Dropping Certain Clients - ACA Uninsured/Under Insured

[zeros]

In reading through the instructions and looking at the various ACA forms, it looks a little more complicated than I first realized.  If client has "full coverage" throughout the year, it appears to be quite straight-forward and no real problem.  But when that is not the case, where a client has no insurance or partial year coverage, it can get quite complicated, and filling out the forms, time consuming.  For sure, it would cost the client more in preparation fees for the time spent.  From a preparer point of view, I plan on giving notice to the non/under insured clients that I will not be preparing their return this year.  I know, kind of a radical decision and not sure how many clients this would affect, but being close to retiring from this business anyway, I think this is the right decision for me.  Probably most have full coverage.  Will save a lot of headaches.  Do you think the IRS will delay the implementation for one more year?

[Pacun]

I do returns from people who make less than 100K, so instead of charging them $100 extra, they should take the $95 penalty and not much digging to do. Don't fire your clients for something that's not their fault, just do your best.

[kcjenkins]

Just remember, it's not just $95.  The penalty is the greater of:

For 2014, $95 per uninsured person or 1 percent of household income over the filing threshold,

For 2015, $325 per uninsured person or 2 percent of household income over the filing threshold, and

For 2016 and beyond, $695 per uninsured person or 2.5 percent of household income over the filing threshold.

 

So a couple making $80,000 total, the penalty would be 1% of $60,000 or $600.  Not $190.  

[NECPA in NEBRASKA]

I just got a call today from a long time client saying that he wanted to stop using Sch C and only use the C-EZ form. I asked him why and he said that he didn't make as much this year as he had projected for his health care credits so he doesn't want to take his expenses. His reasoning was that some attorney on the Internet said that expenses are optional and that you can do whatever you want. I asked him what he wanted to do with the equipment that he was depreciating and his office in the home. I explained to him that I have to sign his return and that if I know that the return is incorrect, that I won't be signing it. I also explained that his messing around with expenses may cause him to get a larger EIC and I wasn't going to be part of that. He said that the return would not be incorrect. I asked him if all of his past returns were incorrectly filed and he did not have an answer. I may have to dump this guy, because I can't trust him. Next year, he will probably want to change back again. This is why I hate having everything dumped on a tax return. I know I'm just cranky, but if my husband wasn't sick, I would probably be looking for a different job and get out of this mess. 

[Ray in Ohio]

Just remember, it's not just $95.  The penalty is the greater of:

For 2014, $95 per uninsured person or 1 percent of household income over the filing threshold,

For 2015, $325 per uninsured person or 2 percent of household income over the filing threshold, and

For 2016 and beyond, $695 per uninsured person or 2.5 percent of household income over the filing threshold.

 

So a couple making $80,000 total, the penalty would be 1% of $60,000 or $600.  Not $190.  

 

I am under the impression that there is a maximum penalty of $285.00 per household for 2014. So the penalty in your example would be $285. Not the $600 (1% of income.)

 

Please correct me if I am wrong.

[Catherine]

Here in MA we've had health insurance non-coverage penalties for years.  They are a ROYAL pita; charts up the wazoo by county, by income, by family size, all needing to be cross-correlated.  Software doesn't do all those calculations very well (ATX didn't do them at ALL - I had to look up every piece separately on the MassDOR book that I downloaded; Drake at least is able to pull the county and income info over and you add in the family size since that can be [often is] different from the exemption number), so there is lots of do-it-by-hand nonsense.

 

Folks most likely to be hit are low income or those who had jobs and lost them and decided not to pay for COBRA coverage.  Plus in MA we also have a requirement for "minimum creditable coverage" so there are still folks who don't meet *that* criterion and get penalized.  Some do it every year, as the insurance they have is sufficient for their needs and the penalty is less than the step-up in coverage.

 

My recommendation is to buy your Motrin in the convenient 55 gallon drum package for next tax season.  Perhaps install a dispenser like the ones for gumballs/Skittles/M&Ms you still see in stores.

Edited October 18, 2014 by kcjenkins
To add emphasis [cause I loved it so much]

[Jack from Ohio]

As a tax professional, I have learned all that I can find, and continue taking seminars and teaching to be fully aware of how to handle ACA.  I will be charging more again this year, as everyone must file at least one additional form.  This is an opportunity for me, as a professional, to earn more money and show my worth as a professional.

 

In regards to the person who wants you to not claim certain expenses, dump him.  Plain and simple.

 

From the IRS person at the Chicago Forum: "The IRS will not be checking or following up on any taxpayers that answer the question about having proper coverage for 2014, UNLESS the taxpayer acquired insurance from one of the marketplaces (healthcare.gov, etc)."

 

Therefore, I will accept the answer from my clients on that question unless they received Form 1095 from their insurance company. There is no process in place for the IRS to verify for 2014.

[Lion EA]

My least favorite is the family size info.  If Mom has a child living with her but ex-husband claims the child and has child on his health plan, Mom has to have some info from Dad, right?  Or, Mom pays the penalty since child is in her household, right?  Makes for a new way for spouses to argue, stick it to one another, use the child, take more of our time.

