To Maintain Eligibility for Advance Payments of the Premium Tax Credit, File ASAP

The IRS is sending letters to taxpayers who received advance payments of the premium tax credit in 2015, but who have not yet filed their tax return. You must file a tax return to reconcile any advance credit payments you received in 2015 and to maintain your eligibility for future premium assistance. If you do not file, you will not be eligible for advance payments of the premium tax credit in 2017.

If you receive Letter 5858 or 5862, you are being reminded to file your 2015 federal tax return along with Form 8962, Premium Tax Credit.  The letter encourages you to file within 30 days of the date of the letter to substantially increase your chances of avoiding a gap in receiving assistance with paying Marketplace health insurance coverage in 2017.

Courtesy of IRS

For more information contact Neikirk, Mahoney and Smith at 502-896-2999

Changes in Circumstances?

If you purchased 2016 health care coverage through the Health Insurance Marketplace, you may have chosen to have advance payments of the premium tax credit paid to your  insurance company to lower your monthly premiums. If this is the case, it’s important to let your Marketplace know about significant life events, known as changes in circumstances.

These changes – such as those to your income or family size – may affect your premium tax credit. Reporting the changes will help you avoid getting too much or too little advance payment of the premium tax credit.  Getting too little could mean missing out on premium assistance to reduce your monthly premiums. Getting too much means you may owe additional money or get a smaller refund when you file your taxes. If your income for the year turns out to be too high to receive the premium tax credit, you will have to repay all of the payments that were made on your behalf, with no limitation.   Changes in circumstances that you should report to the Marketplace include:

an increase or decrease in your income
marriage or divorce
the birth or adoption of a child
starting a job with health insurance
gaining or losing your eligibility for other health care coverage
changing your residence

For more information contact Neikirk, Mahoney and Smith at 502-896-2999

Three Tax Considerations during Marketplace Open Enrollment

From Neikirk, Mahoney & Smith, the IRS has just published some tips on the health insurance marketplace. When you apply for assistance to help pay the premiums for health coverage through the Health Insurance Marketplace, the Marketplace will estimate the amount of the premium tax credit that you may be able to claim.  The Marketplace will use information you provide about your family composition, your projected household income, whether those that you are enrolling are eligible for other non-Marketplace coverage, and certain other information to estimate your credit.

Here are three things you should consider during the Health Insurance Marketplace Open Enrollment period:

1. Advance credit payments lower premiums - You can choose to have all, some, or none of your estimated credit paid in advance directly to your insurance company on your behalf to lower what you pay out-of-pocket for your monthly premiums.  These payments are called advance payments of the premium tax credit or advance credit payments.  If you do not get advance credit payments, you will be responsible for paying the full monthly premium.

2. A tax return may be required - If you received the benefit of advance credit payments, you must file a tax return to reconcile the amount of advance credit payments made on your behalf with the amount of your actual premium tax credit.  You must file an income tax return for this purpose even if you are otherwise not required to file a return.

3. Credit can be claimed at tax time - If you choose not to get advance credit payments, or get less than the full amount in advance, you can claim the full benefit of the premium tax credit that you are allowed when you file your tax return. This will increase your refund or lower the amount of tax that you would otherwise owe.

For more information about open season enrollment, which runs through January 31, 2016, visit Healthcare.gov. You can also contact Neikirk, Mahoney & Smith PLLC at 502-896-2999, or through our website contact form.

How Your Income Affects Your Premium Tax Credit

shared by Neikirk, Mahoney & Smith, a CPA Firm

The Internal Revenue Service says you are allowed a premium tax credit only for health insurance coverage you purchase through the Marketplace for yourself or other members of your tax family. However, to be eligible for the premium tax credit, your household income must be at least 100, but no more than 400 percent of the federal poverty line for your family size. An individual who meets these income requirements must also meet other eligibility criteria. The amount of the premium tax credit is based on a sliding scale, with greater credit amounts available to those with lower incomes.  Based on the estimate from the Marketplace, you can choose to have all, some, or none of your estimated credit paid in advance directly to your insurance company on your behalf to lower what you pay out-of-pocket for your monthly premiums.  These payments are called advance payments of the premium tax credit.  If you do not get advance credit payments, you will be responsible for paying the full monthly premium. If the advance credit payments are more than the allowed premium tax credit, you will have to repay some or all the excess.  If your projected household income is close to the 400 percent upper limit, be sure to consider the amount of advance credit payments you choose to have paid on your behalf.  You want to consider this carefully because if your household income on your tax return is 400 percent or more of the federal poverty line for your family size, you will have to repay all of the advance credit payments made on behalf of you and your family members.     For purposes of claiming the premium tax credit for 2014 for residents of the 48 contiguous states or Washington, D.C., the following table outlines household income that is at least 100 percent but no more than 400 percent of the federal poverty line: Federal Poverty Line for 2014 Returns                                 100% of FPL                          400% of FPL One Individual           $11,490                               up to $45,960 Family of two            $15,510                               up to $62,040 Family of four           $23,550                                up to $94,200 The Department of Health and Human Services provides guidelines for residents of the 48 contiguous states and Washington D.C., one for Alaska residents and one for Hawaii residents. For purposes of the premium tax credit, eligibility for a certain year is based on the most recently published set of poverty guidelines at the time of the first day of the annual open enrollment period for coverage for that year. As a result, the premium tax credit for 2014 is based on the guidelines published in 2013. The premium tax credit for coverage in 2015 is based on the 2014 guidelines. For more information, you can spend hours digging through irs.gov or you can spend a half hour on the phone with one of the tax professionals at Neikirk, Mahoney & Smith at (502) 896-2999.