Tax Tips and Tidbits #7
Steven R. Anderson E.A.,
Master Tax Advisor, H&R Block, Pawling, NY
Before we get to this week’s discussion of the Affordable Care Act, here’s a tidbit for all the procrastinators out there: only 20 days left {from 3/29/16} until the filing deadline. This year, in NY, the filing deadline is Monday, April 18, 2016!
For the third and final part of our discussion on the ACA, we are going to talk about the Shared Responsibility Payment (SRP), or simply the penalty as most people are calling it.
- How is the SRP calculated?
- For 2015 the SRP is the greater of $325 per household member without insurance (dependents are only $162.50), or 2% of the household income. If you were only uninsured for part of the year, divide the SRP by 12 and multiply by the number of uninsured months.
- The SRP is reported on form 1040, line 61; 1040A, line 38; or form 1040EZ, line 11.
- Exceptions to the SRP. There are two types of exceptions to the SRP. Those granted directly on the tax return, and those granted through the marketplace.
- Tax Return Exemptions.
- i. Household or Gross Income below the Filing Threshold. If your household income or gross income is below $10,300 single, $13,250 head of household, $20,600 married filing jointly, or $4000 married filing separately, then you have an exception. Claim on form 8965, part II.
- ii. Unaffordable Coverage. If the lowest price coverage available costs more than 8.05% of your household income, you have an exemption. Claim on form 8965, part III, code A.
- iii. Short Coverage Gap. If you are uninsured for less than 3 consecutive months. Coverage on any day of a month counts as a whole month. Remember it must be less than 3 months, meaning 1 or 2 months. Claim on form 8965, part III, code B.
- iv. Incarceration. Claim on form 8965, part III, code F.
- v. Household Member Born or Died, or Adopted. This exemption is good for any month to which it applies. Claim on form 8965, part III, code H.
- Market Place Exemptions. To claim these exemptions, you need to submit an application to the marketplace, provide the necessary proof, and record the exemption number on form 8965. The exemptions are good for the month before the hardship, the duration of the hardship, and the month after the hardship.
- i. Homelessness. The taxpayer was homeless.
- ii. Eviction/Foreclosure. The taxpayer is facing eviction or foreclosure. Provide a copy of the notice.
- iii. Utility Shut Off. Taxpayer receives a shut off notice from a utility company. Provide a copy of the notice.
- iv. Domestic Violence. The taxpayer was a victim of domestic violence. This includes children of taxpayers who experienced domestic violence.
- v. Death of a Close Family Member. Include a copy of the death certificate, coroner’s report, newspaper article, etc.
- vi. Disaster Victims. Taxpayers who experienced a fire, flood, or other human or natural caused disaster. Include a copy of the police or fire report, insurance claim, or other agency documentation.
- vii. Bankruptcy. Include a copy of the filing documents.
- viii. Unpaid Medical Expenses. Include copies of the unpaid bills.
- ix. Disabled or Aging Family Members. If the taxpayer experienced an increase in necessary expenses due to caring for an ill, disabled, or aging family member. Include copies of receipts for care.
- Tax Return Exemptions.
There are some other, less common exemptions. They are listed in the form 8965 instructions.
On a final note, I used the phrase “household” several times in this article. For ACA purposes, the taxpayer’s household includes anyone listed on the return: the taxpayer, spouse, and dependents. For example, if you live with your spouse, your 17 year old son, and you 26 year old daughter who as income over $4000, then your household for ACA purposes includes you, your spouse, and your son. Even though you daughter lives with you, she is her own household for ACA purposes.
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Tel: (845) 855-1241 · e-Mail: standerson@hrblock.com
