ACA EXEMPTION

[Max W]

There has been a lot of discussion about ACA, but there is barely any mention of the exemptions, either here or in the IRS info.  In order to properly fill in form 8965, an ECN (Exemption Certified Number) is required.  To obtain this number, one of 7 different application forms -depending on category -  has to be filed with the Health Insurance Marketplace in London, KY. They say that the response takes 10 to 14 days - assuming that the application is complete.

 

One application form - Unable to Afford Coverage - is about seven pages and requires much of the same information as a 433A. Documentation is also required.  If a client wants to claim an exemption, this will delay preparation of the return 2 or more weeks.

 

 

 

 

 

 

[ILLMAS]

Good post, let's not forget hardship exemption:

 

If any of the following circumstances apply to you, you may qualify for a “hardship” exemption from the penalty:

1. You were homeless
2. You were evicted in the past 6 months or were facing eviction or foreclosure
3. You received a shut-off notice from a utility company
4. You recently experienced domestic violence
5. You recently experienced the death of a close family member
6. You experienced a fire, flood, or other natural or human-caused disaster that caused substantial damage to your property
7. You filed for bankruptcy in the last 6 months
8. You had medical expenses you couldn’t pay in the last 24 months that resulted in substantial debt
9. You experienced unexpected increases in necessary expenses due to caring for an ill, disabled, or aging family member
10. You expect to claim a child as a tax dependent who’s been denied coverage in Medicaid and CHIP, and another person is required by court order to give medical support to the child. In this case, you don't have the pay the penalty for the child.
11. As a result of an eligibility appeals decision, you’re eligible for enrollment in a qualified health plan (QHP) through the Marketplace, lower costs on your monthly premiums, or cost-sharing reductions for a time period when you weren’t enrolled in a QHP through the Marketplace
12. You were determined ineligible for Medicaid because your state didn’t expand eligibility for Medicaid under the Affordable Care Act
13. Your individual insurance plan was cancelled and you believe other Marketplace plans are unaffordable
14. You experienced another hardship in obtaining health insurance

Applying for a hardship exemption

To apply for a hardship exemption, use this exemption form: Individuals who experience hardships (PDF). See instructions to help you fill out an exemption application (PDF).

How long a hardship exemption lasts

Hardship exemptions are usually provided for the month before the hardship, the months of the hardship, and the month after the hardship. However, the Marketplace may provide the exemption for additional months after the hardship, including up to a full calendar year.

• For a hardship exemption based on affordability, the exemption will be granted for the remaining months in the coverage year.
• For people ineligible for Medicaid only because a state hasn’t expanded Medicaid coverage, the hardship exemption will be granted for the whole calendar year.
• For people eligible for Indian Health Services, the hardship exemption will be granted on a continuing basis. It may be kept for future years without having to submit another application. This is true as long as there are no changes to your membership in a tribe or eligibility for services from an Indian health care provider.

[Lion EA]

In my ACA update class last night, the instructor showed the chart from page 2 of the Form 8965 instructions with 8 Exemptions Claimed on tax return only, 6 Granted by Marketplace only, and 4 that can be either.  In addition, the Income below filing threshold Exemption needs No Code See Part II.  All the Exemptions that can be Claimed on tax return (6+8=12) have the letter Codes to use listed in the chart.  The 6 Granted by Marketplace note Need ECN See Part I.  The instructor in another class said, "If you can't find an Exemption, you're not trying hard enough."  

[easytax]

There has been a lot of discussion about ACA, but there is barely any mention of the exemptions, either here or in the IRS info.  In order to properly fill in form 8965, an ECN (Exemption Certified Number) is required.  To obtain this number, one of 7 different application forms -depending on category -  has to be filed with the Health Insurance Marketplace in London, KY. They say that the response takes 10 to 14 days - assuming that the application is complete.

 

One application form - Unable to Afford Coverage - is about seven pages and requires much of the same information as a 433A. Documentation is also required.  If a client wants to claim an exemption, this will delay preparation of the return 2 or more weeks.

