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SEPTEMBER 23, 2014
BY MICHAEL COHN
The Internal Revenue Service has issued new draft instructions, notices and a publication to help taxpayers and tax practitioners deal with the Affordable Care Act.
The draft instructions were released last week for Form 8962,, “Premium Tax Credit,” and Form 8965, “Health Coverage Exemptions.” The IRS had previously released draft versions of the forms themselves, both 8962 and 8965, along with draft instructions for several other draft forms for the Affordable Care Act (see IRS Gears up for Impact of Health Care Reform on Tax Season).
“They are still draft, but in the world of today’s technology and computer-based tax preparation, early drafts—and even more important—the instructions to the drafts, are very important and pretty much the way it will ultimately shake out,” said Jackson Hewitt chief tax officer and senior vice president Mark Steber.
The IRS also released last month a one-page publication to help taxpayers find out if they qualify for an exemption from the individual mandate for health coverage or from paying a penalty. Publication 5172, Health Coverage Exemptions includes information about how you get an exemption (see IRS Publishes Guide to Health Coverage Exemptions). The Affordable Care Act calls for each individual to have qualifying health insurance coverage for each month of the year, have an exemption, or make an individual shared responsibility payment when filing their federal income tax return, the IRS said Tuesday.
Taxpayers may be exempt if they have no affordable coverage options because the minimum amount you must pay for the annual premiums is more than eight percent of your household income, have a gap in coverage for less than three consecutive months, or qualify for an exemption for one of several other reasons, including having a hardship that prevents you from obtaining coverage or belonging to a group explicitly exempt from the requirement.
On www.IRS.gov/ACA, taxpayers and practitioners can find a comprehensive list of the coverage exemptions. The IRS noted that taxpayers can obtain some exemptions only from the health insurance marketplace in the area where they live, others only from the IRS when you file your income tax return, and others from either the marketplace or the IRS.
Additional information about exemptions is available on the Individual Shared Responsibility Provision web page on IRS.gov. The page includes a link to a chart that shows the types of exemptions available and how to claim them. For additional information about how to get exemptions that may be granted by the marketplace, visit HealthCare.gov/exemptions.
Last week, the IRS also issued several notices related to the Affordable Care Act, Notice 2014-49 describes a proposed approach to the application of the look-back measurement method, which may be used to determine if an employee is a full-time employee for purposes of Section 4980H of the Tax Code, in situations in which the measurement period applicable to an employee changes.
Notice 2014-55 expands the permitted election rules for health coverage under a Section 125 cafeteria plan and addresses two specific situations in which a cafeteria plan participant is permitted to revoke his or her election under the cafeteria plan during a period of coverage. The first situation involves a participating employee whose hours of service are reduced so that the employee is expected to average less than 30 hours of service per week but for whom the reduction does not affect the eligibility for coverage under the employer’s group health plan. The second situation involves an employee participating in an employer’s group health plan who would like to cease coverage under the group health plan and purchase coverage through a competitive health insurance marketplace established under the Affordable Care Act.
Notice 2014-56 provides the applicable dollar amount that applies for determining the Patient-Centered Outcomes Research Institute fee for policy years and plan years ending on or after October 1, 2014 and before September 30, 2015. This notice applies to health insurance providers.
Jackson Hewitt is already finding the draft forms and instructions useful in training its preparers for what to expect next tax season, according to Steber.
“The IRS was not historically prone to releasing draft documents, but they recognized the sooner that they get that information into the hands of the tax industry, the software development industry and public media at large, the better people are able to understand it and communicate open issues,” said Steber. “For example, we’ve noted a mistake in the instructions already. It’s a period of refinement, but the IRS is very careful to say, ‘Draft—Not for Filing.’ There will be some period of correction and towards the end of the year they’ll issue the finals. But they do tell a great story of how the new Affordable Care Act rules will work, some of the nuances in terms of what the shared responsibility payment computation will look like, the Premium Tax Credit reconcilement and those things. The drafts, even though they say ‘draft,’ cannot be overemphasized in terms of their importance to tax preparers to understand what it all really means when tax time comes.”