ACA’s Premium Tax Credit and Potential New Tax Forms
The Treasury Inspector General for Tax Administration completed an audit last year in order to assess how well the IRS is providing taxpayers with the tools and information they need to obtain minimum essential coverage (MEC) and the Premium Tax Credit (PTC). This audit was crucial, since The Affordable Care ACT (ACA) makes approximately fifty tax changes by either amending or adding to certain certain parts of the tax code. The report included a summary of 3 new forms the IRS is looking at implementing or releasing. Moreover, an overview of the Premium Tax Credit was provided as well which we believe will be useful for our readers.
What is the PTC or Premium Tax Credit?
The PTC is a refundable tax credit (that will be claimed on 2014 tax returns or provided monthly to a taxpayer’s health insurance company) that offsets a taxpayer’s health care costs. However, everyone doesn’t qualify for this tax credit.
Who Qualifies for the Premium Tax Credit (PTC)?
Taxpayers and families who do not have access to an affordable MEC plan through an employer, through the government (medicaid, medicare) and who earn less than 400% of the Federal poverty level will qualify. If an individual or family is making less than 2.5x the Federal poverty level set for 2013-2014, the individual or family may still qualify for lower copayments, deductibles and lower out of pocket costs. For example, an individual will qualify if they make less than $45,960. Families with 2 children who earn less than $62,040 will qualify. Here is chart to give you an idea of the FPL levels for 2013-2014:
New IRS Forms for ACA Implementation?
The IRS intends to provide outreach and education, update or create tax forms, update or create publications, and provide employee training so that IRS representatives can assist taxpayers so they can avoid any penalties associated with the ACA. Here are some of the new forms being created and proposed in order to implement the ACA:
- Form 8965, Reporting of Exemptions From Coverage – This form intends to report the exemption certificate to the IRS a taxpayer receives form the marketplace, or if individuals wants to apply for an IRS exemption. This is basically a way for taxpayers to tell the IRS that they do not need to maintain the MEC in order to avoid the penalty.
- Form 1095-A, Affordable Insurance Exchange Statement – This form will be sent by the Marketplaces to individuals or family members who qualify for an approved health insurance plan. Information on this written statement is sent to the IRS and it serves as proof that the individual met MEC guidelines and will not be hit with a penalty.
- Form 1095-B, Health Insurance Coverage Statement – This form will be sent by health insurance providers to individuals or family members who qualify for an approved health insurance plan. It serves as proof that the individual met MEC guidelines and will not be hit with a penalty.
These forms will be released sometime in May 2014, subject to public comments. Final versions will be released sometime in the first quarter of 2015.