Take-a-ways from - IRS 2014 ACA Webinar on Sept. 17, 2014

[easytax]

Basically the webinar was a decent overview of ACA and the practitioner (more individual needs than business, but overall good).

 

The BIG take-a-ways (for me) were when I reviewed the forms mentioned. The 8962 (reconciliation) and the 1095-A (reportable from the "Market Place") helped somewhat with the review of the 8965 (exemption forms) having the biggest impact with the most information.

 

As with most government instructions, you have to take-it-slow and wade through step-by-step but in this case very worth it. With all the examples and some thought, you can come away with a decent understanding of the practitioner needs for the coming tax season (as least as to the individual side of the ACA reporting for 2014). This might also offer a partial answer for your clients questions on what they might require as to forms, etc..

 

All forms can be found at http://apps.irs.gov/app/picklist/list/draftTaxForms.html .

[Uncle Sam]

What I'm feeling is a sense of frustration.

 

When I first came into this profession - we had to know only tax law and peripheral areas of tax law.

 

Now - we not only have to be conversant with tax law - but be compliant conscious on foreign tax reporting, HEALTH CARE reporting, EIC compliance -

 

i.e. - we have to have eyes in the back of our heads to watch over each and every step a client takes during the year - and most clients don't appreciate what we have to know, nor are willing to PAY the value of those services.

 

They just listen to the advertising commercials of the storefront preparer factories and expect US to match their fee structure.

[kcjenkins]

This is the natural result of people assuming that every problem can be solved with another law.  A really bad assumption.  

[SaraEA]

Uncle Sam, you are so right that now we have to be conscious of so many things it makes me wish our fancy software was more like Block's:  It forced you to ask questions and enter answers (was your student ever convicted of drug charges?  Did you pay anyone over $600 and issue a 1099?)  Fancy software assumes the preparer knows what s/he is doing and doesn't force it.  Maybe it should because we can't keep all this in our heads anymore.

 

I do warn everyone not to automatically enter "no" to foreign accounts or trusts.  ASK THE CLIENT.  Banks are being forced not just by the IRS but by the tax authorities in many nations to hand over their client lists.  (Other nations are just as unhappy as the US that their citizens are hiding money in offshore accounts.)  It isn't pretty if the client gets reported before they self-report.

 

I just finished almost 2 months of work as a Kovel accountant for a long-time client with several foreign accounts he never mentioned to us.  The income he never reported was less than a month's pay for this guy who makes $3M a year.  Our fee was $19k, who knows what his tax attorney is charging, and he'll pay about $900k to the IRS IF he's accepted into the voluntary program (almost twice that if not).  You're right, they don't want to pay for us knowing to ask the necessary questions.  But it sure beats paying for the consequences....

 

As for the ACA, when are we supposed to learn about that?  We just finished the Sept 15 entity deadline and are now facing the October 15 individual.  After that it's assessor's reports due Nov 1.  And then of course the rest of our CPEs have to be taken, useless because Congress won't have passed any tax bills or extenders until they recover from the Nov elections (read:  Dec 31).  And we're still digesting the new repair/supplies regs and brushing up on our Form 3115 skills. Yet  we have to know all about health care before clients start coming in the door.  This tax season ain't gonna be pretty.

[Jack from Ohio]

I learned about the ACA at IRS Nationwide forums in 2013 & 2014 as well as several seminars from Oct-Dec 2013.  The information has been out there for over 2 years.  I do not understand preparers that have not sought out this information by now. 

[kcjenkins]

Come on, Jack, the IRS only released the Draft forms on August 28, 2014, and IR-2014-87, Sept. 8, 2014.  Sure we've been reading and studying but until they finalize their forms, we will not really KNOW what they want where.  Since THEY don't yet know for sure, [that's why they are DRAFT forms] we can't either.  

[Jack from Ohio]

Come on, Jack, the IRS only released the Draft forms on August 28, 2014, and IR-2014-87, Sept. 8, 2014.  Sure we've been reading and studying but until they finalize their forms, we will not really KNOW what they want where.  Since THEY don't yet know for sure, [that's why they are DRAFT forms] we can't either.  

I am completely up to speed already on what they want.  Using a new form is elementary to the process.  Too many people procrastinated and now the rush is on!! 

 

I worry more about why things go on the form and the proper way to report.  Where on the form is simply a matter of reading the new form.  Since I have already learned what they want, it is a simple matter to comply.

[Uncle Sam]

These ACA rules are going to force tax return season to start on April 15th with zillions of extensions.

I can just picture these health insurance providers and/or others responsible for submtting the 1099 information to taxpayers on time.

[Catherine]

These ACA rules are going to force tax return season to start on April 15th with zillions of extensions.

I can just picture these health insurance providers and/or others responsible for submtting the 1099 information to taxpayers on time.

 

They've been doing it in MA for several years now.  First couple of years were rough.  Some providers were sluggards but mostly it was the taxpayers who didn't know what the 1099-HC was, or what it was for, who either didn't bring it, or threw it out because they didn't understand it.  What REALLY gets people angry is when they get hit with the penalties.  

[Jack from Ohio]

These ACA rules are going to force tax return season to start on April 15th with zillions of extensions.

I can just picture these health insurance providers and/or others responsible for submtting the 1099 information to taxpayers on time.

The only people this affects are those that purchased insurance through one of the marketplaces.  Those are the only ones that will be receiving Form 1099-A.

 

All others simply have to answer the question:  "Did you have appropriate coverage for 9 of the 12 months in 2014."  It is a yes or no question.

 

The IRS will not be checking the accuracy of the answers to that question, unless you purchased insurance from the Marketplace.

 

So, those that purchased from the Marketplace will be at the mercy of the Government for issuing the 1099-A forms.

