Hypothetical ACA problem

[Black Bart]

Much obliged and thanx jmcdtax,

merely trying to help Bart with his question about page 11 of the instructions, see above. Nobody said taxes were getting easier. That's why we all keep coming back each year for more gobble-de-gook.

I'll give page 11 (and 10) another try/reading, see what I was doing wrong, and maybe dope it out.

[Black Bart]

Arlo

I can get to the link but it does not calculate when I put in the information. I am from Illinois and Illinois does not have an exchange so maybe this has something to do with it. Any help would be appreciated.

Are you sure you're typing in all the required information to get it to calculate after you get inside the link? I just used it to pull up Illinois and it worked okay after I got in. Look at this display: http://www.valuepenguin.com/ppaca/exchanges/il

You have to fill in four spots 1. county 2. household size 3. app info 4. income. Also don't forget to mark "2014" plans at the top - I think it defaults to 2015.

Maybe give it another shot and see if you can get it.

[arlo]

commonstqlk link

I can get to the link but it does not calculate when I put in the information. I am from Illinois and Illinois does not have an exchange so maybe this has something to do with it. Any help would be appreciated.

[jmcdtax]

No, I was

merely trying to help Bart with his question about page 11 of the instructions, see above. Nobody said taxes were getting easier. That's why we all keep coming back each year for more gobble-de-gook.

[Corduroy Frog]

For which purpose?

You look up the Federal Poverty Level dollar amount for the Household Size. For example, for Household of 2 the dollar amount is $15,730. Then divide Household income by the dollar amount found on the Federal Poverty Level Chart for the Household size. The result will be used to calculate the tax credit. There is one FPL chart for 48 states and one separate for Alaska and Hawaii. See http://aspe.hhs.gov/poverty/14poverty.cfm

Hi, jmcdtax. Are you speaking of calculating the credit for purposes of the 8%, or calculating the credit which goes on the tax return? Shows how complicated any question can get. You actually illuminate how complex this mess has become when you mention PAGE 11 of the instructions.

[jmcdtax]

For 8965 pg 11 instructions

You look up the Federal Poverty Level dollar amount for the Household Size. For example, for Household of 2 the dollar amount is $15,730. Then divide Household income by the dollar amount found on the Federal Poverty Level Chart for the Household size. The result will be used to calculate the tax credit. There is one FPL chart for 48 states and one separate for Alaska and Hawaii. See http://aspe.hhs.gov/poverty/14poverty.cfm

[TaxGuyBill]

I wonder if it is possible, converting information from the above posts into some sort of instruction, to help us determine just what to do about this 8% threshold. First of all, I think we are all thankful for the weblink provided by Commonstalk.

Don't marvel at my ignorance - I may in fact absorb less than most of you, and this stuff is brand new. We had, at some point in the discussion, the following "roadmap":

1. Find the lowest (gross) premium in the Bronze for your state or region.
2. Subtract the CREDIT found in the second-lowest Silver plan for your state or region.
3. Annualize the results above.
4. Divide by AGI. If the results exceed 8% then the taxpayer escapes the penalty as being unaffordable.

This sank in just fine until the two posts above, where reference is made to supplant 1. above with "whatever plan you have." Where I fail to understand is if the taxpayer actually HAS a plan, then he has complied with the requirements of the ACA and is off the hook for the penalty anyway and the calculation is not necessary.

What have I missed? Dave and TaxGuyBill (two of our best people) are apparently happy with their conclusion.

I'm sorry, my comment about "whatever plan you have" wasn't very clear. What I meant was the although the Premium Tax Credit is calculated by using the Second Lowest Cost Silver Plan, the actual credit is the same no matter which plan you have. If it's a $100 credit for the Second-Lowest Cost Silver Plan, it's $100 for the lowest Bronze plan and $100 the highest Platinum plan.

For the 8% exemption, it is based on the lowest Bronze plan. And yes, if you are covered by any other plan, you would not be subject to the penalty (although others in your household might).

