Marketplace Exemptions tax year 2014

[Jack from Ohio]

        1. Is it possible to go to the Marketplace and obtain an exemption for tax year 2014? 

I have a client who is insisting that she is eligible for a hardship exemption.  This must be obtained from the Marketplace. 

Her 2014 tax return was filed with an amount due and she sent payment LESS the amount of shared responsibility payment.  This was April 10, 2015.  She just received a notice for the amount due for her Shared Responsibility Payment.  She did NOT get the exemption from the Marketplace.  I will need to call her about this and cannot find any information about obtaining an exemption in arrears. 

I want to be sure of my information before I call her.

On the same note with the same client: 

           2. When applying for insurance through the Marketplace, is affordability based solely on income, or do tangible assets come into play?  

This lady was divorced in June 2014.  She received $638K from hubby's retirement accounts.  She paid the taxes on the taxable portion took $250K and built a house AFTER the divorce.  She still has about $400K left.  I do not know where the monies are.

She want to plead that COBRA is unaffordable, unable to pay medical expenses in the last 24 months as well as divorce in 2014 as her hardship. 

Information from anyone with experience in these matters would be greatly appreciated.  As usual, she blames us for not documenting things correctly. 

 

[B. Jani]

The way I understand it that she should have applied for the exemption from market place before filing the return. I am not sure weather it will work now as she signed the tax return with shared responsibility. I would suggest she goes to market place and try to file for exemption. if the system allow, she will get the confirmation and you can amend it. if system does not allow then probably she has to deal with IRS. I am sure she did NOT mention this before when you completed the return.

Hope this helps.

[Tax Prep by Deb]

With that much money, I do not see hardship at all.

 

[BulldogTom]

With that much money, I do not see hardship at all.

 

​I don't think I see anywhere in the code or regs that the testing for affordability is wealth based.  It all seems to be income based in my reading.  So, I could have a million bucks in the bank, and still qualify for the subsidies because my job working seasonally at the ski resorts does not meet the 400% poverty level.  That is the way I read it.

Just my 2 cents.

Tom

Newark, CA

[Gail in Virginia]

Tom, I read it the same way BUT it sounds like she had $638K in income, and even after taxes had $250K left to build a house.  Now maybe you don't think $638,000 sounds like a lot of income but it does to me.  Now had she not taken it as a distribution and paid the taxes on it, and it was sitting there waiting for her retirement, I don't think it would have been income and caused a problem with ACA eligibility. 

[Tax Prep by Deb]

Gail said it better than I could have.  I had a client this year who had to pay back the entire subsidy because she finally after three years won her social security disability fight and was awarded a lump sum.  This plus what her husband had to take out of his 401K to survive (was let go from his job) put them over the edge.  The 401k by itself would not have, neither would just the current years social security, but the lump sum including the previous two years did.

[BulldogTom]

Gail and Deb are correct for TY 2014.  But, in tax year 2015, she could have no income and qualify for medicare or if she has a job that pays less than 400% of the poverty level, she could get a subsidy, even with the 400K in the bank that could be used to pay for insurance.

That was the point I was trying (very badly) to make.

Tom

Newark, CA

[MsTabbyKats]

Is the $638K income......as in "taxable".....or something that would be taxable only when distributions are taken.?

i'm seeing this money as "wealth".

Edited June 19, 2015 by MsTabbyKats