 

I will point any of my clients to where they can find/do these exemptions BUT in PA, insurance requires a license and I am a "tax practitioner" not an insurance agent -- my belief is I can point but cannot "do" fro them (outside of being their fingers on a keyboard). If they hire me to do the "paperwork"; I must bill accordingly as a "secretarial" type person --- of which my secretarial fee may start at $100.00 an hour).

 

It may be callous but taxes are one thing while the insurance (or exemptions) are a totally different matter.  (FULL disclosure --- all my current clients are done and ready as far as "ACA").

[Max W]

I will point any of my clients to where they can find/do these exemptions BUT in PA, insurance requires a license and I am a "tax practitioner" not an insurance agent -- my belief is I can point but cannot "do" fro them (outside of being their fingers on a keyboard). If they hire me to do the "paperwork"; I must bill accordingly as a "secretarial" type person --- of which my secretarial fee may start at $100.00 an hour).

 

It may be callous but taxes are one thing while the insurance (or exemptions) are a totally different matter.  (FULL disclosure --- all my current clients are done and ready as far as "ACA").

I fail to see where there is any conflict with helping someone apply for an exemption and state insurance sales requirements.  Each application form has an Appendix page where the client can appoint an authorized representative, akin to a POA.  

 

Charging for that service seems appropriate enough,especially for the hardship and unaffordability forms.  Most clients can probably navigate the other applications without help.  BTW, for Indian Tribes, the application only has to be made once and it is good for all future years.

[easytax]

I fail to see where there is any conflict with helping someone apply for an exemption and state insurance sales requirements.  Each application form has an Appendix page where the client can appoint an authorized representative, akin to a POA.  

 

Charging for that service seems appropriate enough,especially for the hardship and unaffordability forms.  Most clients can probably navigate the other applications without help.  BTW, for Indian Tribes, the application only has to be made once and it is good for all future years.

 

Basically by leaving the "secretarial" option for them to pay me I avoid any licensing concerns (I am looking at this similar to "unauthorized practice of law" - if it was a legal question) as I am filling out the exemption request papers at their guidance and not as anything else than a "keyboard operator".     CALL ME PARANOID - but I want to protect myself from any liability whereas the challenge would be to my expertise (tax, I know (insurance I know too but gave up that license) but tax is what I am doing - NOT insurance). Unfortunately in todays society --- perception by/from client is what gets you into court and I want to CLARIFY the perception in my favor.

 

            With upfront clarification (understanding on both sides) it helps keep honest people honest. Just like a lock on a door keeps a basically "honest" person - honest. Eliminate the misunderstanding/opportunity to misunderstand as much as possible and you will have fewer misunderstanding.

 

Sorry for being wordy --- I have strong feelings like this because basically the "UPL" (unauthorized practice law); to me is the legal profession protecting more business for themselves under the guise of "protecting" the consumer.  (THIS NOT MEANT TO BE POLITICAL) -- it is like government sticking their nose into everything when they really only need to be be/should be into the original things our founding fathers wanted the government limited to.

 

My opinion can be construed as "UPL" in many circumstances by me sharing it and being paid for my time or knowledge (and might be stated the same as an attorney) by since I am not an attorney, I would be in trouble.            Again, sorry for wordy --- long way to explain why even resemblance of "insurance licensing" "opinions, etc. are what I stay away from.

 

There are courts where we the people cannot represent ourselves or if certain entities in business, MUST have an attorney, etc.. It adds cost and confusion where it does not need to be.

 

   RANT over  (for now).      Enjoy the tax season.

[Terry D EA]

Here is what I am looking for. Is there a form to calculate and prove the 8% of income exemption. Looking at form 8965, section II is the place to claim this. However, how do we prove that? A separate calculation in a statement with the return and form 8965? Been looking hard and hope someone can clear the mud for me.

[jklcpa]

Here is what I am looking for. Is there a form to calculate and prove the 8% of income exemption. Looking at form 8965, section II is the place to claim this. However, how do we prove that? A separate calculation in a statement with the return and form 8965? Been looking hard and hope someone can clear the mud for me.

 

The instructions for the 8965 have the worksheets. Use the Affordability Worksheet and possibly the Marketplace Coverage Affordability Worksheet. Doesn't your tax software include some sort of worksheet that you would fill in?

