage: In general, a client is not eligible for the premium tax credit for months in which the client is eligible for                         government-sponsored health coverage. Individuals are granted a short period of time to apply for and transition to government-sponsored coverage. However, any individual who fails by                 the last day of the third full calendar month following when he or she meets the criteria to enroll in the government-sponsored insurance, becomes ineligible for the premium tax credit as of             the first day of the fourth calendar month.

5. Supplemental private insurance coverage: The health care law does not prohibit individuals who have enrolled in Marketplace coverage from obtaining supplemental insurance from a                   private insurance provider. Therefore, dual coverage in this situation as reflected by a Form 1095-A and a Form 1095-B does not affect the client’s eligibility for the premium tax credit.

6. Dual enrollment:

Q. My client enrolled in a qualified health plan with Affordable Premium Tax Credit (APTC) based on a Marketplace determination or assessment that the client was ineligible for Medicaid or            CHIP  coverage. Subsequently, the client was determined eligible for Medicaid and was enrolled for several months while still enrolled in the qualified health plan. Should I treat my client as            eligible  for Medicaid and therefore ineligible for the premium tax credit for these months?

A. Generally, no. If a Marketplace makes a determination or assessment that an individual is ineligible for Medicaid or CHIP and eligible for APTC when the individual enrolls in a qualified               health plan, the individual is treated as not eligible for Medicaid or CHIP for purposes of the premium tax credit for the duration of the period of coverage under the qualified health plan                  (generally, the rest of the plan year). Accordingly, if your client was enrolled in both Medicaid coverage and in a qualified health plan for which advance credit payments were made for one or           more months of the year following a Marketplace determination or assessment that your client was ineligible for Medicaid, your client can claim the premium tax credit for these months, if               the client is otherwise eligible. The Marketplace may periodically check state Medicaid data to identify consumers who may be dual-enrolled, and direct them to return to the Marketplace to             discontinue their APTC. If you believe that your client may currently be enrolled in both Medicaid and a qualified health plan with advance credit payments, you should advise your client to             contact the Marketplace immediately.

Resolving reporting conflicts between Form 1095-A and Form 1095-C:

If a client receives a Form 1095-C that is marked in Box 14 with a code 1A, affordable offer of self-only minimum essential coverage, the client generally would not be eligible for the premium tax credit. However, the return preparer will need to ask clients about their specific circumstances to determine whether a client might still be eligible for the premium tax credit.

1. Reporting errors: If information is reported incorrectly on a Form 1095-A or Form 1095-C, the client should contact the issuer of the form and ask for a correction. Because the issuer also reports this information to the IRS, discrepancies should be resolved at the earliest opportunity.

2. Offers of affordable employer-sponsored insurance and Marketplace enrollment: Generally, individuals who are offered affordable self-only employer-sponsored coverage (in 2015, coverage that costs 9.56% or less of household income) are not eligible for the premium tax credit. There are some exceptions:

a. Employee safe harbor: In good faith, a client may provide accurate information to the Marketplace about the cost of employer sponsored insurance and the Marketplace may determine                  that the individual is eligible for advance payments of the premium tax credit. Under these circumstances, the client would still be eligible for the premium tax credit if he or she meets the                  other eligibility criteria even though the employer sponsored coverage would have been affordable based on the taxpayer’s actual household income. Note: If the client changed employers                 during the year and the new employer offered the client affordable coverage in subsequent months, the client must contact the Marketplace again to redetermine his or her eligibility for the               premium tax credit.

b. Employer-sponsored insurance offerings after Marketplace enrollment: If an employer extends an offer of affordable insurance during the year after the client had already enrolled in                     Marketplace coverage, the client generally is eligible for the premium tax credit until the first day of the first full month the employer coverage could have been effective.

 

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We encourage you to call us at (949) 502-4680 or email us at peterc@coreperformance.net to set up your no-cost, no-obligation consultation.

We’re passionate about Small Businesses with less than 25 Employees !

Understanding the Small Business Health Care Tax Creditisplogo_premreseller

The Affordable Care Act includes the small business health care tax credit, which can benefit small employers who provide health coverage for their employees.

The small business health care tax credit benefits employers who:

  • have fewer than 25 full-time equivalent employees
  • pay an average wage of less than $51,600 a year
  • pay at least half of employee health insurance premiums

Here are some facts that will help you understand this tax credit and how it may affect your small business or tax-exempt organization:

  • Credit percentage is 50 percent of employer-paid premiums; for tax-exempt employers, the percentage is 35 percent.
  • Small employers may claim the credit for only two consecutive taxable years beginning in tax year 2014 and beyond.
  • For 2015, the credit is phased out beginning when average wages equal $25,800 and is fully phased out when average wages exceed $51,600. The average wage phase out is adjusted annually for inflation.
  • Generally, small employers are required to purchase a Qualified Health Plan from a Small Business Health Options Program Marketplace to be eligible to claim the credit.  Transition relief from this requirement is available to certain small employers.

Small employers may still be eligible to claim the tax credit for tax years prior to 2014.   Employers who were eligible to claim this credit for prior years – but did not do so – may consider if they are still eligible to amend prior year returns in order to claim the credit.

Gathering the following information will assist you in completing Form 8941,Credit for Small employer Health Insurance Premiums.

  • SHOP QHP documentation or letter of eligibility from SHOP, unless transition relief applies
  • Numbers of full-time and part-time employees and numbers of hours worked
  • Average annual wages for employees
  • Employer premiums paid per employee, if applicable
  • Relevant K-1s and other pass-through credit information
  • Cost of coverage for each employee
  • Payroll tax liability – for tax-exempt organizations only
  • Pass-through credit info – for K-1s of other small employers

For more information about the Affordable Care Act visit IRS.gov/aca.

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