>> Catherine: I'm Catherine from the IRS, and I would like to welcome you to our online session about
two key provisions of the Affordable Care Act, also known as the Health Care Law. I'm here with Bill,
who will talk about the individual shared responsibility provision and the premium tax credit.
Almost everyone will do something new when they file their tax return this year. Most taxpayers will
simply check a box on their tax return to indicate that each member of their family had qualifying health
coverage for the whole year. No further action is required. Some will be exempt from coverage, while
others will need to make a shared responsibility payment when they file.
Before I turn the session over to Bill, I would just like to remind you that IRS.gov/ACA has information,
online tools, and answers to commonly asked questions that can get help right away for you. And that
using free file tax software, and E-file, will help you file a complete and accurate tax return and avoid
Now, here's Bill to talk about the individual shared responsibility provision and what's new for individuals
and families this filing season.
>> Bill: Thanks, Catherine. And hi, everybody. My name is Bill, and I want to thank you for attending
today's presentation. As Catherine said, we'll be talking about two key provisions that are affecting
everyone's 2014 tax returns. That is the individual shared responsibility provision and the premium tax
credit. Again, we're going to cover a lot of information today, so let's go ahead and get started.
As you can see, the information in this presentation is current as of March 6, and again, all the
information that we're covering is available also on IRS.gov, as well as our current tax forms, instructions
and publications. So again, you don't have to take heavy notes today, but you can visit our website at
IRS.gov/ACA for the latest information about the tax provisions of the Affordable Care Act.
As you can see on the agenda here, again, we're going to be covering a little bit of background about
the Health Insurance Marketplaces and their role. We'll be talking about the shared responsibility
provision, you know, what is minimum essential coverage, who might be eligible for coverage
exemptions, and how to claim them. We'll also be talking about the premium tax credit, who is eligible
for that new credit; how to reconcile advance payments; and a new Form 8962, used to file and claim the
premium tax credit.
We'll also talk about resources, including Publication 974, again, that are available to assist people with
filing and questions that they might have.
So to begin, the Department of Health and Human Services or HHS is the lead agency for administering
the Affordable Care Act. The IRS's role is of course administering the tax provisions that were included.
So HHS is responsible for enrolling individuals in health care coverage through the Health Insurance
Marketplaces, and helping individuals get the appropriate financial assistance that they need, including
advance payments of the premium tax credit.
So the marketplace is the main information source for all health insurance options under the ACA. It's
also the source for certain exemptions from the shared responsibility provision, and it's the only source
of -- the only source of advance payments of the premium tax credit. You can visit healthcare.gov for
information about the marketplace, both the federal marketplace, and again, it can direct you to
state-based marketplaces if you reside in one of those areas.
We just finished the second marketplace open enrollment period for 2015, and the next open enrollment
period for 2016 insurance will begin in November, November 1st of 2015, and run through January 31st.
In the interim, some individuals can qualify or may qualify for a special enrollment period that allows
them to purchase insurance outside of the normal open enrollment. So again, the best place to find out
more information about HHS, the marketplace, or enrollment, is at healthcare.gov.
So next we're going to talk about the shared responsibility provision. So under the Affordable Care Act,
the federal government, state government, insurers, employers, and individuals, all have a shared
responsibility to improve the availability, quality, and affordability of health insurance coverage in the
Starting in 2014, this provision requires all individuals to have for each month of the year either minimum
essential coverage, also known as MEC, or a coverage exemption. For any month that an individual
does not have coverage or an exemption, they may have to make a payment for those months when
they file their federal incomes tax return.
Now, the good news is that most individuals in the United States already have health insurance coverage
that qualifies as MEC. So they won't need to do anything else other than continue the coverage that
they now have.
So let's talk about this provision in a little bit more detail. Who is covered or who is subject to this
provision. So this provision impacts individuals of all ages, including children. Every individual must
address the MEC coverage requirement on their 2014 tax return, and we'll show you how to do that later
in the presentation.
Adults and married couples who can claim a child or another person as a dependent for federal income
tax purposes is responsible for ensuring that all their dependents also have minimum essential coverage,
or an exemption from the coverage requirement. They'll need to make a payment for each month they
or any of their dependents do not have coverage or an exemption.
Senior citizens are also subject to the requirements, but both Medicare Part A and Part C, known as
Medicare Advantage, both qualify as MEC. These apply to U.S. citizens as well as noncitizens who are
in the U.S. long enough during a calendar year to qualify as resident aliens for tax purposes. U.S.
citizens living abroad are treated as having minimum essential coverage if they're not physically present
in the U.S. for at least 330 days during a 12 month period, or if they're a bona fide resident of a foreign
country for the year.
U.S. citizens who travel abroad for shorter periods of time that don't meet that physical presence or the
residency requirements do need to maintain minimum essential coverage, qualify for an exemption, or
make a payment.
