ACA entry in ATX, online penalty calculators, IRS best practices

[easytax]

This helped answer some of my "procedural" questions on the ATX software --- From a comment on the ATX site made 11/17/14:

 

 

The software will include the IRS instructions and forms, however there are several pieces of data that you must obtain from the client and enter manually.

If the taxpayer had full coverage all year, then you will just need to check the box on line 61 of the 1040.

If the taxpayer receives a 1095-A, you will need to complete Part II of the 8962. If there is a difference between the Premium Tax Credit calculated and the Advanced Premium Tax Credit received, it will flow to line 46 if the taxpayer received too much or line 69 if the taxpayer did not receive enough.

If the taxpayer didn't have insurance or is claiming an exemption, you will need to fill out form 8965. If the taxpayer claimed an exemption through the marketplace, then the preparer will enter the Exemption number in Part I. (The taxpayer would provide that exemption ID number to you)

If the taxpayer is claiming an exemption on the tax return, then you will select the exemption in Part III.

If the taxpayer did not have insurance, then you will have to complete the Shared Responsibility Payment worksheet for each member of the household that didn't have insurance and the total amount will flow to line 61 of the 1040.

Note: Part I, Part III and the Shared Responsibility Payment worksheet could be filled in the same return depending when the exemptions or lack of coverage apply.

It is also possible that a 8962 and 8965 could be completed in the same return if the taxpayer had insurance for part of the year.

Stephanie B
Customer Care Director  

[mcb39]

Thanks for spelling it out. I have printed your post for reference. I have attended two seminars on ACA and have received my AFSP certificate; but these instructions put it all in one nutshell.

[MsTabbyKats]

Thanks....I printed it out also.

 

It's not that complicated when....just new.

[jklcpa]

I'm pinning this topic so that it will stay at the top of the post listing and be readily available without searching.

[NECPA in NEBRASKA]

So if someone without insurance has 9 or 10 dependents, then you have to do the shared responsibility worksheet that many times plus the parents? I guess I will just hope that the software has a box to check everyone.  

[BulldogTom]

I'm pinning this topic so that it will stay at the top of the post listing and be readily available without searching.

Thank you and please leave it there for the entire filing season.

 

Thanks

 

Tom

Half way to Newark, CA

[easytax]

ACA Penalty calculator (for tax years 2014, 2015, and 2016)   &&&& Best Practices for practitioners 112614

 

 

ACA Penalty calculator (for tax years 2014, 2015, and 2016)

 

There is also a nice drop down for certain groups that are exempt from penalties ...

 

This website includes a calculator for ACA penalties.
You input minimal return information for an estimated penalty amount.

http://taxpolicycenter.org/taxfacts/acacalculator.cfm

 

 

 

The IRS posted two documents to IRS.gov that discuss best practices for ACA Premium tax credit and ACA shared responsibility

cut and paste these links below to your browser to load the PDF documents

Shared Responsibility: http://www.irs.gov/pub/irs-utl/Best%20Practices%205000A.pdf

Premium Tax Credit: http://www.irs.gov/pub/irs-utl/Best%20Practices%2036B.pdf

 

 

 

Both pieces of information courtesy of (from the other site) Stephanie B, CCH SFS Customer Care

 

 

[Margaret CPA in OH]

This is from a Western CPE eTax Alert: I though it a nice list.

18 Things Small Businesses Must Know about Health Reimbursement Arrangements (HRAs)

If your small business reimburses employee health care costs in any manner, you need to be aware that the law has changed, and there may be actions necessary to take right now to avoid severe tax and legal liabilities.

1. The federal government considers your arrangement to be subject to the extensive legal requirements of a “group health plan,” even if you did not intend it so or think of it that way. The legal requirements include exposure under the Employee Retirement Income Security Act of 1974 for employee welfare benefit plans.

2. To avoid taxes and legal liabilities, the HRA must be integrated with an employer-provided ACA�compliant group health insurance plan.

3. Employers should not reimburse the cost of individual health insurance under any circumstances.*

4. Where an employee is covered by his or her spouse’s plan, employers should never reimburse the cost of the spousal coverage.

5. For purposes of determining whether a violation has occurred, it does not matter whether the reimbursements were made on a pretax or after-tax basis.

6. Taxation of health benefits to the employee is a completely separate issue from the applicability of excise taxes to the employer.

7. Employers who give taxable compensation bonuses should not make reference to any aspect of employee health care costs.

8. The minimum statutory tax penalty for an unintentional violation is 10% of the amount the employer paid. The maximum amount of penalty is $100 per employee, per day of violation; plus (if applicable), wage taxes; plus (if applicable), interest and penalties.

9. Standalone HRAs are prohibited, regardless of whether they are simply informal arrangements or documented employee benefit plans.

10. An integrated HRA must meet additional requirements, including the requirement that they be in writing and be communicated to employees separately from the insurance plan in order to make the benefits tax-free to employees.

