ACA low self-employment income

[Vityaba]

I have a self-employed individual who made around 6,000 in 2014. She qualified for medicaid program but did not apply for it, so, technical, I cannot use Unaffordable exemption because she could have gotten a free coverage. 

Question - can I use Income below the income tax return filing requirement exemption since the income is below $10150

 

Thank you

[Pacun]

_{YES, you should be able to.}

[Vityaba]

See, everywhere I read about that exemption it refers to the filing threshold, but for self-employed it's $400, not $10150. So I am not 100% sure I can use it. Any reference to the code?

[jklcpa]

See, everywhere I read about that exemption it refers to the filing threshold, but for self-employed it's $400, not $10150. So I am not 100% sure I can use it. Any reference to the code?

 

 

Where did you read that filing threshold for self-employed is $400?   Filing threshold is same for self-employed persons as for others, and in determining that, the gross income from self-employment is the gross revenues minus cost of goods sold, and that is the figure from s.e. that is used in addition to any other income to use in determining whether the individual is below the threshold for filing.

 

Ref is sec 5000A(e)(2) where it states - 

 

(e) Exemptions

No penalty shall be imposed under subsection (a) with respect to—

(2) Taxpayers with income below filing threshold

Any applicable individual for any month during a calendar year if the individual’s household income for the taxable year described in section 1412(b )(1)(B ) of the Patient Protection and Affordable Care Act is less than the amount of gross income specified in section 6012 (a)(1) with respect to the taxpayer.

 

and here is a link to 6012 (a)(1)

 

And here is a link to IRS website, pub 554 with a chart of the filing thresholds where it defines gross income from self-employment that is use in determining if the person is below the filing threshold.

 

[Pacun]

Judy brings a good point, Vityaba and myself were confusing to different terms: Filing Threshold and Filing Requirement.

 

Thank you for the clarification.

[Pacun]

I gave you the correct answer from the beginning, but I also had my doubt. What I was going to say right before Judy cleared it up, was that the worksheet adds automatically $10,150 to the amount to be considered. So 6K was going to be below that amount and no penalty.

Edited March 26, 2015 by Pacun

[Vityaba]

Yes, it's really confusing - filing threshold vs. filing requirements.

 

Self-employed individual has to file a tax return if net earnings are $400 or more: http://www.irs.gov/publications/p17/ch01.html#en_US_2014_publink1000170425

Edited March 26, 2015 by Vityaba

[Pacun]

To add to our confusion and to defend our point, the ACA regulations read, you are supposed to add your income and the income of ANY dependents required to file a return. I need a break!!!!!!!!!!!!!!!

 

So if your client was a dependent, you would add his income? (he is required to file). BUT if he was a dependent and made 6K on a W-2, he was not required to file and therefore no need to add his income.

Edited March 26, 2015 by Pacun

[jklcpa]

Yes, it's confusing and that is why I reread the code sec and gave you the link to 6012(a)(1), because it doesn't mention self-employed persons, only lists the standard deduction and exemption amounts.

[jklcpa]

I wanted to add that I'm moving this topic out of general chat and over to the ACA forum.