So just to recap, I know I've covered a lot of information there, each person has to have minimum
essential coverage or a coverage exemption, and if they don't, a shared responsibility payment would be
So we've covered this, so now let's go into a little bit more detail about what qualifies as a minimum
essential coverage. So the Internal Revenue Code spells out what qualifies as minimum essential
coverage, and we're going to be showing you the major categories on the screen here, and also kind of
tell you about resources where you can go to find out specific plan information. And in particular, you
can go to IRS.gov/ACA, and we have a chart of plans that meet the definition of MEC. We also have a
chart that shows other specialized coverage that does not meet the definition. You can also go to
healthcare.gov, there's information there, as well.
So the major categories of plans that do meet the minimum essential coverage requirement are the three
bullets you see here on the screen. So coverage provided by an employer, including COBRA plans and
retiree coverage, those plans qualify. You know, those are both -- those are offered to both employees
and their dependents. And so again, if they have coverage, they have minimum essential coverage.
Coverage under most health -- I'm sorry -- coverage offered under most health plans in the individual
market, and all qualified health plans offered through the Health Insurance Marketplace qualify. And the
third bullet you see on the screen is that coverage under certain government-sponsored programs, such
as Medicare Part A and Part C, most Medicaid coverage, the Children's Health Insurance Program, and
other certain government programs also qualify as minimum essential coverage.
So now that we've talked about the major categories of the plans that do meet the definition, let's talk
about a few that do not meet the definition. So generally speaking, specialized coverage is not MEC.
Some examples of specialized coverage are coverage for vision or dental care, workers compensation,
accident or disability policies, and Medicaid coverage that provides only specialized services, like family
planning, tuberculosis related services, or limited treatment of other certain conditions.
Now, the IRS has issued some transition relief for 2014 for individuals who are covered under some
limited benefit government programs, and you can find information about that on IRS.gov/ACA. Again,
the good news is that most individuals in the U.S. have coverage today that qualifies as MEC and can
just maintain that coverage.
Individuals who do not have coverage, again, they should visit healthcare.gov to kind of assess their
eligibility for coverage, and potentially for financial assistance.
So we've said earlier, right, every individual has to address the minimum essential coverage requirement
on their tax return, and so the IRS has updated all of our 1040 tax returns so that an individual can either
indicate that everybody in their household had coverage for the entire year, or they can attach a form to
claim a coverage exemption, or they can report and make a shared responsibility payment.
So as you can see here on the screen, for taxpayers whose entire tax household maintained minimum
essential coverage for all 12 months of the year, report that on line 61 when they filed a return. And
again, if everybody had coverage, including themselves, their spouse, and all dependents for the entire
year, they can simply check the box, you leave the entry space blank, and that's all there is to it. No
forms are required to be attached.
We have a similar line on the 1040A and 1040EZ to allow this type of reporting. And just to give you a
quick example, just to give you an example, let's say Suzy is single and she had employer sponsored
coverage for the entire year. She would just check the box under 1040 when she filed her return, okay?
And we're actually going to cover in the next couple of slides, you know, how to actually claim a
coverage exemption, or when you might actually have a dollar amount there in line 61 for individuals who
would owe a shared responsibility payment.
All right, so if you think somebody qualifies for an exemption, how do they claim it. Well, it all depends
upon the type of exemption. There are several different coverage exemptions from the provision, and
some are obtained through the marketplace directly, and many are obtained through just the filing of a
tax return. And there's a few that actually can be obtained either way, so we're going to kind of cover
those into more detail in the next couple of slides.
Again, IRS.gov/ACA has a great exemption chart showing, you know, each of the types of exemptions
and how they can be obtained.
Now, one key point I wanted to make here is that requests for exemptions that can only be granted by
the marketplace should be applied for as soon as possible. That way they can report the exemption
when they file their tax return. Most exemptions can be claimed directly on the IRS tax return, and again,
we'll show you which exemptions qualify for that. And again, those are very easy to claim when you file
your federal tax return.
All right, so now you can see on the screen some of the different types of coverage exemptions, and
these are the types that are available only when you file a federal tax return. So let's kind of go over
each of these in a little bit of detail. The first exemption is the affordability exemption, and this is for
individuals who can't afford coverage because the minimum amount that they would be required to pay
for their insurance premium would be more than 8 percent of their household income. Now, for this
provision, household income is the adjusted gross income from the individual's tax return, plus any
excludable foreign earned interest income, and tax-exempt interest that they received during the year.
In addition, household income must include the incomes of dependents who have sufficient income that
makes it where they're required to file a federal tax return. So again, we're talking about a true tax
household including dependents who are required to file.
If you have a household on the affordability exemption, if you have a household where the costs,
combined costs of a husband and a wife, for them to each purchase insurance would exceed 8 percent
of household income, they would also qualify.
The second coverage exemption is for short-term coverage gaps. And so any individual who had a gap
in coverage that is less than 3 consecutive months during the year, so again, if they had a 1 or 2 month
gap, they could claim the short coverage gap exemption.
If an individual had multiple gaps during the year, this gap would -- this gap exemption would only apply
to the first coverage gap.
Now, I guess an important point to mention here, when we talk about coverage gaps, is that for purposes
of this provision, if somebody has coverage for one day during the month, they are considered covered
for the entire month. So again, partial months of coverage are considered as months of full coverage
for purposes of this provision.
