TAX-AIDE Patient Protection and Affordable Care Act (PPACA) Better known as ACA The Weeds 1

TAX-AIDE Three Main Elements 1. Everyone must have Healthcare Insurance Exemptions are available (Form 8965) 2. Financial Assistance May be available (Form 8962) 3. No Insurance? May be penalized (Shared Responsibility Payment) 2

TAX-AIDE Did everyone on the return have minimum essential coverage for every month? Step 1 NO See Step 2. Is anyone on the tax return eligible for an exemption from the coverage requirement for any month during the year? Step 2  Can this exemption be granted by the IRS on the tax return? OR  Does this exemption require approval from the Marketplace? If no coverage and no exemption, calculate Individual Shared Responsibility Payment using tax worksheet. Step 3 If someone on the tax return purchased coverage in the Marketplace and qualifies for a premium tax credit, complete Form Step 4 There is a requirement to have health insurance coverage starting Jan. 1, People without coverage or an exemption may pay a penalty. YES 3

TAX-AIDE What is Minimum Essential Coverage (MEC) QUALIFIES AS MEC Employer sponsored coverage − Employee coverage − COBRA − Retiree coverage Individual health insurance − Purchased from a health insurance company − Purchased through the Marketplace − Provided through a student health plan Government-sponsored plans − Medicare − Most Medicaid − CHIP − Most TRICARE − Most VA − State high-risk insurance pools − Peace Corps − Refugee Medical Assistance LIMITED BENEFITS THAT ARE NOT MEC Single-benefit coverage (e.g., dental-only or vision-only plans) Accident or disability insurance Workers’ compensation AmeriCorps/AfterCorps coverage Limited-benefit Medicaid –Family planning services –Tuberculous treatment –Pregnancy-related –Emergency medical condition –1115 demonstrations –Medically needy Limited-benefit TRICARE –Space-available care –Line-of-duty care Exemption available for 2014 – no penalty 4

TAX-AIDE Who needs an exemption? ● Each individual on the tax return who did not have MEC for the entire year should be screened for exemption eligibility Start with exemptions that can be claimed on the tax return  Much simpler than applying for Marketplace applications on paper! Some exemptions cover specific months; some are good all year Some exemptions can be claimed directly on the tax return; others need advance approval from the Marketplace Some exemptions represent “transition relief” to help taxpayers in 2014 only 5

TAX-AIDE Types of Exemptions Does anyone qualify for a Marketplace hardship exemption? NO Exemptions for individuals (duration varies): NO Does the taxpayer have income below the filing threshold? Applies to the entire household for the entire year. NO Exemptions for individuals that have a limited duration: YES Does the taxpayer already have an exemption from the Marketplace? ExemptionExemption Code Certain noncitizens and citizens living abroadCode C Health care sharing ministryCode D Federally-recognized Indian tribe or eligible for IHS Code E Limited benefit MedicaidCode H IncarcerationCode F Insurance is unaffordableCode A Aggregate cost of insurance is unaffordableCode G ExemptionExemption Code Short coverage gapCode B Coverage by May 1 or “in-line” Code G Non-calendar year coverage Code H Enter on Form 8965, Part I YES Enter on Form 8965, Part II YES Enter on Form 8965, Part I apply 6

TAX-AIDE 2. Financial Assistance May be Available ● Premium Tax Credit (PTC) – Refundable Credit ● Advance available to help pay premiums Exchange can estimate PTC at time of purchase ● PTC can be paid in advance to insurance company OR applied as refundable credit on 2014 federal tax return ● Must be reconciled on 2014 tax return Form 1095-A and Form

TAX-AIDE Premium Tax Credit Eligibility ● Must buy Health Insurance through Marketplace (= Cover Oregon for OR residents) ● Employer coverage NOT eligible ● Household income within limits (100% – 400% of government federal poverty guidelines) ● Not eligible for coverage in Government Program ● Cannot file MFS ● Cannot be claimed as a dependent 8

