Are you exempt from ACA coverage?

Westchester NY accountant Paul Herman of Herman & Company CPA’s is here for all your financial needs. Please contact us if you have questions, and to receive your free personal finance consultation!

By Bankrate.com

Millions of taxpayers have yet to file their 2014 federal tax returns. For a lot of folks, the issue is simple procrastination (guilty!).

Others, however, have put off filing because of the complexities of the Affordable Care Act, or ACA, popularly known as Obamacare.

One ACA component that could cause both filing and financial problems is the shared responsibility payment. This is the penalty individuals could face if they did not have ACA-acceptable insurance coverage for all of last year.

ACA exemption options

But you don’t have to worry about the tax penalty if you’re exempt from the ACA rules.

So just who gets an Obamacare coverage pass? The Internal Revenue Service says some common exemption situations are:

  • Unaffordable coverage. The lowest amount of coverage you could find is considered unaffordable, which generally means the policy costs more than eight percent of your annual household income.
  • Short coverage gap. You went without coverage for less than three consecutive months last year.
  • General hardship. You were unable to obtain coverage because of homelessness, eviction, foreclosure, domestic violence, death of a close family member or unpaid medical bills.
  • Income below the return filing threshold. You didn’t make enough to require that you file a tax return.
  • Indian tribe. You are a member of a federally recognized Indian tribe, including an Alaska Native Claims Settlement Act Corporation Shareholder. This exemption also applies if you were eligible for services through an Indian health care provider or the Indian Health Service.
  • Religious sects. You are a member of a religious sect in existence since December 31, 1950, that is recognized by the Social Security Administration as conscientiously opposed to accepting any insurance benefits, including Medicare and Social Security. The most commonly recognized group that qualifies for this exemption is the Amish.

No state Medicaid expansion

You also might qualify for an ACA exemption if you qualify for Medicaid coverage, but you live in a state that does not participate in Medicaid expansion under the ACA.

The states that the IRS currently lists as refusing to expand Medicaid include Alabama, Alaska, Florida, Georgia, Idaho, Indiana, Kansas, Louisiana, Maine, Michigan, Missouri, Mississippi, Montana, North Carolina, Nebraska, New Hampshire, Oklahoma, Pennsylvania, South Carolina, South Dakota, Tennessee, Texas, Utah, Virginia, Wyoming and Wisconsin.

Check IRS site, forms

If you don’t have minimally acceptable ACA coverage and believe you might qualify for an exemption, check out the full list on IRS.gov.

Your tax preparer or tax preparation software also should be able to walk you through the exemption list.

You also can find additional information in the instructions to Form 8965. This is the form you must file to claim an exemption. If is one of four pieces of new tax paperwork created in connection with Obamacare.

Have you filed your taxes yet? Is the health care mandate at least part of the reason you’re putting off the task? If you have filed, did you run into any ACA problems?

Herman and Company CPA’s proudly serves Bedford Hills NY, Chappaqua NY, Harrison NY, Scarsdale NY, White Plains NY, Mt. Kisco NY, Pound Ridge NY, Greenwich CT and beyond.

IRS Offers Obamacare Penalty Relief

Westchester NY accountant Paul Herman of Herman & Company CPA’s is here for all your financial needs. Please contact us if you have questions, and to receive your free personal finance consultation!

By Bankrate

Tax season is always a challenge. This year, things are ramped up a bit, thanks to 2015 being the first tax-filing season where we have to deal with Obamacare on our returns.


Some taxpayers could, in fact, find themselves owing an unexpected tax bill or getting a smaller refund because of the Affordable Care Act advance premium credit. And some of those folks could even face penalties in connection with the subsidies used to help them pay for their health insurance coverage.

The Internal Revenue Service, however, is giving those folks a break. It is waiving some possible penalty charges.

Subsidy calculation complications

Folks who got the premium tax credit when they purchased health insurance from health care exchanges will have the most work to do this filing season.

That subsidy, a provision of the Affordable Care Act, or ACA, made it possible for them to buy coverage. But if they didn’t accurately estimate their income when the advance tax credit was calculated, they’ll have to pay back any excess tax break they received.

As noted in my Bankrate story about this potential advance premium glitch, filers could be in this situation if their personal circumstances that affect the credit amount changed last year and the changes weren’t reported to the marketplace so that the subsidy could be adjusted.

That’s just one part of the bad news. Many of these folks could be in a jam in coming up with what they owe by April 15, especially if it’s an unexpectedly large amount.

Some taxpayers might, in fact, find that they can’t pay their new, higher tax bills on time. Missing the filing deadline typically means a bigger bill in the form of penalties and interest on the unpaid amount.

And where taxpayers owe a lot due to improperly calculated advance premium credit payments, those filers also could face penalties for failing to pay estimated tax.

Asking for penalty relief

However, given that we’re all coping with the ACA effects on our taxes for the first time this year, the Internal Revenue Service is cutting advance premium credit filers some slack.

The agency is waiving premium tax credit late-payment and estimated tax payment penalties.

To get the penalty relief, you must ask.