The third type of exemption is for those that are not law fully present. So an individual who is not a U.S.
citizen, a U.S. national, or an alien lawfully present in the U.S. qualifies for an exemption.
The fourth exemption is for those individuals or households that have no filing requirement. So if an
individual has gross income or household income below the minimum filing threshold, so again, they
would not have to file a federal tax return, they're automatically exempt from this provision. So again,
they don't have to file a return to claim it, but if they do file a return anyway, for example somebody who
might file to claim a refund of withholding, can claim an exemption for this when they filed a federal tax
The fifth bullet is for individuals who obtain the minimum essential coverage during the 2014 open
enrollment period. So again, anybody that enrolled in insurance outside the marketplace or inside the
marketplace and had coverage effective by May 1st of 2014, or they applied for coverage under the
Children's Health Insurance Program, or they were in line and are treated as having enrolled in coverage
through the marketplace by March 31st. So again, individuals who had gaps in coverage beginning in
2014 for any of those reasons qualify for an exemption.
And last but not least, individuals who reside in a state that did not extend Medicaid coverage, that had
household income below 38 percent of the federal poverty line, qualify for an exemption.
So again, these are the exemptions that can be claimed directly on the federal tax return.
All right, so now you can see on this screen the exemptions that can only be obtained through an
application to the marketplace. The first is the exemption for religious conscience. So an individual
who is a member of a religious sect that is recognized by the Social Security Administration as being
conscientiously opposed to accepting health insurance benefits can apply to the marketplace for an
Secondly, any individual who has suffered a hardship that made them unable to obtain coverage, as
defined by HHS, can apply as well. Now, this could include but is not limited to homelessness,
eviction, foreclosure, domestic violence, death of a close family member, or unpaid medical bills, for
example. So again, those can only be obtained through the marketplace.
Now, there are certain hardship exemptions that can be claimed on the federal tax return, but again, you
can check our chart on IRS.gov/ACA for a list of all the exemptions and where they can be obtained
Now, I did want to mention, while we're talking about exemptions from the marketplace, about the
process. So again, if you go to healthcare.gov you can see the application process and you can
download a copy of the application. Once you fill out the paper application you mail that into the
marketplace, and when it's processed they will assign an exemption certificate number for each
exemption that's applied for. And the exemption certificate number, or ECN, if you will, is used to
report the exemption on your tax return when you file.
Now, we'll show you how to do that in just a moment on Form 8965 where we'll talk about that, but I
guess one of the things I did want to also mention is that because it's a paper application process for a
marketplace exemption, we have created a process for taxpayers who have a pending application, and
when they filed their federal tax return they'll be able to write the word "pending" on Form 8965 when
they're reporting pending marketplace applications for exemptions.
All right, so we've talked about exemptions that can be obtained directly from the IRS, we've talked
about some that can be obtained only through the marketplace, and here's a couple more that can be
obtained either way. So the first is for members of an Indian -- recognized, federally recognized Indian
tribe. Secondly is members of a health care sharing ministry. And a health care sharing ministry is a
501(c)(3) organization whose members share a common set of ethical or religious beliefs and have
shared medical expenses in accordance with those beliefs since at least December 31st, 1999.
The third category are for American Indians, Alaska natives, spouses or descendents, who are eligible
for services through an Indian Health Care Provider. So again, they don't have to be a direct member of
the federally recognized tribe, but if they're able to access services through the Indian Health Care
Provider they qualify for an exemption.
And last but not least, individuals who have been convicted and are serving a sentence in jail, prison, or
similar penal institution or correctional facility can claim an incarceration exemption. So again, these
exemptions can be obtained either way.
Now again, as I said earlier, unless you have to apply for an ECN from the marketplace, we recommend
that you actually claim these directly on your federal tax return. It's a more efficient process to claim it
on the return, rather than to apply on paper to the marketplace.
All right, so this is the new Form 8965, and it's used to report or claim health care coverage exemptions.
This form is submitted as an attachment to the federal tax return, and again, it's used to report ECNs for
exemptions granted directly by the marketplace, or to claim exemptions with the IRS. Now, there's a
little distinction there, in that the IRS does not grant exemptions. Taxpayers of course claim them
directly on the return, and the IRS more verifies the process.
We'd like to emphasize that the IRS accepts requests for an exemption only at the time of filing. So
again, we won't grant a coverage exemption by phone or correspondence, you have to file this form with
your 1040 tax return to claim a coverage exemption.
Now, this form is used to claim exemptions for the entire tax household. You fill out -- file one of these
forms that covers everybody on the return. So you, your spouse, and any dependents you claim on
your tax return, you can use this form to claim exemptions.
It is a three-part form, and again for brevity we're not going to go over the form in detail today, but just in
general, Part 1 is used to report marketplace exemptions, Part 2 is used to claim exemptions for income
below the filing threshold, and Part 3 of this form is used to claim coverage exemptions directly from the
So a household could actually complete more than one part of the form, but this is the form used to
claim all different types of coverage exemptions.