TAX-AIDE Reconciliation The PTC can be taken In advance Forwarded to the insurer monthly to reduce premiums; reconciled on tax return At tax time Claimed on the tax return or 9

TAX-AIDE Verification ● Taxpayer must notify Marketplace if Changes in Household income Changes in Household  Marriage or Divorce  Birth or Death  Eligibility for other Programs ● Advance payments adjusted 10

TAX-AIDE 3. No Insurance? May be penalized ● If taxpayer or any dependent doesn’t have Minimum Essential Coverage (MEC) and doesn’t have an exemption must: Must make an Individual Shared Responsibility Payment (ISRP) with tax return ● Effective January 1,

TAX-AIDE * Capped at national average premium of a bronze level plan purchased through a Marketplace. For 2014, the cap is $2,448 per individual ($204 per month per individual), with a maximum of $12,240 for a family with five or more members ($1,020 per month for a family with five or more members). YearFull-year payment is greater of: 20141% of income above tax filing threshold (up to cap*) $95 per adult, $47.50 per child (up to cap of $285) 20152% of income above tax filing threshold (up to cap*) $325 per adult, $ per child (up to cap of $975) % of income above tax filing threshold (up to cap*) $695 per adult, $ per child (up to cap of $2,085) > 2016Values increased by a cost-of-living adjustment Individual Shared Responsibility Payment (ISRP) 12

TAX-AIDE Penalty Calculation: 1. $17,000 - $10,150 = 2. $95 x 1 adult = Example: John (Single) Income:$17,000 (148% FPL) Filing Status:Single Adults:1 Children:0 $6,850 x 1% $68.50 $95.00 ISRP for 2014 Tax Filing Threshold:$10,150 Months Uninsured:12 13

TAX-AIDE Intake/Interview & Quality Review Sheet – Form C 14

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TAX-AIDE Counselor Interview Flow Chart 17

TAX-AIDE Health Insurance Interview Questions ● Did you, your spouse and all dependents have Medicare or Medicaid all or part of the year? If only part of the year what months were covered? ● Did you, your spouse and all dependents have health insurance that meets the Minimum Essential Coverage all or part of the year? If only part of the year what months were covered? 18

TAX-AIDE Counselor Interview Flow Chart Prepare Return in Normal Manner 19

TAX-AIDE Health Insurance Interview questions ● Did you, your spouse and all dependents purchase health insurance through the Marketplace? If yes, Form 1095-A is required ● Did you, your spouse and all dependents qualify for an exemption for all or part of the year? If yes, provide exemption certificate number(s) or exemption code(s) received from the IRS or Marketplace 20

TAX-AIDE Counselor Interview Flow Chart Special Processing Required 21

TAX-AIDE Verification of MEC ● Many taxpayers will not have tax document that verifies MEC in 2014 Coverage reporting by employers and insurers is voluntary for 2014; will be mandatory starting in Tax Year ● In general, tax preparers will take clients at their word on insurance coverage this year Standard rules apply: Tax return is signed under penalty of perjury 22

TAX-AIDE Tax Forms That Show MEC Cost of employer- sponsored coverage Medicare premiums deducted from benefits 23

TAX-AIDE MEC Purchased Through Marketplace May be eligible for Premium Tax Credit ● Refundable Credit ● Must buy Health Insurance through Marketplace ● Household income within 100%*– 400% of government federal poverty guidelines * See 8962 Instructions page 5, line 6 for exceptions ● Exchange will send Form 1095-A to taxpayer by 1/31/15 to allow reconciliation on tax return using Form

TAX-AIDE MEC Purchased through Marketplace – Form 1095-A 25

TAX-AIDE Form 1095-A 26

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TAX-AIDE Calculation of Credit ● Credit claimed on Form 8962 ● Need Benchmark Plan Premium for area Form 1095-A ● Need Household Income + Federal Poverty Line (FPL) for area ● Affordable percentage table value 28

TAX-AIDE Household Income for PTC ● Modified adjusted gross income for taxpayer (and spouse) Plus ● MAGI for all other individuals for whom taxpayer claims dependency exemption deductions and are required to file a federal income tax return 29