Your numbered list is correct IF the taxpayer did not have access to employer insurance. If they had access to employer insurance, it's based on the cost of the employer plans. The lowest "self-only" plan determines the taxpayer's eligibility for the exemption, and the lowest "family plan" determines the eligibility of the rest of the family. There is also a possible "hardship" if two or more members of the household have access to employer insurance. Unfortunately, that makes the employer plan 8% exemption or hardship is a bit more difficult.

If our software (or the IRS) does not give us a worksheet for the 8% exemption or hardship, I have made a spreadsheet to help us with this. It's not ideal because it's not interfaced with our software or the Healthcare Marketplace databases (although I may try to incorporate the databases), but it may help. I will share it with everybody if the software (or the IRS) does not provide a better version. I DO think the IRS will at least provide a webpage similar to the one that Commonstalk posted.

[Black Bart]

You've got company

I wonder if it is possible, converting information from the above posts into some sort of instruction, to help us determine just what to do about this 8% threshold. First of all, I think we are all thankful for the weblink provided by Commonstalk.

Don't marvel at my ignorance - I may in fact absorb less than most of you, and this stuff is brand new. We had, at some point in the discussion, the following "roadmap":

1. Find the lowest (gross) premium in the Bronze for your state or region.
2. Subtract the CREDIT found in the second-lowest Silver plan for your state or region.
3. Annualize the results above.
4. Divide by AGI. If the results exceed 8% then the taxpayer escapes the penalty as being unaffordable.

This sank in just fine until the two posts above, where reference is made to supplant 1. above with "whatever plan you have." Where I fail to understand is if the taxpayer actually HAS a plan, then he has complied with the requirements of the ACA and is off the hook for the penalty anyway and the calculation is not necessary.

What have I missed? Dave and TaxGuyBill (two of our best people) are apparently happy with their conclusion.

Amen to that about commonstalk's link.

About your guy that HAS a plan, you don't need do anything except check the box (line 61 - "full-year coverage") on the back of the 1040 and that's that. You're through with it and don't need any other forms (assuming he had it all year).

I called ATX and they (and Drake) aren't (so far) furnishing a worksheet for the affordability exemption; they're just writing the program to figure the over/underpayment of premiums and the penalty due for not having insurance. Only people I can find online that have the capability to figure the exemption for people whose employers don't offer coverage and didn't buy any insurance through Healthcare.gov or elewhere are Block and TurboTax ($29.99/figures it in three minutes if you happen to be a customer, which I'm not). ATX suggested an email to their "suggestion box" (I'm expecting lotsa help there).

I'm still tryin' to make that affordability worksheet on page 11 of the form 8965 instructions work out -- it wants to know the federal poverty level for some reason (which I can figure up-has to be under 400% as I recall) but don't see how it's having any effect on the worksheet. Take a look at that page 11 and see how is works for your guy (assume that he does NOT have a plan). Your step 4 ("Divide by AGI") doesn't work for me).

[Corduroy Frog]

Compile a Flowchart?

I wonder if it is possible, converting information from the above posts into some sort of instruction, to help us determine just what to do about this 8% threshold. First of all, I think we are all thankful for the weblink provided by Commonstalk.

Don't marvel at my ignorance - I may in fact absorb less than most of you, and this stuff is brand new. We had, at some point in the discussion, the following "roadmap":

1. Find the lowest (gross) premium in the Bronze for your state or region.
2. Subtract the CREDIT found in the second-lowest Silver plan for your state or region.
3. Annualize the results above.
4. Divide by AGI. If the results exceed 8% then the taxpayer escapes the penalty as being unaffordable.

This sank in just fine until the two posts above, where reference is made to supplant 1. above with "whatever plan you have." Where I fail to understand is if the taxpayer actually HAS a plan, then he has complied with the requirements of the ACA and is off the hook for the penalty anyway and the calculation is not necessary.

What have I missed? Dave and TaxGuyBill (two of our best people) are apparently happy with their conclusion.

[TaxGuyBill]

See the worksheet on the bottom of page 11. http://www.irs.gov/pub/irs-dft/i8965--dft.pdf

It's not the PTC of the second-lowest cost silver plan but rather the monthly premium. My guess is the PTC is calculated based off the cost of the second lowest cost silver plan regardless of which plan you actually select, so the worksheet probably calculates the PTC. It would be interesting to compare the calculation on the worksheet to what the marketplace indicates and see if the two match up.

