ObamaCare

Tax Information About the Affordable Care Act

SOME Q&As REGARDING OBAMACARE also known as the AFFORDABLE CARE ACT

The first thing to know about Obamacare is that if you have health insurance AT WORK for at least nine months of the year–then you don’t need to think about this.   Let me be even more specific–you can’t get any “premium tax credits” if you get your health insurance through your employer.  Got it?  Okay, so if that applies to you, why are you still here, reading this page?  Go on, you’re wasting your time.  You don’t need to read any further.

So, now let’s continue on for those whose situations include not having insurance for the entire year.  I am going to do this in Q&A format.

Can I have a gap in my insurance during the year?

Yes.  You are allowed up to a 3 month gap in insurance once during each calendar year.  Also, note that any month you have one day of coverage counts for the full month.  Each time we prepare your taxes, we need to make sure you have health insurance.  If you have more than a three month gap, we either need to calculate a penalty or try to find a reason why you might be exempt from the penalty.

What’s the big deal, isn’t the penalty only $95 a year per person for not having health insurance?

No.  This is a rumor in the press.  In a few cases, the penalty can be that low, and then of course, it’s easier to just pay the penalty, but for many people the penalty could be more on the order of 1%-2% of Adjust Gross Income.  (For example, the penalty for $50,000 is $500-$1,000).  And the penalty is going up next year and the year after.  So, avoiding the penalty is going to be a big deal.  Also, the penalty calculation is very complex and is something that I expect as a preparer to start to work with during tax season as more and more clients expose me to different scenarios.

My income was pretty low this past year (or it is going to be low in the upcoming year), how do I get the health care tax credit?

Okay–LISTEN UP!  The only way to get a tax credit is to buy insurance through a “healthcare exchange”.  Here in Massachusetts, this is called the Mass Health Connector.  Frankly, if you buy your own insurance, I see no reason why you shouldn’t buy your insurance via the Connector.  In order to access Blue Cross/Blue Shield, Harvard Community Health Plan, Tufts, etc.  you must NOT check the box that you want a state subsidy.  If you check the box that you want a state subsidy, you will be limited to the five Commonwealth Connector plans.    I find these five plans are, well, kind of lousy, but they aren’t horrible and they sure are affordable–but your choice of doctors will be greatly limited.  Of the five plans, I recommend Neighborhood Health Plan, but feel free to do whatever research you want to do.

You can only buy insurance during open enrollment unless you have a qualifying event.  If you have questions about how this works, please feel free to reach out and contact me.

I am self employed and just pay for my insurance via a policy with Blue Cross Blue Shield.

I strongly recommend you take a look at buying through the Health Connector or your health exchange.

Okay, I didn’t have health insurance all year and it looks like I am subject to the penalty.  What do I do now?

This is something that we will need to investigate and see if we can come up with a reason to minimize the penalty that you might be assessed.

Is this going to affect the cost of my tax preparation?

Sadly, yes.  If you need the penalty calculated or minimized, the calculations are so complex and the information gathering is so significant, that it will affect the cost of your taxes.  I think you will find this pretty consistent across all tax preparers.

I still don’t see why this can be so complicated.

Here’s a typical example:  Someone who isn’t working (and therefore isn’t required to get health insurance and is not subject to a penalty) gets married in June.  For the second of the year, they join their spouse’s health plan (Ah, the joys of married life!)  Now for the calendar year, their joint income is enough that this person should have had health insurance for the whole year.  But wait!  There should be a way to exempt for the first half of the year when they had no income.  There should be, shouldn’t there?  The IRS forms are very complex on how to do this.

I look forward to assisting anyone with Obamacare issues when they prepare their taxes.