[Max W]

Here is what I am looking for. Is there a form to calculate and prove the 8% of income exemption. Looking at form 8965, section II is the place to claim this. However, how do we prove that? A separate calculation in a statement with the return and form 8965? Been looking hard and hope someone can clear the mud for me.

For the 8% exemption, the taxpayer has to apply for an exemption. That Exemption number (ECN) would then go onto form 8965.  The 13 page application asks for financial information and substantiation. The Marketplace will determine if an exemption is granted. There are no calculations for the preparer to make. 

 

    • Unaffordable Coverage Options- People who would have to pay more than 8% of their household income (MAGI) for the lowest priced Marketplace Health Insurance after subsidies qualify for this exemption. or if employer insurance is unaffordable, costing more than 9.5% after employer contributions for self-only coverage, you will likely quality for this exemption. You must apply for this exemption. Remember that your MAGI is not your taxable income; it includes the amounts you invested into non-taxable savings accounts, income from Social Security, and educational expenses.

NOTE: If your employers coverage is considered affordable (less than 9.5% of your household income), you will not qualify for an exemption from the fee yourself, but your uninsured dependents will be. The fee is 1/12 the fee per month for each family member without coverage.

[jklcpa]

For the 8% exemption, the taxpayer has to apply for an exemption. That Exemption number (ECN) would then go onto form 8965.  The 13 page application asks for financial information and substantiation. The Marketplace will determine if an exemption is granted. There are no calculations for the preparer to make. 

 

    • Unaffordable Coverage Options- People who would have to pay more than 8% of their household income (MAGI) for the lowest priced Marketplace Health Insurance after subsidies qualify for this exemption. or if employer insurance is unaffordable, costing more than 9.5% after employer contributions for self-only coverage, you will likely quality for this exemption. You must apply for this exemption. Remember that your MAGI is not your taxable income; it includes the amounts you invested into non-taxable savings accounts, income from Social Security, and educational expenses.

NOTE: If your employers coverage is considered affordable (less than 9.5% of your household income), you will not qualify for an exemption from the fee yourself, but your uninsured dependents will be. The fee is 1/12 the fee per month for each family member without coverage.

 

Max W, that's interesting because it conflicts with these sources I've posted below. Was your post taken from research materials, forms, some other official source?  This kind of conflicting information will make for an even more difficult season.

 

The instructions to 8965, the IRS site on the exemption due to unaffordability, and the Marketplace all say that this exemption (code A) is to be claimed on the tax return, not granted by the Marketplace. Actually, the Marketplace says there are 2 options: that it can be claimed directly on the 2014 tax return, or the person can fill out an application for 2015 with links provided to the forms to be submitted.

Edited January 12, 2015 by jklcpa
had to fix links!

[Terry D EA]

The instructions for the 8965 have the worksheets. Use the Affordability Worksheet and possibly the Marketplace Coverage Affordability Worksheet. Doesn't your tax software include some sort of worksheet that you would fill in?

Judy,

 

I am way behind this year getting sample returns done through the software. I am using OneDesk and have asked the questions about worksheets and didn't get a clear answer yet. So, I will take some time this evening and look.

[Max W]

For the 8% exemption, the taxpayer has to apply for an exemption. That Exemption number (ECN) would then go onto form 8965.  The 13 page application asks for financial information and substantiation. The Marketplace will determine if an exemption is granted. There are no calculations for the preparer to make. 

 

    • Unaffordable Coverage Options- People who would have to pay more than 8% of their household income (MAGI) for the lowest priced Marketplace Health Insurance after subsidies qualify for this exemption. or if employer insurance is unaffordable, costing more than 9.5% after employer contributions for self-only coverage, you will likely quality for this exemption. You must apply for this exemption. Remember that your MAGI is not your taxable income; it includes the amounts you invested into non-taxable savings accounts, income from Social Security, and educational expenses.

NOTE: If your employers coverage is considered affordable (less than 9.5% of your household income), you will not qualify for an exemption from the fee yourself, but your uninsured dependents will be. The fee is 1/12 the fee per month for each family member without coverage.