[Tax Prep by Deb]

I am under the impression that there is a maximum penalty of $285.00 per household for 2014. So the penalty in your example would be $285. Not the $600 (1% of income.)

 

Please correct me if I am wrong.

I had this same question come up on a continued education exam and I answered the question the same as you that the maximum penalty would be $285 and that answer was marked correct. That is the way I read and understood as well.

[kcjenkins]

Ray and Deb, I sincerely hope that's right.  Still about three times the quoted $95, tho.

[MsTabbyKats]

I think 2014 will be relatively easy since insurance companies don't have to issue anything. So, if someone says they have insurance...once again...I am NOT the IRS police. It's the next year where exemptions and formulas kick in.

But...I am with OP. If it's too much headache....I'll drop.

I am giving an across the board increase this year...which I will explain as "increase of paperwork with decrease of support".

[Jack from Ohio]

Anyone in my area of Ohio wishing to drop clients due to ACA, feel free to send them my way.

[joanmcq]

I'm teaching a class on how to fill out the forms on the 28th, so I figure I better have a decent idea of how to do it by then. A way to increase billings....

[BulldogTom]

I'm teaching a class on how to fill out the forms on the 28th, so I figure I better have a decent idea of how to do it by then. A way to increase billings....

Damn, I would like to go to that class, but I am already taking a day off for an estate and trust seminar.  Why didn't you do this on a Saturday? 

 

Do you have room in the class for one more?  How much?  I might send my wife to this.

 

Can you post the details or do you want to have an offline discussion? 

 

you can contact me through the board if you want to go offline.

 

Let me know, I am interested.

 

Thanks,

 

Tom

Hollister, CA

[easytax]

I'm teaching a class on how to fill out the forms on the 28th, so I figure I better have a decent idea of how to do it by then. A way to increase billings....

 

Think WEBINAR!

 

As a person who does almost all with Webinars my perspective is that you can help more people, increase your business (both as tax pro and teacher) with not that much more work over giving a "class".

 

Costs can be very variable but you do not have to pay a lot to have a GREAT course --- after all, you have you -- that would be the biggest cost with the GREATEST benefit; the rest is just tech (easy stuff).

[zeros]

My plan is to send my mailer out at the beginning of the year and put an extra sheet in there advising the ones with no insurance or partial insurance that I will not be preparing their return this year.  If they come in anyway, hmmmm, not sure what I'll do,  Hide under my desk?

 

I would think that the lot of the EIC clients probably have no health insurance. Maybe get rid of two problems.

[easytax]

 

From the IRS person at the Chicago Forum: "The IRS will not be checking or following up on any taxpayers that answer the question about having proper coverage for 2014, UNLESS the taxpayer acquired insurance from one of the marketplaces (healthcare.gov, etc)."

 

Therefore, I will accept the answer from my clients on that question unless they received Form 1095 from their insurance company. There is no process in place for the IRS to verify for 2014.

 

Understood, the however there is --- what will the "program do"?   It is simple if the answer is yes --- continue moving on.  If "no", will the program move to the different forms to figure the penalty, etc. and if so, will they be "mandated" by the "program" to be used in order to e-file, etc.. Given there will be a LOT of entry and information gathering -- there almost MUST be an additional cost as there may be A LOT of additional time.

 

Just a different perspective.   Just like the IRS does not "bow to the courts" for use of what is done, said in divorce decrees, etc. --- a lot may depend on how our illustrious "programmers" read and understand (or not) what really needs to be done (hopefully by code and just not what is "understood", read, heard, or been stated in seminars, etc. by the IRS employees or presenters).  

 

Remember the IRS has specificially stated that you can not rely on their information (instructions, forms, regulations, etc. as the definitive answer or way to do things -- their words) but MUST rely on the "code" as written. ----- SCARY isn't it ....

[joanmcq]

Damn, I would like to go to that class, but I am already taking a day off for an estate and trust seminar.  Why didn't you do this on a Saturday? 

 

Do you have room in the class for one more?  How much?  I might send my wife to this.

 

Can you post the details or do you want to have an offline discussion? 

 

you can contact me through the board if you want to go offline.

 

Let me know, I am interested.

 

Thanks,

 

Tom

Hollister, CA

 

Damn, I thought I had replied to this.  The class is the Sacramento Chapter of CSTC's October dinner meeting, on the 28th.  Starts at 6pm.  one hour by me on filling out the forms, and an hour by Marc Zine, our IRS Practitioner's liaison.  I'm not sure what he'll be talking about.  Its at Mimi's Café on Alta Arden Way in Sacramento for anyone out there that might like to attend!

[SaraEA]

The shlared responsibility penalty for 2014 is $285 because it it limited to the monthly cost of a bronze plan, but I believe that is for each family member.

 

1.5000A–4 Computation of shared responsibility payment.

(a)In general.For each taxable year the shared responsibility payment is the lesser of—(1) The sum of the monthly penalty amounts for each individual in the shared responsibility family; or (2) The sum of the monthly national average bronze plan premiums for the shared responsibility family.