All right, so now we've talked about coverage, and we've talked about exemptions. So when would an
individual need to make a payment. Well, as we've said earlier, if they don't have coverage and they
don't have an exemption for any months during the year, they'll need to make a shared responsibility
payment when they file their tax return. And as we showed you earlier, line 61 on the 1040 return is used
to report shared responsibility payments. It's actually a line in the Other Taxes section. And on Form
1040A it's also a similar line on line 38, and on the Form 1040EZ, line 11. So again, it doesn't matter
what type of tax return you're filing, you can still make a shared responsibility payment.
Now, we're going to show you in just a moment how to calculate a shared responsibility payment. And
again, there's instructions and worksheets in the Form 8965 instructions that will walk you through the
All right. So again, we're going to go through kind of how that payment is calculated for individuals that
don't have coverage or an exemption. And to begin the process, taxpayers again need to know what
their tax household income is, and what their applicable income tax filing threshold is. Now, the good
news is that using tax preparation software or the assistance of a tax professional greatly simplifies the
calculation of the payment and completion of the form. So again, we like to encourage electronic filing
for that reason.
So we're going to kind of walk through how this is done, knowing that most of you will probably be
using software to accomplish these computations.
So to describe this, the payment, as simply as possible, it's the greater of either a percentage of income
or a flat dollar amount. But the amount of the payment can never be more than the national average
premium for bronze level coverage, for the cost of insurance.
So we're going to walk through each of these, and I'll get my little pointer here going. The first part
again, the percentage of income amount, is the percentage of household income above the filing
threshold for the primary filer or the joint filers in the family. And as you can see here, the percentage
for 2014 is 1 percent. And the amount actually, as you can see, increases each year, because the 2
percent in 2015, 2.5 percent for 2016, and beyond. Okay? So now let's look at -- compare that
percentage of income calculation against the flat dollar amount method. The flat dollar amount method
is for one adult, it's $95 for 2014, and it's half that amount or 50 percent for individuals under 18.
And as you can see, just like the percentage of income, it goes up each year. So for 2015 it's $325 per
adult. 2016, it's $695 per adult. Plus this one is actually increased based on cost of living adjustments
each year after 2016. And again, for dependents under age 18, it's 50 percent of the adult amount,
corresponding adult amount for each year.
Now, so one important bullet up here that I wanted to mention, so if you look at the second bullet at the
top, for families, the maximum flat dollar amount calculation cannot exceed three times the adult flat
dollar rate. So for 2014, three times $95, which is the flat dollar amount, equals 285. So it means that
the flat dollar amount calculation can never exceed $285 for a household, regardless of family size.
Again, it can be less, but it can never be more than that.
So we've talked about calculating the payment based on a percentage of income, comparing it against
the flat dollar amount calculation. And it would be the larger of those two, but it can never exceed -- as
it says here in the third bullet -- can never exceed the national average bronze plan amount for the family
size. Which again represents the cost of -- the lowest cost of insurance that's available through the
Now, just to give you a sense, in 2014, the bronze plan amount for a single individual was $2,448, but it
goes up to over $12,000 for a family of 5 or more members. So again, you'd have to look that up, or
the software will do it when you do the comparison.
So again, just to recap, the amount of the payment is either a percentage of income, flat dollar amount,
but it's capped at the national average bronze plan.
And again, these, by the way, are the annual figures. And it is prorated out per month. So for
example, the $95 is for a year, so for an adult if -- you know, if they were uninsured and didn't have a
coverage exemption for six months, it would be one half or 6/12ths of the amount per year, so it would
be 47.50 for the year. So again, it's prorated out based on the number of months without insurance.
All right, so just wanted to recap quickly. Again, individuals either have to have minimum essential
coverage or an exemption, or they're going to make a payment when they file their tax return. We
showed you earlier the check box, so for taxpayers who had MEC or minimum essential coverage for the
entire year for everybody in their household, all they had to do was check the box on line 61.
If they didn't have MEC all year and wanted to claim a coverage exemption, they use Form 8965 to
request coverage exemptions from the IRS, or to report exemptions received from the marketplace.
And again, if they didn't have coverage or an exemption, they'll use the instructions -- they'll use the
instructions for Form 8965, and the worksheets contained within them, to calculate the shared
responsibility payment due. And that, again, also gets reported on line 61 of their tax return.
Now, one thing that's unique about a shared responsibility payment is that the IRS has a little bit of
limited collection authority related to this provision. If a taxpayer is unable to pay this whole balance
when they file their tax return they should contact us, because we routinely work with taxpayers who
cannot pay an amount that they owe at the time of filing. We'll typically set up a payment plan or
Our limitations that I wanted to mention is that the IRS does not have authority to file a notice of lien or
levy to collect this balance due from a shared responsibility payment, but we do have the ability to
offset refunds or overpayments. So again, we'll reduce somebody's refund by the amount owed to
collect the shared responsibility payment.
Okay, so again, to sum it up, the Form 1040, and as we showed you for example on line 61, is used to
both report minimum essential coverage or a shared responsibility payment, or Form 8965 attached to
the 1040 is used to report claimed coverage exemptions.
