We all know that the ACA deals with health insurance coverage and making sure that every American has access to affordable healthcare, but how can you help your employees understand the complex and sometimes confusing maze of government rules and regulations? It may be simpler than you think if you remember to explain ACA to your employees without using payroll-speak and government jargon.
ACA deals with health insurance coverage and financial assistance for individuals and families, and may even offer a premium tax credit to some.
There is also the individual shared responsibility provision, as well as exemption from that provision in some cases.
This provision requires that every taxpayer and their dependents:
Have minimum essential coverage, or
Qualify for coverage exemption, or
Make an individual shared responsibility payment when they file an income tax return.
With that income tax return, the taxpayer should report their minimum essential coverage, or report their exemptions, or make their individual shared responsibility payment.
Taxpayers whose entire family had minimum essential coverage for every month of the tax year will show that on their tax return by checking the appropriate box, and will not have to do anything else.
Taxpayers who did not have minimum essential coverage for every month of the tax year can claim a coverage exemption. Form 8965, Health Coverage Exemptions, is used to claim these exemptions and/or report exemptions granted to taxpayers by the Marketplace.
Taxpayers who did not have minimum essential coverage for every month of the tax year, or who qualify for an exemption from coverage will have to make a shared responsibility payment, calculated by using the worksheets included with Form 8965. This shared responsibility payment amount due should be reported on Form 1040, line 61 under Other Taxes (or on the corresponding lines/sections on forms 1040A and 1040EZ).
It is likely that most of your employees will have had minimum essential coverage for every month of the tax year, so they will check the FULL YEAR COVERAGE box on their tax return. However, if they or a member of their family was enrolled in a qualified health plan through the Marketplace, they must reconcile any advance credit payments with their actual premium tax credit on Form 8962, Premium Tax Credit. Excess advance credit payments will increase taxes owed by the taxpayer, subject to a repayment cap based on the Federal Poverty Line.
If a taxpayer enrolled themselves or their dependent in a qualified health plan through the Marketplace, the taxpayer will receive Form 1095-A, Health Insurance Marketplace Statement. This form will give the taxpayer the information they need to complete Form 8962, Premium Tax Credit. The net premium tax credit can then be entered in the Payments section of the taxpayer’s federal income tax return. Excess advance credit payments should be entered in the Tax and Credits section of the return.
Taxpayers can visit IRS.gov and go to the Interactive Tax Assistant under the Tools section. There is an interactive interview tool that will help them determine if they may be eligible for a coverage exemption, or if they need to make a shared responsibility payment when they file their tax return. The Taxpayer Advocate Service Individual Shared Responsibility Provision Payment Estimator can also help taxpayers estimate the amount they will have to pay if they did not have minimum essential coverage, or if they had an exemption from the coverage requirement during the year. Another helpful online tool is the Am I Eligible To Claim The Premium Tax Credit? Interactive Tax Assistant at IRS.gov.
Lots of good information is available to help sort through the maze of questions!