I researched this issue and could not find any way to calculate the 8% on the tax return.  There is no work sheet for it. There is however, the marketplace exemption which has to be applied for. A look at the application form (https://www.healthcare.gov/fees-exemptions/exemptions-from-the-fee/) requires an extensive amount of information and documentation.

Is there something I may have missed, or has the IRS not yet provided the guidance for taking the exemption on the tax return (or perish the thought, made a mistake); or has ATX not yet provided a worksheet for it.?  Conclusion: As of today, the marketplace is the only way to get the exemption.

[jklcpa]

Max, I don't know!  The conflicting information is what is making this all so much more difficult. I can't answer about ATX, maybe someone else can chime in on that.  Is it showing that the 8962 and 8965 are fully functional, ready for filing, and not still in draft form?

 

My software has input screens that replicate the worksheets found in the form's instructions and will auto determine and fill in if code A is appropriate.  

[Terry D EA]

Judy as you said, the worksheets are with the IRS instructions that have "draft" all over them. There is a worksheet for calculating the 8% exemption and you need to know the bronze level for your State to calculate this. That is why I posted the link in my other post.

[Jack from Ohio]

I predict a record number of CP2000 forms will be issued for this tax year.  Income potential.

[TaxMan60601]

Totally agree with Judy here. I don't think there is any discrepancy in the info.

The IRS site says:

"Marketplace Exemptions

... If you claim the exemption on your return, you do not need an ECN from the Marketplace."

and a table below:

"Exemptions - Coverage is considered unaffordable - May only be caimed on the tax return"

Page last updated - 12-Jan-2015

 

I think, as usual , it is in the way it was written and in the way you read it. I would say "You must apply for this exemption" shall be read as "You must apply for this exemption (via your tax return)"

http://obamacarefacts.com/obamacare-mandate-exemption-penalty/

 

http://www.gpo.gov/fdsys/pkg/FR-2013-07-01/pdf/2013-15530.pdf- are these really final ones?

[Terry D EA]

You are correct. The exemption can be applied for through the Marketplace and if it was not, then it can be claimed on the tax return.

[Chowdahead]

You are correct. The exemption can be applied for through the Marketplace and if it was not, then it can be claimed on the tax return.

 

There are two types of exemptions.  One is Unaffordable Coverage.  The other is Hardship.

 

Unaffordable coverage is simple (I am speaking relatively here ). If the national average cost of a bronze level plan is more than 8% of household income, then it's considered unaffordable.  I believe, the 8965 in ATX tells me how much the national average cost of a bronze level plan is right  on the form.  This is calculated by the preparer and can be claimed right on the 8965.

 

Hardship exemption must be obtained through the state marketplace (or federal of no state marketplace exists) and it can be granted for a myriad of reasons (eviction, medical bills, etc).  This exemption must be applied for in advance and the marketplace will issue an ECN code to be entered on the 8965.

[easytax]

You are correct. The exemption can be applied for through the Marketplace and if it was not, then it can be claimed on the tax return.

 

 

There are two types of exemptions.  One is Unaffordable Coverage.  The other is Hardship.

 

Unaffordable coverage is simple (I am speaking relatively here ). If the national average cost of a bronze level plan is more than 8% of household income, then it's considered unaffordable.  I believe, the 8965 in ATX tells me how much the national average cost of a bronze level plan is right  on the form.  This is calculated by the preparer and can be claimed right on the 8965.

 

Hardship exemption must be obtained through the state marketplace (or federal of no state marketplace exists) and it can be granted for a myriad of reasons (eviction, medical bills, etc).  This exemption must be applied for in advance and the marketplace will issue an ECN code to be entered on the 8965.

 

Via an IRS ACA Webinar today, both are correct with the EXPLAINATION that all exemptions can be applied for; when DOING THE RETURN (you just need to complete the HHS form/application and mail it in, and then simply MARK PENDING on the tax return (8965) being submitted.  THIS IS WHERE the IRS sets aside the form when received and waits to process until the HHS either issues or does NOT issue the exemption --- THEN the ORS finishes processing the return and issues refund, etc.