All right, so next we're going to talk about the premium tax credit. All right, so what is the premium tax
credit. Well, it's a refundable tax credit, it's claimed on a new Form 8962. And to be eligible, again, an
individual must have enrolled in insurance coverage through a federal or state Health Insurance
Marketplace. It helps individuals and families with the cost of purchasing marketplace insurance, and
their household income -- and again, we're going to talk about this later -- you know, typically has to be
between 100 and 400 percent of the federal poverty line for their family size.
The credit amount is based on a sliding scale, and greater credit amounts are available to those with
lower incomes. Some factors that affect the credit amount include which family members enroll, the
cost of available insurance coverage, and the premiums for the plan that they enroll in, and their family
Again, as we mentioned earlier, that individuals purchasing insurance through the marketplace would --
well, again, they'd have to purchase insurance through the marketplace to be eligible for the credit. And
at the time they enroll, they'll have an option to choose potentially advance payments of the credit.
Now, we're going to talk about advance payments on the next couple of slides, but these are an estimate
of the marketplace on how much a taxpayer's premium tax credit will be, and taxpayers are given the
option to get all of the benefit either when they file their tax return, or they can get some of it advanced
by the marketplace directly to their insurance company before a return is filed. And in that situation,
advance payments of the credit lower their out-of-pocket costs for premiums that they would have to
pay each month.
The amount of advance payment is based on a person's projected household income for the upcoming
year. Again, we've talked about the factors a moment ago. And because it's based on a projection,
advance payments are likely to differ from the actual credit amount, which is based on the actual
household income when the tax return is filed. So for this reason, the advance credit payments must be
reconciled against the actual credit amount when the person files a federal tax return. We're going to
talk about the form for doing that in just a moment, it's Form 8962.
Taxpayers can choose to forgo advance credit payments at the time they enroll, and if they forgo
advance payments in effect it means that when they file their tax return they'll be reimbursed for a portion
of the insurance premiums that they've already paid for. So again, taxpayers who receive advance
payments must file a tax return to reconcile payments, and other individuals would still file the same form
to claim the credit on their federal tax return.
This credit is refundable, as we said in the first bullet here, which means that it can either lower a balance
due or it can create or increase the amount of a refund.
Let's see. Let's move on to the next slide. Talk about eligibility in a little bit more detail. So to get a
premium tax credit, an individual must meet all of the following requirements: First and foremost, they
or a family member must enroll in a qualified health plan at the marketplace for one and more months
during the year. And again, they cannot -- those same individuals cannot be eligible for either employer
or governmental insurance. And they must be lawfully present, and cannot be incarcerated during the
year. So again, this credit is for individuals who purchase marketplace health insurance, and meet the
Typically, they have to have household income between 100 and 400 percent of the federal poverty line
based on their family size. And there are a few exceptions, we'll talk about those in a moment.
If they're married they have to file a joint tax return, with a few exceptions, and again, those exceptions
would deal with victims of domestic abuse or spousal abandonment. And again, there's more
information about that on our website.
And they cannot be claimed as a dependent by another person. Again, if they're being claimed as a
dependent. A child cannot file, for example, on their own and claim a premium tax credit.
So -- oh, and of course as we mentioned earlier, the PTC pays a significant portion of marketplace
premiums when somebody gets advance payments. But taxpayers do have to pay their copay
premiums by the due date of the return for the coverage year for some of those same months to qualify
for the credit.
All right, so let's go over some of the exceptions, right? So as we mentioned earlier, married individuals
can't use married filing separate unless they meet the exception criteria that I already mentioned.
Certain married individuals may qualify to file as head of household. And again, for purposes of this
credit, that means they're treated as unmarried. The bottom line here is that individuals who use the
married filing separate status, but don't meet the exception criteria, are not allowed to claim a premium
tax credit. And if in fact they did receive advance payments, those would have to be repaid subject to a
potential repayment cap.
Now, as I mentioned earlier above, right, taxpayers have to have income between 100 and 400 percent of
the federal poverty line. But if somebody enrolls at the marketplace and they estimated their income to
be in that range, but at the end of the year their income fell below 100 percent of the federal poverty line
at filing because of some type of, for example, a change in circumstance, they're still treated as an
applicable taxpayer if they meet the other eligibility criteria.
In addition, certain individuals who had at least one family member who is an alien lawfully present in the
U.S. but not eligible for Medicaid, they're treated as applicable taxpayers even if they have household
income below 100 percent of the federal poverty line.
I guess a key point to remember on this slide, right, is that most people have insurance coverage, you
know, or minimum essential coverage outside the marketplace through either their employers or other
government sponsored plans, and they would not qualify for this credit. Again, this credit is only for
taxpayers or their family members who enrolled in coverage through the marketplace, and again, are not
eligible for other minimum essential coverage.
All right, so we've talked a little bit about the federal poverty lines, and we wanted to show you some
examples on the screen. The federal poverty line amounts that are in effect on the first day of open
enrollment are used for the entire coverage year. And they're also used to claim the federal tax -- I'm
sorry, the premium tax credit when you're filing your return.