When you get a notice from the IRS regarding your late-payment penalty, the IRS says to submit a letter to the address listed in the notice and include the statement “I am eligible for the relief granted under Notice 2015-9 because I received excess advance payment of the premium tax credit.”

As long as you file your 2014 tax return by April 15, even if you can’t pay your full tax bill then, you will be granted the penalty relief. Interest, however, will continue to accrue. So make arrangements to pay what you owe as quickly as you can.

If you file your tax return after the April deadline, you must pay your tax bill in full by April 15, 2016, to be eligible for the penalty relief.

Similarly, if your tax bill indicates you’ll likely owe a penalty for not making any or enough estimated tax payment, you need to alert the IRS of the ACA issue. The estimated tax underpayment penalty typically kicks in when a tax bill is $1,000 or more.

Request a waiver of the estimated tax underpayment penalty by filing Form 2210. The IRS says to complete page 1 of the form, check box A in Part II and include the form with your tax return, along with the statement “Received excess advance payment of the premium tax credit.”

Sorry about the extra tax work, but it’s worth the effort to at least avoid the penalty charges.

Premium tax credit only

And one final ACA tax issue note. This penalty relief is only for folks who run into tax bill troubles because of the advance premium tax credit.

The IRS penalty relief does not apply to any bumped up tax bills because folks decided not to buy health insurance at all.

If that’s your case, you’ll still have to figure your shared responsibility payment and pay any added tax. But don’t freak out.

Under the ACA, these underpayments are not subject to either the failure to pay or underpaid estimated tax penalties.

If you have any questions, please give us a call.

Herman and Company CPA’s proudly serves Bedford Hills NY, Chappaqua NY, Harrison NY, Scarsdale NY, White Plains NY, Mt. Kisco NY, Pound Ridge NY, Greenwich CT and beyond.

Small Business Affordable Care Act Reporting Responsibilities

Small business obamacare reporting

Extended deadlines, confusing terms for business sizes and hiccups in the Small Business Health Options Program (SHOP) Marketplace may have small business owners dreading the next steps for IRS forms and coverage reporting. Fortunately, only 4% of small businesses are subject to the Affordable Care Act (ACA) reporting requirements or the employer responsibility provision.

The good news is that reporting for the 2014 calendar year is entirely voluntary, and there will be no negative impact or tax liability for either employers or employees, if small business owners decide to report for this year.

Defining Small Business Sizes:

Small Employer: Generally businesses with fewer than 50 full-time employees.

Large Employer: 50 or more full time or full time equivalent employees.

Not sure how many full time employees or full time equivalent (FTE) employees you have? Head over to the healthcare.gov FTE calculator.

Reporting Start Dates:

100 or more employees: Minimal Essential Coverage (MEC) must start January 1, 2015, with mandatory reporting filed no later than February 29th, 2016 or March 31, 2016 if e-filing.

50 or more employees: While MEC is not required until January 1, 2016, reporting for the 2015 calendar year is required.

25 or less: Reporting is encouraged, but not mandatory. However, small businesses of this size may be eligible for tax credits and other benefits if they voluntarily file reports for 2014 or 2015. Learn more about these tax credits at the IRS website.

What is Reported

Small businesses must report about the coverage (if any) offered, per month, to their full-time employees. This information, reported per employee, must include the lowest cost of self-only coverage offered to employees.

Forms, Forms and More Forms

The IRS has, in an effort to streamline the reporting process for businesses, created single, combined form for information reporting. The forms created (6055 & 6056) will be used by employers to report to both the IRS and to furnish employees with information about their offered coverage.

Simplified Reporting Options

Employers that offer a qualifying offer – minimal value coverage for a full time employee that costs the employee no more than $1,100 and also offers an option family coverage – have an even simpler way to report for 2015. Business owners must inform employees that they may be eligible for premium tax credits and provide standard statements for all reporting.

If the employee receives a qualifying year-round offer, the employer needs to report only that they received the qualifying offer 12 months out of the year and the name, address, and taxpayer identification number of said employee. A copy of this or a statement of the same information must be furnished to the employee.

If the employee receives this qualifying offer for fewer than 12 months out of the year, the IRS accepts reporting that simply indicates an offer was made with a code entered for each month the offer was made.

These simplified options were brought about in a response to feedback from stakeholders, and are the results of the IRS trying to make a difficult and often costly change in the way small businesses are run a little easier on business owners.

W-2 Reporting

If an employer provides coverage under a group health plan, they must report the value of the healthcare provided on employee W-2 forms in Box 12 using the code DD to identify the amount. Find out more about W-2 reporting from the IRS page that also provided a chart on W-2 reporting.

While the IRS has instituted a policy of leniency for employers throughout this transition period, it is always a good idea to find webinars online, local workshops, or work with a small business accountant to better understand the responsibilities of a small business owner.

If you feel overwhelmed or would like more information, contact Paul Herman for a consultation, (914) 400-0300.

Any U.S. tax advice contained in the body of this website is not intended or written to be used, and cannot be used, by the recipient for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code or applicable state or local tax law provisions.