Navigating Federal Taxes: Considerations for ADAPs

Amy Killelea, NASTAD

Presentation Outline

Premium Tax Credit Reconciliationo Considerations for ADAPs and clients

o Case studies

Individual mandate shared responsibility payment and exemptions

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Advance Premium Tax Credit (APTC) Life Cycle

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Step One: Marketplace Application• Demonstrate financial eligibility for APTC in application to Marketplace• Individuals may apply for advance premium tax credit based on

projected annual incomeDates: November 1 – January 31

Step Two: Report Income Changes • Report changes in income to Marketplace that will impact APTC amount• Report changes in tax household size that will impact APTC amountDates: January 1 – December 31 (tax year)

Step Three: File Your Federal Taxes!• Individuals receiving APTC MUST file federal taxes for year in which they received

the tax credit• IRS will determine if individual received the right amount APTC throughout yearDates: By April 15

Tax Forms Relevant to ADAPs

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Tax Form Description

Form 1095-A Form generated by the Marketplace and sent to anyone receiving APTC

Form 1095-B Form sent by the insurer to the insured verifyingindividual had coverage

Form 1095-C Form sent by employer to the employee verifyingwhether the individual had coverage

Form 8962 Addendum to tax return documenting APTC reconciliation

Form 8965 Addendum to tax return documenting any exception to the requirement to have minimum essential coverage

Putting it Together: Determining if There was an APTC Under or Overpayment

The 1095-A: Tells you how much the individual actually received in APTCs throughout the year (by month)

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Putting it Together: Determining if There was an APTC Under or Overpayment

The Form 8962: Tells you how much the individual should have received in APTCs according to MAGI-based income on tax return and allows for calculation of any overpayment or underpayment

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REFUND OWED TO INDIVIDUAL

LIABILITY OWED TO IRS

Putting it Together: The 1040

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Line 46 on IRS Form

1040 indicates excess

premium tax credits a

person owes to the IRS

Line 69 on IRS Form

1040 indicates net

premium tax credit (i.e.,

amount owed to the

taxpayer as refund)

Repayment Amounts Are Capped

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Income Single filers All other filers

< 200% FPL $300 $600

At least 200% FPL and < 300% PFL

$750 $1,500

At least 300% FPL and < 400% FPL

$1,275 $2,550

400% FPL and greater

N/A N/A

HRSA/HAB Guidance

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HRSA/HAB PCN 14-01

In the event of APTC tax refund to the client

In the event of APTC liability owed to the IRS by the client

Grantees must “vigorously pursue” any excess premium tax credit a client receives from the IRS upon submission of federal tax return

Grantees may cover client tax liabilities associated with an overpayment of the premium tax credit.

Recovered premium tax credit refunds are not considered program income; grantees must use recovered refunds in the Health Insurance Premium and Cost-sharing Assistance service category in the grant year when it’s received

The payment to the IRS must be made from funds available in the year when the tax liability is due

Grantees must develop processes to coordinate payments directly to IRS (payments to clients are prohibited) and may only pay the amount directly attributed to the reconciliation of the premium tax credits

Helpful Tip: include the client’s name, SSN, tax year, and portion of tax liability to which the Ryan White/ADAP payment should be designated

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Premium Tax Credit Reconciliation Case Studies

Case Study One: Ann

When Ann applied for 2016 Marketplace coverage with advance premium tax credits (APTC) in December of 2015, her annual income was $27,000 (230% FPL)o Ann gets $2,136 in APTC/annually

BUT, Ann changed her job mid-way through the year with a reduction in salary and failed to report this to the Marketplaceo When Ann files her taxes, her annual income ends up being $11,000

(95% FPL)• Note: Ann lives in a non-Medicaid expansion state

o Special rule: because Ann was eligible for APTCs when she applied, she is actually owed a refund (her expected contribution is 2% of her annual income)

o Ann is entitled to APTC of $3,191/annually

Ann will get a refund from the IRS in the amount of $1,055

Determining Refund Amount

$1,055

IRS Form 8962

Case Study Two: Carlos (and Sam)

Carlos is an ADAP client. He is married to Sam, who is not living with HIV and, therefore, is not an ADAP client. Carlos and Sam’s annual household income when they applied for 2016 coverage was ~$37,000 (230% FPL).o Carlos and Sam’s tax household (of two) gets $5,511 in

APTC/annually

ADAP assists Carlos with an individual QHP and Sam is able to purchase a separate QHP that just covers him with his allocation of APTC (see CMS presentation on spouses enrolling in separate plans)

At tax time, Carlos and Sam get two separate 1095-As, but they must file their taxes as married filing jointly. ADAP must determine the APTC reconciliation allocation just for Carlos.

1095-As for Separate Plans for Members of Same Tax Household

Carlos and Sam will get separate 1095-As with their monthly APTC amounts

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Carlos’ 1095-A

Sam’s 1095-A

230690

690 230

690

690 230

230

300

300

300

300

Married Filing Jointly for Reconciliation

Putting it together on household 8962 Form

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Total for household: $5,551

Total for household: $7,000

Total for household: $1,449

ADAP determines client’s allocation of refund. In this case, half of $1,449

Case Study Three: Sean

When Sean applied for 2016 Marketplace coverage with advance premium tax credits (APTC) in December of 2015, his annual income was $27,000 (230% FPL)o Sean gets $1,995 in APTC/annually

Sean refuses to file his 2016 taxes

A person is not eligible for APTC if HHS notifies the Marketplace that an individual did not file taxes.

Sean does not immediately lose his APTCs (and he never loses his Marketplace eligibility); with filing extensions, Sean actually has until October 2017 to file his 2016 taxes.

o If he does not file his federal taxes, Sean will be ineligible for APTCs when he goes to re-enroll in a 2018 plan

Things to Keep in Mind for OE5

Make sure to send reminders to clients to file their taxes (It’s not too late! Clients can file federal taxes for 2016 with an extension to be eligible for APTCs for 2018 plan year)

Provide education about the importance of filing federal taxes and reporting income changes throughout the year at the point of enrollment and throughout the benefit year

Develop policies and procedures for how ADAP will approach potential APTC overpayments and underpayments

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Individual Mandate and Exemptions

Individual Mandate and Shared Responsibility Payments

Individuals are required to have minimum essential coverage

Individuals indicate if they had minimum essential coverage throughout the year on line 61 of their federal tax return

If a person did not have coverage, he/she may have to pay a penalty when they file their taxeso For 2016 coverage year, the penalty is $695 or 2.5% of

income over the tax filing threshold, whichever is higher

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Common Exemptions from the Individual Mandate

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Exemption How Granted

Under the tax filing threshold IRS/tax filing

Living in a non-Medicaid expansion state

IRS/tax filing

Uninsured for less than 3 months IRS/tax filing

Plan affordability IRS/tax filing or Marketplace application

Incarceration IRS/tax filing

Certain non-citizens IRS/tax filing

Hardships Marketplace application

Putting it Together at Tax Time

Form 8965

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Resources National Alliance of State & Territorial AIDS Directors (NASTAD),

www.NASTAD.org o Amy Killelea, akillelea@nastad.org

JSI ACE TA Center, https://careacttarget.org/ace

HRSA/HAB Ryan White HIV/AIDS Program Guidance https://hab.hrsa.gov/program-grants-management/policy-notices-and-program-letters

IRS The Health Insurance Premium Tax, https://www.irs.gov/affordable-care-act/individuals-and-families/premium-tax-credit-claiming-the-credit-and-reconciling-advance-credit-payments

Center on Budget and Policy Priorities, Beyond the Basics, http://www.healthreformbeyondthebasics.org/

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