11. Employees may not contribute to an HRA on a voluntary salary-deducted basis.

12. Employees who waive health insurance or have other non-employer-provided insurance cannot participate in the HRA.

13. HRAs are not tools to reduce the cost of employee health benefits. In fact, HRAs may trigger the “Cadillac tax” provisions for rich health benefits in the future, because they increase the total health benefits for employees.

14. Improper reimbursements may trigger severe excise penalties under Section 4980D of the Internal Revenue Code. This penalty is $100 per day excise tax per applicable employee (which is $36,500 per year, per employee). Smaller penalties may apply in 2014 if the violation was not due to willful neglect.

15. If the employer is subject to the smaller 10% excise penalty for 2014 and then still does not correct the HRA plan for 2015, there would likely be a greater chance that the higher severe penalty would be assessed for the same repeat violation in the second year.

16. Employers that had a medical reimbursement plan prior to 2014 and have not updated their plan this year may unknowingly be subject to the excise tax. Apparently, there are many small firms that don’t even know about this problem.

17. Employers affected by 14 above should act as quickly as possible to terminate or amend plans and make appropriate payroll tax adjustments if necessary to avoid additional late tax penalties.

18. Excise tax penalties are self-reported on IRS Form 8928, which has not yet been updated for 2014 to include provisions for HRAs.

Disclosure and clarification: The advice in this article is simplified for the purpose of clear communication regarding most small businesses. As with most aspects of tax and benefit law, there are special circumstances that may change this information. This article ignores the possibility of uninsured ACA�compliant health plans or grandfatthered health plans simply because these are not common.

*Many of these points do not apply to one-person C corporations. The term “health insurance” in this discussion refers to primary ACA�compliant major medical insurance.

References

Department of Health & Human Services: Application of Affordable Care Act Provisions to Certain Healthcare Arrangements

IRS Notice 2013-54

TD 9705: Minimum Essential Coverage and Other Rules Regarding the Shared Responsibility Payment for Individuals

29 CFR 2510.3-1(j)

26 U.S.C. 4980D: Failure to Meet Certain Group Health Plan Requirements

U.S. Department of Labor: FAQs about Affordable Care Act Implementation (Part XXII)

[ETax847]

Will each person receive a 1095 form indicating their health insurance coverage? Or is this form only for people who signed up through the market place?

[Jack from Ohio]

Will each person receive a 1095 form indicating their health insurance coverage? Or is this form only for people who signed up through the market place?

For 2014, only the people buying insurance through a marketplace will receive a 1095-A.

 

For 2015, people purchasing their insurance through a marketplace will receive a 1095-A

 

For 2015, anyone that has insurance from a source other than the marketplace will receive a 1095-B from their insurer.

 

For 2015, anyone that has insurance provided by their employer through a group plan will receive a 1095-C from their employer.

 

All issued 1095s are REQUIRED for proper completion of the tax returns in the respective years.

[jklcpa]

IRS pub 5157 that is the ACA guidance provided to VITA preparers.  It's a nice overview with some brief quiz questions and answers that highlight a few of the more common fact patterns we may see. It's a pdf that can be downloaded.

 

http://www.irs.gov/pub/irs-pdf/p5157.pdf

[michaelmars]

So if someone without insurance has 9 or 10 dependents, then you have to do the shared responsibility worksheet that many times plus the parents? I guess I will just hope that the software has a box to check everyone.  

only if the kids needed to file a return themselves, and this doesn't include a kid that made 1000 and is filing to get a $6 fwt back.  the dependent has to be required to file a return based on tax laws.

[joanmcq]

I believe that if the dependent does file, then the wages are included in household income. However this is off the cuff; I'll have to review my notes to see if I'm correct here.

[Gail in Virginia]

According to the classes that I took, Michael is correct - there has to be a filing requirement before income must be counted,

[easytax]

So if someone without insurance has 9 or 10 dependents, then you have to do the shared responsibility worksheet that many times plus the parents? I guess I will just hope that the software has a box to check everyone.  

 

According to the 8965 instructions and form, one worksheet should cover up to six family members (you just list each in the proper section of the form worksheet). No mention of -- what if there are more than the six (at least --- not at this time --- changes happen). Also, possibly if the number is above six ---- then the amount MIGHT (just a gust/thought - do not remember where I pulled this from in my brain) take you into the "flat dollar" penalty,,, errr,,, "tax" amount and numbers would be irrelevant.

 

     Only one Form 8965 should be filed for each tax household. If you can be claimed as a dependent by another taxpayer, you do not need to file Form 8965 and do not owe a shared responsibility payment.

 

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

[David W Ristau CPA]

Thank you to the multiple posters on this thread and JKLCPA for pinning this thread in the forum.

New law, new filing requirements, new skills.

[Yardley CPA]

What a great cheat sheet this string is.  Thanks to all who contributed.

[kcjenkins]

Vityaba, on 31 Jan 2015 - 3:30 PM, said:

This calculator does all the magic: http://www.valuepenguin.com/ppaca/exchanges/

I played with it today for a few hours, verified calculations by checking healthcare.gov Bronze and SLCSP rates for several scenarios and everything was matching.

 

[Abby Normal]

 

 

 

Nice find! Thanks for sharing!