 

If HHS application done before hand (typical answer time before tax season was about 4-5 weeks) you get processed when tax form submitted --- if HHS application applied for when tax return is filed --- who knows how long before the tax return gets the exemption matched between the IRS and HHS and then still needs to get IRS processed????

[Chowdahead]

Via an IRS ACA Webinar today, both are correct with the EXPLAINATION that all exemptions can be applied for; when DOING THE RETURN (you just need to complete the HHS form/application and mail it in, and then simply MARK PENDING on the tax return (8965) being submitted.  THIS IS WHERE the IRS sets aside the form when received and waits to process until the HHS either issues or does NOT issue the exemption --- THEN the ORS finishes processing the return and issues refund, etc.

 

If HHS application done before hand (typical answer time before tax season was about 4-5 weeks) you get processed when tax form submitted --- if HHS application applied for when tax return is filed --- who knows how long before the tax return gets the exemption matched between the IRS and HHS and then still needs to get IRS processed????

 

I don't believe the "Unaffordable Coverage" requires any paperwork for HHS.

 

However, I was wrong in that you can use the average national bronze level plan.  The average cost is only used to calculate the penalty.  You have to use actual cost to calculate the Unaffordable Coverage exemption, plus you have to factor in the subsidy.  So it's a real pain to figure out, and it's likely the client would have qualified if they had bothered to apply.

[easytax]

I don't believe the "Unaffordable Coverage" requires any paperwork for HHS.

 

However, I was wrong in that you can use the average national bronze level plan.  The average cost is only used to calculate the penalty.  You have to use actual cost to calculate the Unaffordable Coverage exemption, plus you have to factor in the subsidy.  So it's a real pain to figure out, and it's likely the client would have qualified if they had bothered to apply.

Correct.   My post should have clarified that even the exemptions shown in the charts that needed to be applied for ONLY from HHS  --- could also be applied for on the return but you would need to use the "pending" for the code and your return would be "held" until resolved, etc.

 

Yes, they also clarified in todays webinar that the average bronze was for the penalty but to figure the 8% you should use the most local bronze.

   Here is a URL to find the lowest bronze plan for each area by zip, etc.: https://www.healthcare.gov/taxes/tools/#bronzeplan

[jklcpa]

Correct.   My post should have clarified that even the exemptions shown in the charts that needed to be applied for ONLY from HHS  --- could also be applied for on the return but you would need to use the "pending" for the code and your return would be "held" until resolved, etc.

 

Yes, they also clarified in todays webinar that the average bronze was for the penalty but to figure the 8% you should use the most local bronze.

   Here is a URL to find the lowest bronze plan for each area by zip, etc.: https://www.healthcare.gov/taxes/tools/#bronzeplan

 

Easytax, have you been successful using that link on the Marketplace? I tried to plug in some hypothetical facts there when someone first linked to it and again just now, and I keep getting a message that my family information is incomplete, to go back and edit the entries. Maybe it is something specific only to DE or the particular zip code that I used that isn't working; I didn't try any others. Anyone else having luck?

[Gail in Virginia]

I just tried it, Judy and it seemed to work for me.  I put in my zip code, a taxpayer age 55 with a spouse age 50 and got a bronze plan rate of 686.90 per month. 

[easytax]

Easytax, have you been successful using that link on the Marketplace? I tried to plug in some hypothetical facts there when someone first linked to it and again just now, and I keep getting a message that my family information is incomplete, to go back and edit the entries. Maybe it is something specific only to DE or the particular zip code that I used that isn't working; I didn't try any others. Anyone else having luck?

 

Just now tried it 1706 hr. 01/23/2015 and it worked. Maybe it is just a glitch for that zip.

[jklcpa]

Well it's working for me in IE11 now but Firefox doesn't display the premiums. It goes to a page within the Marketplace having links to the 8965 and big buttons near the top to print or save as a pdf, and clicking those causes an error on the page with no other display, and that is totally different than when I tried it before.  My Firefox settings must be blocking the premiums being displayed. At least I can get to the information with the other browser.