Hypothetical ACA problem

[Bees Knees]

I thought the ONLY place to get an exemption form was through the Marketplace?
Who else would issue it?

The Form 8965 is NOT a processable form this year - as I learned from IRS Stakeholder
Liaison this week. It is not posted on irs.gov website because it's not required for
reporting until tax year 2015.

Well, maybe that IRS Stakeholder is looking to get fired. Form 8965 is most definitely required for tax year 2014.

Here is the link to the form:

http://www.irs.gov/pub/irs-pdf/f8965.pdf

Here is the link to the instructions:

http://www.irs.gov/pub/irs-pdf/i8965.pdf

And here is the wording in the instructions that tell you the form is required to claim an exemption:

If you are required to file a tax return, you do not have minimum essential coverage for yourself and everyone else in your tax household, and you want to report or claim a coverage exemption for yourself or another member of your tax household, file Form 8965 to report or claim coverage exemptions. Attach Form 8965 to your tax return (Form 1040, Form 1040A, or Form 1040EZ).

[Black Bart]

Thanx folks

Bart

1. You don't need to check any bronze plan figures. Rev Proc 2014-46 gives the national average for a bronze plan to be $204 per person per month for use on 2014 calculations involving the ISRP. Everyone uses the same average amount as per §5000A.

2. The calculation for affordability is more complicated that just multiplying HHI by 8%. The coverage is unaffordable if the required contribution (insurance cost less possible premium tax credit) exceeds 8% of HHI. Take a look at what David1980 posted.

3. You will need to look up the cost of silver plan coverage for calculating the PTC. Commonstalk appears to have given a link for that.

4. While some may perceive it as an honor system, I think all preparers need to use due diligence to get it right. BTW, I believe the code A (not affordable) is only granted by virtue of claiming it on the tax return - I don't believe the Marketplace are supposed to issue any such exemptions.

(and that's the best chart I've seen, commonstalk), but a couple of questions for NYEA (and thanks much). I know that for the penalty you have to get the second-lowest cost silver plan and premium tax credits (PTC) figures from the 1095-A to figure actual over/under payment

But for the affordability exemption, I'm confused. Are you saying (1) use the $204 monthly bronze figure by itself for everybody without subtracting PTCs? (2) use the $204 monthly bronze figure and subtract PTCs of a silver plan (that doesn't seem to make sense). [3] use the $204 monthly bronze figure and subtract PTCs of a bronze plan. 4. Something else? Reason I ask is that my University of Illinois tax seminar book said use the lowest-cost bronze figure in your area less (bronze, I assumed) PTCs for affordability exemptions. But maybe that book's outdated and IRS has decided to go with a national average.

P. S. I agree with you about the due diligence and am not advocating that we throw made-up garbage in the hopper, but I'm just sayin' it doesn't seem like IRS even wants any exemption information other those granted by the Marketplace.

RSVP

[Uncle Sam]

Hypothetical ACA problem

I thought the ONLY place to get an exemption form was through the Marketplace?
Who else would issue it?

The Form 8965 is NOT a processable form this year - as I learned from IRS Stakeholder
Liaison this week. It is not posted on irs.gov website because it's not required for
reporting until tax year 2015.

[New York Enrolled Agent]

Single client (employer does not offer group plan) will be coming in without insurance and having never contacted Marketplace, local agent, or anybody else. I'm pretty sure I can get him off with "coverage unaffordable" exemption because 8% of HH income will be be less than any plan's cost. Problem: where can I find a chart (or whatever else) that lists the lowest-cost, self-only bronze plan around?

8965 instructions state two options for affordability exemption - 1. claim on tax return 2. apply for exemption at marketplace online (probably take months). Now I suppose we just plop an "A" on part 3 of 8965 and declare him exempt. IRS seems eerily absent from the background of these forms; my software has entries for penalty calculations but nothing for exemptions so nothing's going in to back up the "A". Raises questions (to me) of "Is anybody minding the store at IRS?" How can they possibly check the millions of these things (guess it's all an honor system).

Bart

1. You don't need to check any bronze plan figures. Rev Proc 2014-46 gives the national average for a bronze plan to be $204 per person per month for use on 2014 calculations involving the ISRP. Everyone uses the same average amount as per §5000A.

2. The calculation for affordability is more complicated that just multiplying HHI by 8%. The coverage is unaffordable if the required contribution (insurance cost less possible premium tax credit) exceeds 8% of HHI. Take a look at what David1980 posted.

3. You will need to look up the cost of silver plan coverage for calculating the PTC. Commonstalk appears to have given a link for that.

4. While some may perceive it as an honor system, I think all preparers need to use due diligence to get it right. BTW, I believe the code A (not affordable) is only granted by virtue of claiming it on the tax return - I don't believe the Marketplace are supposed to issue any such exemptions.

[commonstalk]

This may help

http://www.valuepenguin.com/ppaca/exchanges

[David1980]

How can they possibly check the millions of these things (guess it's all an honor system).

In theory, at least some could be caught with the subsidy calculation. Calculate the maximum annual contribution based on household income (8962 8a) and if less than 8% issue an IRS letter.

I doubt they'll actually do that, probably, especially this first year, it'll be an honor system thing.

Figuring out if someone qualifies for an exemption was discussed a little more in depth here: http://forum.thetaxbook.com/showthre...GI-Marketplace - but there's nothing really answering the question as far as how to determine if they qualify / where to get the 2014 numbers.

[Black Bart]

Single client (employer does not offer group plan) will be coming in without insurance and having never contacted Marketplace, local agent, or anybody else. I'm pretty sure I can get him off with "coverage unaffordable" exemption because 8% of HH income will be be less than any plan's cost. Problem: where can I find a chart (or whatever else) that lists the lowest-cost, self-only bronze plan around? Since he never applied to Healthcare.gov, there won't be anything written anywhere for quotes (much less the Premium Assistance Credits to reduce it). Have him call local agent and get a quote, then write up affidavit for him to sign?
Pray? Suggestions?

8965 instructions state two options for affordability exemption - 1. claim on tax return 2. apply for exemption at marketplace online (probably take months). Now I suppose we just plop an "A" on part 3 of 8965 and declare him exempt. IRS seems eerily absent from the background of these forms; my software has entries for penalty calculations but nothing for exemptions so nothing's going in to back up the "A". Raises questions (to me) of "Is anybody minding the store at IRS?" How can they possibly check the millions of these things (guess it's all an honor system). Too, suppose I decided he was not exempt and owes money based on what we could round up and another preparer later tells him he was exempt, then I'd start wishing I hadn't dropped my E&O.

It all seems very strange to me and I don't think they intend to check any of this stuff (figures grabbed from the air so-to-speak) anymore than they ever have followed up on EIC abuse.