Navigating Premium Tax Credit Reconciliation: ADAP Policies & Best Practices Xa Xavior Robin inson an and Emily ly McC cCloskey, NA NASTAD August 19 19, , 20 2015 15
Participant Considerations Phone lines • Lines will be muted until dedicated question time • Please do not put your call on hold Verbal Questions • Please wait until the Q & A section to ask questions on the phone • Please identify yourself when asking a question or providing a comment Written Questions • Participants have the ability to submit written questions during the webinar using the “ Chat ” function Webinar Hyperlinks • Participants can access resources addressed in webinar using hyperlinks • Webinar Presentation Slides Evaluation • Following the webinar, participants will have the opportunity to complete a brief survey to provide feedback on the webinar
Webinar Overview 1) HRSA/HAB Policies on Tax Reconciliation 2) Review Premium Tax Credit Basics 3) Assessing Reconciliation Documents 4) Case Studies 5) Insight from ADAPs Colorado Iowa 6) Question and Comments
HRSA/HAB ACA Policies on Tax Reconciliation • Ryan White program grantees and sub-grantees must vigorously pursue any excess premium tax credit a client receives from the Internal Revenue Service (IRS) upon submission of the client’s tax return o Recovered excess premium tax credit refunds are not considered program income. Grantees must use recovered excess premium tax credits in the Health Insurance Premium and Cost-sharing Assistance service category in the grant year when the refund is received by the grantee or sub-grantee.
HRSA/HAB ACA Policies on Tax Reconciliation • NEW PCN 14-01 and Frequently Asked Questions: o HRSA will allow RWHAP grantees to cover client tax liabilities associated with an overpayment of the premium tax credit. o The payment to the IRS must be made from funds available in the year when the tax liability is due, even if the premiums that generated the tax liability were incurred in a previous funding year. o Programs are responsible for establishing and maintaining policies and procedures for coordinating payments to the IRS ( direct payments to clients are prohibited ). o Programs may only pay the amount directly attributed to the reconciliation of the premium tax credits; under no circumstances can Ryan White Program funds be used to pay the fee/penalty for a client’s failure to enroll in minimum essential coverage.
Review of Premium Tax Credit Basics
Quick Review: Premium Tax Credit (PTC) Eligibility 1. To enroll in an Marketplace Qualified Health Plan you must be: • Citizen or lawfully present • Not incarcerated • (except if pending disposition of charges) – Resident of the service area of the Marketplace 2. Have income between 100 and 400 percent of the federal poverty line based on Modified Adjusted Gross Income (MAGI) 3. Be eligible to file taxes (or included as a dependent) 4. Be ineligible for other minimum essential coverage (MEC), which includes most public and employer-sponsored coverage Best Practice: Align ADAP enrollment/recertification with MAGI
Quick Review: Determining PTC Amount Click icons below for pertinent calculations Source: Center on Budget and Policy Priorities
Quick Review: PTC Advance vs. Lump Sum Advance : Lump Sum: • Premium Tax Credit • Individuals responsible paid directly to the for paying QHP Qualified Health Plan premiums monthly (QHP) issuer monthly. • Individuals receive PTC PTC is distributed as a lump sum upon evenly throughout the filing federal taxes benefit year • Individuals responsible Best Practice: Require clients to accept the for remaining monthly PTC as an advance premium balance
Quick Review: Life Cycle of Premium Tax Credits Best Practices: Encourage clients to file taxes • Prioritize tax filing documents • for ADAP enrollment and recertification
Quick Review: Lifecycle of Premium Tax Credits 2012 2013 2014 2015 Client files Client earns Client files Client taxes and income taxes and receives PTC reconciles generates a based on a projected MAGI for the projection of MAGI with 2012 tax their income actual MAGI year based on earned in 2012 MAGI Best Practices: 2014 Encourage clients to report changes • in income and life circumstances to Tip: the Marketplace Click here to view a list of documents Develop process to iteratively check- • that can be used as proof of income to in with clients regarding changes in the Marketplace (listed under Income ) income or life circumstance
Assessing Tax Reconciliation Documents
