Tax 101: ACA compliance, step by step

January 19th was the start of the 2016 tax filing season, and Steven Siegel, J.D., LL.M., president of the Siegel Group, provided step-by-step instructions for preparers assisting individuals and employers in reporting compliance with the Patient Protection and Affordable Care Act (ACA). In a webinar presented by Wolters Kluwer Tax & Accounting, Siegel identified forms and offered tips for individuals and employers reporting ACA tax information including information about penalty exemptions and the advance premium tax credit. He cautioned that the ACA is a “moving target,” as the IRS continues to issue notices and frequently asked questions regarding the extension and modification of deadlines and requirements, and that his advice was current as of the presentation of the January 15th webinar.

Individuals. Three lines on IRS Form 1040 relate to ACA reporting requirements: line 61, relating to full-year health care coverage; line 46, relating to excess advance premium tax credit repayment; and line 69, relating to the net premium tax credit. Individuals who did not maintain full-year coverage must indicate whether they qualify for exemptions, as described on Form 8965. Siegel reminded preparers that some exemptions, such as a coverage gap of less than three consecutive months, can be claimed at the time of filing, but other exemptions, such as general hardship, must be claimed through the marketplace and require filers to submit an exemption certificate number (ECN).

Individuals who did not maintain full-year coverage and do not qualify for an exemption must calculate their shared responsibility payment by using worksheets listed in the Instructions for Form 8965. Determining eligibility for and claiming the premium tax credit requires preparers to complete Form 8962, which can be complicated, particularly if an individual has undergone a change in familial status, such as a divorce, marriage, or change in dependents due to birth or death.

Although they do not need to file the following forms, individuals should receive proof of coverage via: Form 1095-A, if they received health insurance through the marketplace; Form 1095-B, if they received insurance via a government program, outside the marketplace, or received certain other coverage; or Form 1095-C, if they were self-insured through an employer. Siegel asked preparers to consider whether they trust their clients enough to rely on their statements that they had coverage during the year.

Employers. Siegel noted that the IRS extended the deadline for large employers to issue Forms 1095-B and 1095-C to employees from February 1, 2016, to March 31, 2016, and for filing the related transmittals of that information to the IRS on Forms 1094-B and 1094-C from February 29, 2016, to May 31, 2016, and from March 31, 2016, to June 30, 2016, if filing electronically.

In line 16 of Form 1095-C, employers must indicate that an employee had coverage or that the employer was not required to provide coverage for a legitimate reason, such as the fact that the employee was not employed during any day of a month or that the employee worked part-time; employers can also list IRS Code Section 4980H safe harbor protections noted in the IRS Notice, 2012-58.

Siegel emphasized that the IRS has indicated that it is willing to give first-time filers the benefit of the doubt with respect to errors in forms, but could not guarantee this was the case.

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