TAX-AIDE Form 8962 (PTC) ● Foreign earned income ● Tax-exempt interest ● Social Security benefits not included in income Form 8965 (Exemptions/SRP) ● Foreign earned income ● Tax-exempt interest ● Foreign housing exclusion or any foreign housing deduction claimed Different Definitions of MAGI Modified Adjusted Gross Income is AGI Plus: 30

TAX-AIDE Repayment of Excess Advance Net Premium Tax Credit 31

TAX-AIDE Summary – Taxpayer Who Had Insurance All Year ● If Taxpayer had minimum essential coverage and insurance was purchased through the Marketplace, there is potential for Premium Tax Credit ● Premium Tax Credit is calculated on Form 8962 with information provided by the Marketplace on Form 1095-A 32

TAX-AIDE Taxpayer, Spouse and Dependents Had No Insurance All Year 33

TAX-AIDE Who needs an exemption? ● Screen each individual on tax return who did not have MEC for the entire year exemption eligibility Start with exemptions that can be claimed on tax return  Much simpler than applying for Marketplace applications on paper Some exemptions cover specific months; some are good all year Some exemptions need advance approval from Marketplace Some exemptions represent “transition relief” to help taxpayers in 2014 only 34

TAX-AIDE Marketplace Granted Exemptions 35

TAX-AIDE Form 8965 Part II Taxpayer Selected Exemptions 36

TAX-AIDE Form 8965 Part III Exemptions Claimed on the Return 37

TAX-AIDE Types of Exemptions Does anyone qualify for a Marketplace hardship exemption? NO Exemptions for individuals (duration varies): NO Does the taxpayer have income below the filing threshold? Applies to the entire household for the entire year. NO Exemptions for individuals that have a limited duration: YES Does the taxpayer already have an exemption from the Marketplace? ExemptionExemption Code Certain noncitizens and citizens living abroadCode C Health care sharing ministryCode D Federally-recognized Indian tribe or eligible for IHS Code E Limited benefit MedicaidCode H IncarcerationCode F Insurance is unaffordableCode A Aggregate cost of insurance is unaffordableCode G ExemptionExemption Code Short coverage gapCode B Coverage by May 1 or “in-line” Code G Non-calendar year coverage Code H Enter on Form 8965, Part I YES Enter on Form 8965, Part II YES Enter on Form 8965, Part I apply 38

TAX-AIDE Form 8965 Part III Exemptions Claimed by the Taxpayer 39

TAX-AIDE Part III Exemptions From the Marketplace or on Tax Return 40

TAX-AIDE TaxWise computation of ISRP using 1040 Wkt8 41

TAX-AIDE JanFebMarAprMayJunJulAugSepOctNovDec Calculating the ISRP– Partial Year Coverage ● ISRP is prorated for number of months without coverage during tax filing year Gets job with employer coverage Uninsured and not eligible for exemption Without coverage for 7 months ISRP = 7/12 of annual calculation 42

TAX-AIDE Shared Responsibility Payment Entered on 1040 Ln 61 43

TAX-AIDE Summary - ACA Steps in Tax Return Did everyone on the tax return have coverage all year? Step 1 NO See Step 2. Determine whether any person on the return can be exempt from penalty. (Form 8965) Is anyone on the tax return eligible for an exemption from the coverage requirement for any month during the year? Step 2  Can this exemption be granted by the IRS on the tax return? OR  Does this exemption require approval from the Marketplace? If no coverage and no exemption, calculate Individual Responsibility Payment using tax worksheet. Step 3 If someone on the tax return purchased coverage in the Marketplace and qualifies for a premium tax credit, complete Form Step 4 YES 44

TAX-AIDE It’s Going to Be a Learning Experience ● What we have seen should cover 85% of returns ● The IRS is still writing instructions ● Many questions remain ● We’re all learning how this will work ● This will be the year we use the 800 number on the back cover of the

TAX-AIDE Affordable Care Act Questions? Comments… 46