Health Care Reform

[peggysioux]

The news this morning had a speaker from H&R Block stating that people who are not required to file a tax return for 2012 should still file due to the health care reform that will go into effect 1/1/14. He stated that government will look at 2012 tax return to determine how large a subsidy taxpayer will receive for insurance coverage. Have any of you heard anything about this?

[Bees Knees]

From TTB What’s New In-Depth, page 7-10:

In applying for enrollment, an individual claiming a costsharing
subsidy is required to submit to the exchange
income and family size information and information regarding
changes in marital or family status or income.
Personal information provided to the exchange is submitted
to the Secretary of Health and Human Services
(HHS). In turn, the Secretary of HHS submits the applicable
information to the Social Security Commissioner,
Homeland Security Secretary, and Treasury Secretary
for verification purposes. The Secretary of HHS is notified
of the results following verification and notifies the
exchange of such results. The law specifies actions to be
undertaken if inconsistencies are found.

The secretary notifies the plan that the individual is eligible
and the plan reduces the cost sharing by reducing the
out-of-pocket limit under the provision. The plan notifies
the secretary of cost-sharing reductions and the secretary
makes periodic and timely payments to the plan equal to
the value of the reductions in cost sharing. The provision
authorizes the secretary to establish a capitated payment
system with appropriate risk adjustments.

Author’s Comment: Currently, there is no provision to receive
this subsidy by claiming a credit or deduction on the
income tax return of the individual. The subsidy is paid directly
by the government to the insurance provider, which in turn
reduces the amount of out-of-pocket expenses the individual
is required to pay. Thus, low-income individuals with highdeductible
plans must deal directly with their insurance exchange
to receive the subsidy.

In my opinion, there is no need to file a 2012 tax return. The IRS may look at 2012 data, but that is no different than looking at information returns submitted by payers that is used to determine whether the IRS is looking for a tax return. In the past, I have had clients receive letters stating they should no longer file a tax return because their data suggests the taxpayer is below the filing requirement. I see no difference here. IRS does not need a tax return filed to determine the taxpayer’s income.

Having said that, if the taxpayer is below the filing requirement and does not file a return, it appears the law requires the taxpayer to submit some kind of household income report to HHS when applying for this subsidy. It may be just as easy to file a return and use that info in the application process.

[mastertaxguy]

Health Care Insurance mandata

I disagree that those not required to file should, as a blanket rule, not file a federal and/or state tax return.

Recalling that the health "care" law was upheld under the taxing power of Congress, our always friendly Federal Government has a web site providing information on the law. Among other things there is the following:

(www.healthcare.gov; find the link to checklist for individuals)
-------
7 things you can do to get ready now
1.Learn about different types of health insurance. Through the Marketplace, you’ll be able to choose a health plan that gives you the right balance of costs and coverage.
2.Make a list of questions you have before it’s time to choose your health plan. For example, “Can I stay with my current doctor?” or “Will this plan cover my health costs when I’m traveling?”
3.Make sure you understand how insurance works, including deductibles, out-of-pocket maximums, copayments, etc. You’ll want to consider these details while you’re shopping around. Visit Insurance Basics to learn more about how insurance works.
4.Start gathering basic information about your household income. Most people will qualify to get a break on costs, and you’ll need income information to find out how much you’re eligible for.
5.Set your budget. There will be different types of health plans to meet a variety of needs and budgets, and breaking them down by cost can help narrow your choices.
6.Find out from your employer whether they plan to offer health insurance, especially if you work for a small business.
7.Explore current options. You may be able to get help with insurance now, through existing programs or changes that are in effect already from the new health care law. Use our resources to get information about health insurance for adults up to age 26, children in families with limited incomes (CHIP), and Medicare for people who are over 65 or have disabilities.
------

Item four deals with "household income." Some tax chains are providing a one page summary of the taxpayer's AGI and filing status, family size, and so on, for their customers. Other smaller tax return businesses (such as my little practice) are doing a follow up letter after April 20th with both AGI and total income information.

Filing a tax return, even for those not required to file, may be a better option. It may also be helpful should the taxpayer need to apply for other government benefits, a car loan, senior chore service help, state property tax or other "senior type" credits (home heating?) and the like. It also starts the statute of limitations running.

[Nashville]

Household Income

4.Start gathering basic information about your household income. Most people will qualify to get a break on costs, and you’ll need income information to find out how much you’re eligible for.
...
Item four deals with "household income." Some tax chains are providing a one page summary of the taxpayer's AGI and filing status, family size, and so on, for their customers. Other smaller tax return businesses (such as my little practice) are doing a follow up letter after April 20th with both AGI and total income information.

Maybe you know something about how to interpret "household income" and how it is defined under this wonderful new law. I have brought a question to the forum twice in the past and received no response, not even a reference to any authoritative reading material on the subject.

It is obvious an employer cannot recover healthcare costs from the employee, except to the extent of "household income" (whatever that is). How will the employer have any idea how much the employee's spouse makes? Or any other kind of income?

Would household income include 1)taxable income only 2)non-taxable income 3)income from other family members.
Is the tax return supposed to show this? Is the tax return the vehicle by which to present to an employer in order to limit withheld amounts of insurance??

[Bees Knees]

Household Income

TTB, What’s New In-Depth Edition, page 7-5 says:

Household Income
Household income is the sum of the modified adjusted
gross incomes of the taxpayer and all individuals accounted
for in the family size required to file a tax return
for that year. Modified adjusted gross income means adjusted
gross income increased by all tax-exempt interest
and foreign earned income.

This definition applies for purposes of the rule that if employer sponsored coverage or the lowest cost bronze plan in the local exchange exceeds 8% of household income for the year, then such person is exempt from the penalty for not having health insurance. One would assume the same definition of household income applies for purposes of other provisions in the health care law.

[Nashville]

Application of Foregoing

Would this definition also apply to employer's recovery limitation of "9.5% of employees' household income"?

If so, this would be sufficiently definitive from the tax return. But how is the employer supposed to know?

[Bees Knees]

Would this definition also apply to employer's recovery limitation of "9.5% of employees' household income"?

The definition is found in Section 36B(d)(2) and applies to the refundable credit, as well as the requirement for large employers to provide employees with affordable health insurance coverage, and the requirement for individuals to obtain affordable health insurance coverage if not covered under an employer plan.