One of the big changes income tax filers and tax preparers will face when they file their taxes next year has to do with the health care insurance requirement under the Affordable Care Act and whether they will pay a penalty for not having it.
Contrary to what some people think, not everyone who does not have the required health insurance this year will have to pay a tax penalty when filing their 2014 taxes.
Some may qualify for an exemption to reduce or eliminate their Affordable Care Act tax penalty..
In fact there are more than 30 exemptions you can apply for that fall into two categories.
People with incomes so low they're exempt from filing a tax return or those for whom the lowest-priced coverage costs more than 8 percent of their household income are some.
A recent survey shows that almost half of Americans are unaware they are required to report their health insurance status on their upcoming 2014 tax returns.
The Intuit TurboTax Health Survey, conducted online by Harris Poll, among over 2,000 U.S. adults over the age of 18, shows Americans are still largely unaware of the connection between their health care and taxes, a news release states.
Fifty-six percent were unaware of the tax penalty exemptions, while nearly half (45 percent) did not know about tax credits that allow those eligible to lower their insurance premiums, the survey showed.
Moreover, while 62 percent of uninsured Americans are aware that those without any health insurance will be required to pay a penalty, 87 percent do not realize that the deadline to avoid a tax penalty for 2014 has passed.
These numbers indicate that even with open enrollment (for 2015) in full swing many Americans still do not know the correlation between their health care and taxes,
There is confusion among tax preparers, the government and the Internal Revenue Service.
Theoretically, everything is set, But I'm expecting people to get notices.
Taxpayers may have to respond to the notices, and tax refunds may get held up, he said.
IRS spokesman Michael Dobzinski said most taxpayers will simply have to check a box to indicate they have appropriate coverage for the year.
The Affordable Care Act sets up a system of third party information reporting to the IRS and does not require taxpayers to submit documentation of health coverage with their tax returns; however, as always, taxpayers are responsible for the accuracy of the information on the tax returns that they sign.
Tax preparers should follow their normal due diligence in determining if their client has appropriate health coverage, Starting next year, insurers and certain employers will send reports on health coverage to the taxpayer and the IRS.
Meanwhile, some of those exemptions from the health insurance penalty are easier to claim. Others are more involved.
Exemptions can be claimed while filing an income tax return or through the health insurance marketplace/exchange.
If the exchange grants the exemption, it will generate an exemption certificate with a number that should be included on IRS Form 8965, to go with the income tax return.
According to the IRS, some of these exemptions can be claimed either during tax time or through the exchange. Some can be granted only through the exchange.
Exemptions that can be claimed on the tax return would cover some of the following people:
Those who had health insurance coverage by May 1, 2014.
Those whose household income is below the minimum filing amount. According to the IRS that threshold for 2014 is $10,150 for single taxpayers and $20,300 for married taxpayers who file a joint return.
Some of those eligible for exemptions granted by the health exchange/ marketplace include:
A member of a religious sect with objections to insurance and those who have experienced a hardship in 2014.
Those who meet one of the 15 hardship exemption criteria. Some of those include those who experienced homelessness, eviction, foreclosure, bankruptcy, or those who were denied Medicaid and live in state that did not expand Medicaid, such as Florida.
"The more difficult exemptions will be hardship exemptions that require documentation like utility shut-off, eviction or foreclosure notices or death certificates, for example," Mertes said.
The process is also more complicated, Mertes explained. It requires a taxpayer to submit a paper application to the Department of Health and Human Services (HHS). HHS will then provide the taxpayer with a number to enter on their tax return, he said.
Hardship applications with HHS should be done early in the tax season in order to meet the April 15 tax filing deadline. If a taxpayer doesn't receive their confirmed application number before April 15, they will have to file their return without the hardship exemption and complete an amended return after they receive the number,
To get full information on penalty exemptions, including how to apply for them, go to healthcare.gov/exemptions.
Another misconception people have is amount the amount of tax penalty for the first year.
You may have heard that the penalty the first year is 'just $95, That's only partially true.
It's actually whichever amount is greater: $95 per adult member of the household ($47.50 for dependents under 18) or 1 percent of household taxable income less the minimum filing amount.
Many people will be surprised by this year.
