During his first week in office, President Trump signed an executive order asking federal agencies to reduce the economic burden the Patient Protection and Affordable Care Act (ACA) puts on American citizens.
Unfortunately, this executive order is causing confusion. Many people are left wondering if fines will no longer be imposed or rules no longer need to be followed. Until the agencies impacted by this executive order publish their intent, act as though current laws are still in play. This includes:
- The requirement to have health insurance
- The requirement to pay a shared responsibility tax if you do not have continuous health insurance coverage
- The ability to receive a health insurance premium credit if you qualify
- Possible health insurance credits for qualifying small businesses
It’s important to realize that unless tax laws actually change, you are expected to follow the laws as they are currently written.
Under the current Affordable Care Act (ACA), all Americans must have health insurance. If you receive your health insurance through the ACA marketplace or from your employer, you will receive a Form 1095. This form is used as documentation that you have adequate insurance and is used for other ACA reporting and potential tax benefits.
What’s happening now
Prior to filing your tax return you should receive your Form 1095 and review it for accuracy. If you receive your health insurance through a state or federal marketplace you will receive Form 1095-A. Otherwise your version of the form will be either Form 1095-B or Form 1095-C. Unfortunately, some providers of the “B and C” versions of Form 1095 are still having trouble issuing the forms on time. Because of this, the IRS has issued a notice backing off on this “receive the form before you file” requirement. While you will still need to prove you have adaquate health insurance, the suppliers of the Form 1095-B and Form 1095-C were given until as late as March 2 to get the form out to you.
What to do
- If you have health insurance through a state or federal marketplace, you will receive a Form 1095-A. You should have already received this form, and you must have it prior to filing your tax return.
- If you receive health insurance through your employer, or another program that generates Form 1095-B or 1095-C, for 2016 only, you can still file a tax return without receiving the form. Just make sure you can prove health insurance coverage for you, your spouse, and your dependents for the year.
- Place Form 1095 in your tax files. Even though some Forms 1095-B and Forms 1095-C will be received later, you must still retain the form in your files.
- If you file your tax return and then discover an error in your reporting based on a Form 1095-B or Form 1095-C received after February 1, there is penalty relief from the IRS if you need to amend your tax return.
Remember, this applies to the 2016 tax year only. For the 2017 tax year, unless changed, you will be required to use a Form 1095 as proof of health insurance prior to filing your tax return.
A health reimbursement arrangement, or HRA, is a benefit plan you can offer to your employees to reimburse them for medical expenses that are not covered by an insurance plan. HRAs offer tax benefits, including the deductibility of contributions you make to your employees’ accounts. Since the Affordable Care Act (ACA) took effect, if you employed 50 or fewer workers, your ability to provide HRAs to your employees may have been limited. However, a law passed in December 2016 created a new type of HRA that you can offer if you do not provide group health insurance.
The 21st Century Cures Act allows “stand-alone” HRAs if the accounts meet funding and other requirements. These new HRAs allow you to help your employees pay for medical costs, such as the reimbursement of premiums for policies purchased on the healthcare exchange. In addition, the Act extends relief from the $100 per day penalty for prior arrangements that did not meet Affordable Care Act rules.
Please contact us for more information about this new employee benefit option. This discussion could be crucial given the uncertainty of future ACA rules.
Beginning this month, you can sign up for a new 2017 health insurance policy on the health insurance Marketplace. You can also change or renew the policy you purchased during the last enrollment period. Even if your current policy has an automatic renewal feature, you’ll want to verify that you’re getting the best deal, and that you are still eligible for the federal premium tax credit.
What if you didn’t sign up last winter and didn’t have health insurance coverage in 2016? You may owe a penalty on your 2016 federal income tax return. The penalty is calculated in one of two ways: as a percentage of your income, or on a per-person basis. You pay whichever is higher.
For 2016, the penalty is 2.5% of your annual household income, up to a maximum of the national average premium for a Bronze plan. The per-person penalty is $695 per adult and $347.50 per child under 18 (up to a maximum per-family penalty of $2,085).