That is correct. To figure out the amount of the Premium Tax Credit, the calculation involves the Second Lowest Cost Silver Plan. Once you have the amount, that amount applies to whatever plan you have (or in this case, the lowest Bronze plan).

[David1980]

Is this what you are saying?
Lowest cost bronze plan (before PTCs) less PTCs from the second-lowest cost silver plan equals client's contribution.

See the worksheet on the bottom of page 11. http://www.irs.gov/pub/irs-dft/i8965--dft.pdf

It's not the PTC of the second-lowest cost silver plan but rather the monthly premium. My guess is the PTC is calculated based off the cost of the second lowest cost silver plan regardless of which plan you actually select, so the worksheet probably calculates the PTC. It would be interesting to compare the calculation on the worksheet to what the marketplace indicates and see if the two match up.

[Black Bart]

If I

I agree with New York Enrolled Agent.

....

For the 8% exemption, we need ACTUAL amounts for the lowest cost Bronze plan and the Second Lowest Cost Silver plan (to calculate the hypothetical Premium Tax Credit).

understand both you and NYEA regarding the affordability exemption; in order to get the client's contribution, you look up the lowest cost (regional) bronze plan but don't use the premiums tax credits listed with it; instead look up the second-lowest cost silver plan and the premium tax credits listed with it, then subtract those silver premium credits from the bronze cost.

This can be done using commonstalk's handy-dandy chart which lists cost of actual plans (silver, bronze, etc.) in ascending price order plus the premium tax credits that go with each and the net contribution (also lets you select state and county to get your regional price). However, it seems odd to subtract silver PTCs from bronze cost, unless I'm misunderstanding you (or both of you).

Is this what you are saying?
Lowest cost bronze plan (before PTCs) less PTCs from the second-lowest cost silver plan equals client's contribution.

[TaxGuyBill]

I agree with New York Enrolled Agent.

For calculation of the limitation for the penalty, we just use the $204 "average" bronze plan.

For the 8% exemption, we need ACTUAL amounts for the lowest cost Bronze plan and the Second Lowest Cost Silver plan (to calculate the hypothetical Premium Tax Credit).

[New York Enrolled Agent]

(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

Bart

In your original post you asked where you could get the bronze cost. I assumed (in light of your latest post, I think I made a false assumption) you wanted that as part of the penalty. You use the average bronze cost as part of the calculation of the penalty. It is a limiting factor. Thus if the family had 2 people and no coverage for the year, the penalty regardless of income could not exceed 2 times $204 times 12 months = $4,896

IRC §5000A (c) Amount of penalty

(1) In general
The amount of the penalty imposed by this section on any taxpayer for any taxable year with respect to failures described in subsection (b)(1) shall be equal to the lesser of--


(A) the sum of the monthly penalty amounts determined under paragraph (2) for months in the taxable year during which 1 or more such failures occurred, or
(B) an amount equal to the national average premium for qualified health plans which have a bronze level of coverage, provide coverage for the applicable family size involved, and are offered through Exchanges for plan years beginning in the calendar year with or within which the taxable year ends.



For the affordability exemption, the required contribution must exceed 8% of HHI

Required contribution = lowest cost bronze level ( now you use the locality cost) minus the PTC

PTC = second lowest cost silver plan (once again using locality) minus family's expected contribution to health cost

Hopefully, every thing I've written is correct but if not someone will let us know.

[New York Enrolled Agent]

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.

Sam

A follow-up to Bees. The IRS person might have confused Form 8965 and the Forms 1095-B and C which are not required this year.

Exemptions (depending on which type) are obtainable from either the Marketplace (which will provide an ECN for use on the 8965) or by the IRS via the Form 8965 as part of the Form 1040 return. Some exemptions are exclusive to one of the two (MP or IRS); others can be obtained from either.

We're going to cover this at Metro meeting on January 7. You and your fellow EA (you know who I mean )are welcome to come.