So that means that for -- the 2013 federal poverty line table was used to determine both advance credit
payments during the enrollment period, and it was also used to determine the premium tax credit on the
2014 tax returns. You can see here that for 2014 tax year, for a single individual the range goes from
$11,490, that's 100 percent of the federal poverty line, up to and including $45,960, which is 400 percent.
So you can see depending upon your family size, the range varies. The government recently began
using the 2014 federal poverty line table for 2015 coverage.
All right. So again, individuals, families, who are again between these ranges, would qualify for the
premium tax credit, as long as they met the other criteria.
All right, a few key considerations. Again, we mentioned earlier the advance payments of the premium
tax credit that can be sent directly to a taxpayer's insurance company based on an estimate made, you
know, with the marketplace, of the amount that they would be claiming on their return.
So again, during the enrollment process, the marketplace is going to estimate that based on the family
size, the projected income, and information that's provided on the application at filing, you know, to
show who is eligible for health coverage, and who would be purchasing insurance through the
Because it's an estimate, the better the estimate and the faster that an insured adjusts the estimate, the
likely that it will be -- or it increases the likelihood it will be closer to the amount that they're entitled to at
tax filing. So again, we want to ensure that people report changes in circumstance as quickly as
possible to the marketplace to minimize the impact of changes in the circumstance.
Now, when the marketplace estimates somebody's premium tax credit, their potential premium tax credit,
it is up to the individual applicant to choose whether or not to receive the benefit of advance payments,
and if so, how much.
Now, for individuals that do decide to receive the benefit of advance credit payments, a few key
messages that we'd like to make sure that they're aware of, right? First, that advance credit payments
are optional; that if they choose to receive advance credit payments that they must reconcile the
advance payments against the actual credit when they file their tax return; and because the advance
credit payments are based on an estimate, the differences between that estimate and the actual premium
tax credit are likely. And again, changes in circumstances can affect the differences. And again, we
want to ensure that taxpayers report those as quickly as possible.
Now, individuals are going to file a Form 8962 to claim the premium tax credit at the end of the year, and
to reconcile advance payments of the premium tax credit. We'll be covering that form in just a few
moments and -- you know, again, because we know that again, people are doing the best they can to
estimate their eligibility at the time of enrollment, the law was written such that there are certain repayment
limits or caps in place that might limit the amount somebody is required to pay back if they received
excess advance payments.
Again, those repayment caps only apply to individuals or filers with income below 400 percent of the
federal poverty line. And for a single individual, those repayment caps can range from 300 to $1260,
depending upon where their income falls in the federal poverty line, or levels. And the amount for joint
filers, or all other filers that are not single, are double the amount of single filers. So again, for a joint
couple those ranges for example, repayment cap ranges, would go from $600 all the way up to $2500.
So again, the repayment caps are there to kind of limit the amount somebody might be required to pay
back if they received excess advance payments, and their income, again, is less than 400 percent of the
federal poverty line.
You can see on the screen here, actually the next two slides are going to just give you a little bit more
detail on changes in circumstances, or the types of changes in circumstances that can, you know, affect
somebody's eligibility or the amount of the premium tax credit that they'll be entitled to receive.
And again, the key message here is that reporting changes to the marketplace promptly allows the
marketplace to adjust your advance credit payments. And again, doing so helps to prevent large
differences between the amount of advance payments and the amount that you'll be able to claim on
your tax return.
And again, allowing the marketplace to adjust those advance payments kind of can help avoid getting a
smaller refund, or potentially owing money that you didn't expect to owe when you file your federal tax
return. It's really a similar process to withholding or estimated tax payments. And again, you want to
adjust those if there's a change.
I guess a key concept is that if you're receiving the benefit of advance payments of the premium tax
credit, the greater the change and the longer time that you take to report it, the more significant the
difference will be at the end of the year between the amount of advance payments and the actual credit.
So here you can see some examples of the types of changes in circumstances that should be reported
to the marketplace, either online or by phone, to adjust advance credit payments. Some of these
changes also open the door for marketplace special enrollment periods. And again, the marketplace
can advise taxpayers as to their eligibility for those.
If there's a life change that qualifies somebody for a special enrollment period, they typically only have
60 days from the date of the life event to enroll in coverage.
Now again, I'm not going to read these all off, you can see them on the screen. But healthcare.gov has
information about changes in circumstances. We also have a complete list available in a Health Care
Tax Tip on IRS.gov. And there's a publication that the IRS produced, it's a flier, it's Publication 5152
titled Report Changes to the Marketplace if they Happen.
All right, so when somebody is getting ready to file to claim their premium tax credit, what types of
documentation will they need. Well, the first form that I want to discuss is the Form 1095-A. So as you
can see, Form 1095-A, it's the Health Insurance Marketplace Statement. Those forms are issued by
January 31st each year following the year of coverage, and it shows the individuals who are enrolled in
marketplace insurance; the premiums for the plan for themselves or their family members; it will show the
second lowest cost silver plan, which is again used to calculate the credit; and it will show whether or not
they received advance credit payments during the year.