Three Key IRS Forms IRS Form Purpose Origin 1095-A – Health Statement of covered Marketplace Generated Insurance Marketplace individuals and amount Statement of monthly APTC sent to QHP(s) 8962 – Premium Tax Reconciles projected Publically Available Credit APTC with actual PTC due to client 1040 – U.S. Individual Individual/family tax Publically Available Income Tax Return filing document Best Practice: Collect these forms from clients enrolled in Marketplace QHPs •
IRS Form 1095-A Health Insurance Marketplace Statement • Sent to anyone deemed eligible for the PTC • Statement of covered individual(s) and • amount if APTC sent to QHP(s) monthly Generated by the Marketplace •
Best Practice: Confirm recipient identification information
IRS Form 8962 • PTC Form • Used to reconcile projected APTC with actual PTC owed to client • Publically available
Lady Gaga 123456789 Quick Tip: Boxes 1 through 5 determine the amount of premium tax credit a person was eligible for based on MAGI Quick Tip: Line 26 will tell you if the person will receive a refund from the IRS Quick Tip: Line 29 will tell you if the person owes an amount to the IRS
Lady Gaga 123456789 Best Practice: For individual clients, use line 26 to vigorously pursue funds owed to ADAP Best Practice: Explore opportunities to assist clients with this liability listed in line 29
IRS Form 1040 • U.S. Individual Income Tax Return • Can be used to file individual or family taxes • Publically available
Tip: Full-year coverage should be checked and Line 61 should be ‘0’ for clients who were enrolled in an ADAP supported QHP for the ENTIRE tax year. Tip: RWHAP funds cannot be used to satisfy tax liabilities related to individual shared responsibility payment
The information a person includes on Form 8962 will be used to indicate whether that person is owed a refund or owes the IRS money because of an advance premium tax credit overpayment. Tip: The amount listed on Line 46 on IRS Form 1040 should be equal to Line 29 of IRS Form 8962 Tip: The amount listed on Line 69 on IRS Form 1040 should be equal to the amount listed on Line 26 of IRS Form 8962
Additional Tax Filing Information
Repayment Amounts Are Capped Based on Income Income Single filers All other filers < 200% FPL $300 $600 At least 200% FPL $750 $1,500 and < 300% PFL At least 300% FPL $1,250 $2,500 and < 400% FPL 400% FPL and N/A N/A greater Tip: Recent IRS guidance waives penalties for late payment and underpayment of owed taxes; the underlying tax liability due to advance premium tax credit overpayments owed to the IRS is not waived
How Much Will Repayments or Refunds Be? Estimated Average Amount of Repayment or Refund Annual 2013 income (% FPL) Average Average Refund Repayment 100% to < 200% FPL $667 $412 200% to < 300% FPL $886 $1,016 300% to 400% FPL $1,380 $1,601 All (100-400% FPL) $794 $773 Source: Kaiser Family Foundation, Estimated Average Amount of Repayment or Refund among tax households owing repayment or receiving a refund
Case Studies
Change in Income
Taxpayer Murray
Murray • When Murray applied for 2014 Marketplace coverage with advance premium tax credits (APTC) in October of 2013, his MAGI was $27,000 (235% FPL) o Murray gets $865 in APTC/annually • BUT, Murray changed his job mid-way through the year and failed to report this to the Marketplace o When Murray files his taxes, his MAGI ends up being $11,000 (95% FPL) • Note: Murray lives in a non-Medicaid expansion state • Special rule : because Murray was eligible for APTCs when he applied, he is actually owed a refund (he expected contribution is 2% of his annual income) o Murray is entitled to APTC of $2,724/annually Murray will get a refund from the IRS in the amount of $1,859
Determining Refund Amount
Determining Refund Amount IRS Form 8962 $1,859
Form 1040
Considerations for Families
Considerations for Families • If a client is filing a joint tax return, but enrolled as an individual in a health plan o Each spouse will receive a Form 1095-A, which will delineate how the APTC was allocated across the plans
Considerations for Families • After determining the refund or repayment amount for the family, you must calculate the client’s refund or repayment APTC for Client: $ 700 APTC for Spouse: $1200 Total APTC: $1900 Client received 37% of APTC for the Family
Considerations for Families Total Refund: $2000 Client share of APTC: x 37% Client Share of refund: $736
Considerations for Non-filers
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