[Gail in Virginia]

Even if you purchase your insurance from the marketplace, if you are not receiving a subsidy isn't the only question still "Did you have appropriate coverage for 9 of the 12 months in 2014."  And if they purchased it on the marketplace, isn't it a given that it is appropriate coverage?

[Jack from Ohio]

Even if you purchase your insurance from the marketplace, if you are not receiving a subsidy isn't the only question still "Did you have appropriate coverage for 9 of the 12 months in 2014."  And if they purchased it on the marketplace, isn't it a given that it is appropriate coverage?

No.  You must fill out the form almost exactly like the MA form.  Receiving the subsidy is not part of the requirement to receive the 1099-A and report the information accordingly.  It was supposed to be ALL insurance companies, but the POTUS delayed non-marketplace acquired insurance requirement till after the mid-term election.

 

You must also calculate if the taxpayer is eligible for, received too much or too little subsidy and adjust the additional tax or additional refund accordingly.

[kcjenkins]

You must also calculate if the taxpayer is eligible for, received too much or too little subsidy and adjust the additional tax or additional refund accordingly.

That may be the real problem area.  The government may be paying incorrect subsidies to more than 1 million Americans for their health plans in the new federal insurance marketplace and has been unable so far to fix the errors, according to internal documents at HHS.  Under federal rules, consumers are notified if there is a problem with their application and asked to upload or mail in pay stubs or other proof of their income. Only a fraction have done so, according to the documents. And, even when they have, the federal computer system at the heart of the insurance marketplace cannot match this proof with the application because that capability has yet to be built.  

 

So piles of unprocessed “proof” documents are sitting in federal contractor Serco’s Kentucky office, and the government continues to pay insurance subsidies that may be too generous or too meager. Administration officials do not yet know what proportion are overpayments or underpayments.  According to various recent internal documents, income discrepancies are the most frequent kind of inconsistencies among insurance applicants, and they exist on 1.1 million to 1.5 million out of nearly 4 million inconsistencies overall. Of the total inconsistencies, the documents show, consumers have uploaded or mailed in about 650,000 pieces of “proof” — or for about one inconsistency in six.

 

The federal rules say consumers have 90 days after applying to try to prove that their information is correct and, if an inconsistency is not resolved by then, whatever the federal records show is assumed to be correct. By now, about one-third of people with inconsistencies have passed their 90-day window. But because of the trouble verifying incomes, the government has not lowered or raised anyone’s subsidies.  That's where I see problems for preparers, as we seem to be set up in this situation as the "bearer of bad tidings".   Remember back when the feds changed the withholdings tables, to reduce 'overwithholding'?  People got a few dollars extra per week, which they hardly noticed, then at tax time, got a noticeably smaller refund.  H&R was urging people to come in and let  them 'fix' your withholding, FREE.  Because they knew the dummies would blame the preparer if the refund went down.  

[easytax]

The only people this affects are those that purchased insurance through one of the marketplaces.  Those are the only ones that will be receiving Form 1099-A.

 

All others simply have to answer the question:  "Did you have appropriate coverage for 9 of the 12 months in 2014."  It is a yes or no question.

 

The IRS will not be checking the accuracy of the answers to that question, unless you purchased insurance from the Marketplace.

 

So, those that purchased from the Marketplace will be at the mercy of the Government for issuing the 1099-A forms.

 

It is when they answer -- No --- that the fun begins. That is when --- without proper information and documents AND forms we may or may not have, the onus is placed on us as preparers --- not on the government (both from client perspective and from IRS possible penalties). Make sure you detail your interview notes -- so if/when the IRS decides to try and take penalties from us for improper filing -- you can substantiate it was clients info, etc..

[Jack from Ohio]

It is when they answer -- No --- that the fun begins. That is when --- without proper information and documents AND forms we may or may not have, the onus is placed on us as preparers --- not on the government (both from client perspective and from IRS possible penalties). Make sure you detail your interview notes -- so if/when the IRS decides to try and take penalties from us for improper filing -- you can substantiate it was clients info, etc..

From the IRS at the Nationwide Forum in Chicago - Other than those that receive Form 1095-A, there is no process in place to match or verify the information provided by others.

In other words, the IRS will not match, check or hold preparers accountable for that question in 2014.

I asked Karen Hawkins this question directly, and that is the answer she gave. In addition... "If the IRS does not have a method to check the answers, we cannot hold the preparer responsible for incorrect answers given by taxpayers. Therefore, since there is no documentation available for this question (other than those that receive insurance through a Marketplace) there is nothing for you to document for tax year 2014.

My process for tax year 2014 is to simply ask the question, and enter the answer given.

[easytax]

From the IRS at the Nationwide Forum in Chicago - Other than those that receive Form 1095-A, there is no process in place to match or verify the information provided by others.

In other words, the IRS will not match, check or hold preparers accountable for that question in 2014.

I asked Karen Hawkins this question directly, and that is the answer she gave. In addition... "If the IRS does not have a method to check the answers, we cannot hold the preparer responsible for incorrect answers given by taxpayers. Therefore, since there is no documentation available for this question (other than those that receive insurance through a Marketplace) there is nothing for you to document for tax year 2014.

My process for tax year 2014 is to simply ask the question, and enter the answer given.

Thanks Jack --- that eases my mind somewhat.

The main thing now is getting the "other" information from those clients so we can complete the 8695 form and related worksheets for those that say "no" to the question about full year coverage for them and dependents, etc.

According to the 8995 instructions (draft right now):

Even if you do not need to report or claim a coverage exemption, you will need to use the Shared Responsibility Payment Worksheet included in these

instructions to calculate the shared responsibility payment if you or another member of your tax household did not have minimum essential coverage or a coverage exemption for one or more months.