This form is very similar to, say, a Form 1099 or a W-2 in that one copy of the form is filed with the IRS,
and another copy is mailed to the individual.
So individuals for 2014 should have gotten this form by January 31st, and they would use the
information here on Form 1095-A to compute the premium tax credit on their tax return, using Form 8962,
and they would both calculate the credit and reconcile advance payments.
Now, if an individual did not receive a 1095-A from the marketplace, they should contact the marketplace
to request a copy. It may be available through an online account, a look-up account, or again, they
could contact them via phone. Again, go to healthcare.gov for information about how to contact your
This Form 1095-A, the data from this form is entered onto Form 8962, and taxpayers will actually only
attach the Form 8962 to their return. So Form 1095-A does not get submitted.
Now, I did want to mention here that beginning with the 2015 coverage year, so we're talking about next
January of 2016, certain employers, government insurance agents -- I'm sorry, government agencies, and
insurance companies, will also be required to report non-marketplace coverage information. So again,
starting next January, taxpayers who purchase coverage through the marketplace will get this Form
1095-A, but others may be receiving either a Form 1095-B from their insurance provider, or Form 1095-C
from -- if they work for a large employer. So again, there would be different ways to report coverage
So here's the form we've been discussing, right? Form 8962, to claim the premium tax credit. And as
we mentioned, it's used to claim the credit regardless of whether advance payments were made, but also
used to reconcile advance payments with the actual premium tax credit that's allowed on the return.
The Form 8962 will calculate the credit on a sliding scale, with the greater amount of the credit going to
those with lower incomes. And it factors in household income, family size, and which covered family
members -- or I'm sorry, which family members are enrolled in coverage.
The results of completing Form 8962, Premium Tax Credit Calculation, is that it will flow over to the Form
1040 return, and as a result there are two new lines in the Form 1040. So there's a line 69, which is for
claiming a net premium tax credit. So again, individuals who reconciled advance payments and are due
a refund. There is -- and there's line 46, in those situations where an individual received excess advance
payments and had to repay back some of those.
So again, outcome of this form can either be a net credit on line 69 or potentially having to repay back a
bit if they received excess advance payments, again on line 46.
This Form 8962 can be filed with Form 1040A or 1040 or Form 1040NR. It cannot be filed with a Form
1040EZ or a 1040-PR.
We also just wanted to mention Publication 974, Premium Tax Credit. It's a multi-paged publication for
individuals who purchased coverage through the marketplace and are claiming the premium tax credit or
reconciling advance payments. So again, a lot of good information and examples there, it's available
on IRS.gov. So again, all of our forms and publications are available on IRS.gov.
Just a quick recap before we kind of get into the questions and answers. So the ACA or Affordable
Care Act addresses health insurance coverage and financial assistance options for individuals, families,
including the shared responsibility provision and the premium tax credit.
In general, taxpayers must have minimum essential coverage for each month to qualify for an exemption,
or make a payment on their federal tax return when they file.
Again, individuals who want to claim coverage exemptions can either claim them on the tax return or they
can apply for an exemption through the marketplace.
And any shared responsibility payment due is entered on line 61 in the Form 1040 tax return. And they'll
use instructions in Form 8965 to figure the amount of a shared responsibility payment due.
The premium tax credit is calculated and the advance payments are reconciled on Form 8962.
Taxpayers will receive a Form 1095-A from the marketplace which will contain the information necessary
to complete the form.
Only taxpayers whose family members are enrolled in coverage through the marketplace are allowed a
premium tax credit, assuming they meet the eligibility criteria. And again, this credit is used to reduce
the cost of monthly premiums.
Taxpayers who choose to forgo advance payments will get the full benefit of the credit when they file
their return. And again, if they received advanced payments they'll have to reconcile those.
Here's a slide that just shows the two primary web resources for the Affordable Care Act. IRS.gov/ACA
contains the information related to the tax provisions included in the Act. So again, you can visit that
page or those pages for information about these provisions, including Frequently Asked
Questions, and all the topics we've just covered.
Healthcare.gov, on the right, contains information on health coverage enrollment through the
marketplaces, how to get appropriate financial assistance, including advance payments. And again,
there's many FAQs, as well, on healthcare.gov.
So Catherine, I think we've run through all the slides, and do we have any questions that have come in
through the chat box?
>> Yes, we do, Bill, we have a few questions. I'll start with the shared responsibility provision
>> First question is: Most of my family has insurance, but I'm claiming a dependent that does not.
What forms do I need to file, and can I check the box.
>> All right, let me jump back to slide 8, I think that's the one that had the check box on it. So again,
you can only check the box on line 61 if everyone in the household had coverage for the entire year. So
in the question that you just read, the fact that one dependent did not have coverage means that you
cannot check the box.
Again, if the dependent qualified for a coverage exemption, they would claim the exemption by attaching
a Form 8965, to claim a health care coverage exemption. Or again, if they did not qualify for an
exemption for each month they did not have insurance, you would calculate a shared responsibility
payment using the Form 8965 instructions. And you actually report the amount that was due on line 61
there in the dollar or the entry field to the right.
>> Thank you. Here's question number 2, about exemptions: I'm not sure what exemption I qualify for,
and how to claim it.
>> Okay. Well, as I mentioned earlier, and I know we had several slides that talked about the different
types of exemptions. But I would suggest if you go to IRS.gov/ACA, there's a dedicated page that has
information on coverage exemptions, including a chart of all the different types of exemptions and then,
again, how they can be obtained. Whether it's you can file for it directly on the tax return, or whether
you have to go to the marketplace.
The same table, by the way, is in the Form 8965 instructions. So again, either go online to the website
or go to the 8965 instructions to see what all the different types of exemptions are, covered exemptions
are, and how to claim them.
>> Thank you. Question number three: I think I need to make a shared responsibility payment, but I'm
not sure. What should I do?
>> Well, again, Form 8965 instructions will kind of walk through the process. And again, since we're
looking at this particular slide, again, I'm just going to recap. If you or everyone in your household had
coverage for the entire year, all you have to do is check the check box. You don't have to make a
payment, right? Again, you only would be required to make a payment if you or someone you claim on
your return did not have coverage and did not qualify for an exemption.
And again, to claim an exemption you'd use Form 8965. But if you for any month you didn't have either
coverage or an exemption for that month, you would have to make a payment for that month. And
again, you'd use the instructions and worksheets in Form 8965 to determine the amount of the payment,
and you would report it here on line 61.
>> Thank you. The last question about shared responsibility provision: I just found out I'm going to
owe a shared responsibility payment for 2014. How do I avoid having to pay that next year?
>> Well, that's a great question, right? So looking back, they owed a payment because they had at
least one or more months in 2014 that they didn't have insurance or qualify for an exemption.
So looking forward in 2015, again, unless you know you're going to qualify for an exemption -- and
again, you can look at Form 8965 instructions or our website to see if you fit one of the exemptions
criteria. But if you don't, then obviously you'd want to enroll in coverage. Because again, you won't
owe a payment if you either have coverage or qualify for an exemption.
And if you're not offered insurance through your employer, and you meet the criteria that we mentioned
earlier -- or not, even -- you should contact the marketplace. Go to healthcare.gov and check out your
insurance options. And they can assist you in either enrolling in insurance or tell you what your options
>> Thank you. How do I know if I qualify for the premium tax credit?
>> Okay let's see, that was -- let me move forward to that slide, just to recap. To qualify for the
premium tax credit, again, remember, this credit is only available for those individuals who purchased
marketplace insurance. So just looking at the bullets here, right? You know, you can only purchase
marketplace insurance if you don't have an offer of affordable coverage through your employer and you
don't qualify for government insurance.
So again, if you purchase insurance through the marketplace, because you weren't eligible for affordable
coverage, and your income is going to be -- or you project your income to be between 100 and 400
percent of the federal poverty line, you know, again, you would typically be eligible for the credit.
So you can see the criteria here. And again, Form 8962, the instructions have the eligibility criteria, as
well. And I think we've showed you -- let's see, what was that -- we showed you Publication 974. Again,
move forward on the slide just to show you. Again, Publication 974 will help somebody determine if
they're eligible or not.
>> Next question: What should I do if I have not received my Form 1095-A from the marketplace?
>> Well, you should contact the marketplace to inquire -- again, assuming it's after January 31st for the
year that you're expecting the form -- you should contact the marketplace to inquire as to the status.
If you purchased marketplace -- I'm sorry, if you purchased insurance through the federal marketplace,
and perhaps in some of the state-based marketplaces, you may be able to log into your online health
care account to obtain a copy of it. Otherwise, you could phone your marketplace and request a copy.
Again, go to healthcare.gov for information on how to contact the marketplace to get assistance with
either getting your Form 1095-A, or if there's an error on your form that needs to be corrected, again,
they would be the ones to assist you with that.
>> Okay. Will I have to file a Federal Income Tax Return to get the premium tax credit?
>> Yes, you do have to file a Form 8962 -- and let me put that up on the screen. Should show up in a
second, sorry about the delay. Form 8962 must be filed with your federal tax return to claim the
premium tax credit.
This is required, by the way, if you received advance payments. You have to file a Form 8962 to
reconcile advance payments. But even if you didn't receive advance payments, to get the credit you
have to attach Form 8962 to your 1040 tax return when you file.
>> Thank you. And now our last question: If I have questions or need help, where do I go?
>> Oh. Well again, the best way to get help or to get your questions answered is to go to one of these
two websites. So IRS.gov/ACA has all the information that you'd need to know about the tax provisions
that we covered today. And again, if you needed assistance or had questions about enrollment or
advance payments, you can go to healthcare.gov, as well.
And again, all of our tax forms and instructions and publications are available on our IRS.gov website,
which is our home page.
So again, I think that's the best -- that's the best source. You could also call us, but again, most people
can get their questions answered more quickly and more efficiently online.
>> Thank you again, Bill, for your presentation. And thank you all for attending today's broadcast.
>> Thank you, Catherine. Thank you, everybody.