Showing posts with label health care. Show all posts
Showing posts with label health care. Show all posts
Sunday, December 28, 2014
Monday, September 22, 2014
Health Care Costs And Retirement Planning
Over the last month, I have had several people who are planning for retirement come to me with one burning question, “How much will my health care cost?” I have also heard on numerous occasions, and with a weary tone, “Who can retire these days with the cost of health care?” We are all well aware of the effect that rising health care costs are having on our population, and as a result, the Medicare and Medicaid system in general. This is drastically affecting current retirees and, as we commonly refer to them, the baby boomers, who will be (and are already) retiring in droves over the next 10 to 15 years. But, even if you’re not in that category, I would suggest that you keep reading because these points will likely have even more affect on you and your family over your lifetime, and it’s never too early to start planning for them.
According to the Center for Medicare and Medicaid Services, “health spending is projected to grow at an annual rate of 5.8 percent from 2012-2022, 1.0 percentage point faster than expected annual growth in the Gross Domestic Product (GDP)1.” For retirees, many of whom are on a fixed income, this could ultimately mean substantial reductions to their retirement income and purchasing power.
To make the matter worse, when it comes time to enroll in Medicare (most individuals are eligible upon reaching age 65) the complexity of available options is overwhelming. Between Medicare (Part A, Part B and Part D) and Medicare Supplement (which range from Plan A to Plan N), understanding the choices is not easy.
Medicare Part A covers (up to certain limits): hospital care, skilled nursing care, nursing home care, hospice and home health services. Part A is typically provided at no cost because you (or your spouse) have already paid premiums through payroll deductions while you were working. Part B covers medical insurance, such as doctors’ services and outpatient care. Most individuals pay a monthly premium for Part B. Lastly, Part D covers prescription drug coverage, and also requires a monthly premium. Your premium costs will depend on your MAGI, which is the total of your adjusted gross income (AGI) and tax-exempt interest income (if you’re interested, pull up SSA publication No. 05-10536, which explains this in enough detail to make your eyes water).
To help cover any gaps that exist in coverage, insurance companies offer Medicare supplement or Medigap policies. These policies help cover copayments, coinsurance, deductibles or both. These plans range in benefits and are distinguished by a letter in the alphabet (plans A through N). Learn more here: http://www.medicare.gov/supplement-other-insurance/compare-medigap/compare-medigap.html
The costs for all these coverages are also rising dramatically. According to the 2012 and 2013 Medicare Board of Trustees Report, premiums have increased annually by an average rate of 7.87 percent for Part B; 7.12 percent for Part D; and 5 percent for Medigap insurance.
Out-of-pocket costs may include dental care, vision, hearing and medication costs not covered by the average prescription drug plan. Keep in mind that long-term care expenses are not covered by any of the Medicare or Medigap programs. We have a separate tool that helps us plan for the effects that long-term care expenses can have on your financial plan. There are also long-term care insurance products available, but that is a discussion for another day.
In summary, rising health care costs are likely to have a profound effect not only on retirees, but on our nation as a whole. One way we can better prepare ourselves is to plan for these costs and account for them in our financial plans. One phrase we throw around often is, “People don’t plan to fail, they fail to plan.” We cannot control what the government is going to do, where taxes will be in the future, or where health care costs will be when we retire, but if we sit down and make reasonable assumptions and plan for the unexpected, not only will we be better off as families, but we will be better off as a community and a nation.
According to the Center for Medicare and Medicaid Services, “health spending is projected to grow at an annual rate of 5.8 percent from 2012-2022, 1.0 percentage point faster than expected annual growth in the Gross Domestic Product (GDP)1.” For retirees, many of whom are on a fixed income, this could ultimately mean substantial reductions to their retirement income and purchasing power.
To make the matter worse, when it comes time to enroll in Medicare (most individuals are eligible upon reaching age 65) the complexity of available options is overwhelming. Between Medicare (Part A, Part B and Part D) and Medicare Supplement (which range from Plan A to Plan N), understanding the choices is not easy.
Medicare Part A covers (up to certain limits): hospital care, skilled nursing care, nursing home care, hospice and home health services. Part A is typically provided at no cost because you (or your spouse) have already paid premiums through payroll deductions while you were working. Part B covers medical insurance, such as doctors’ services and outpatient care. Most individuals pay a monthly premium for Part B. Lastly, Part D covers prescription drug coverage, and also requires a monthly premium. Your premium costs will depend on your MAGI, which is the total of your adjusted gross income (AGI) and tax-exempt interest income (if you’re interested, pull up SSA publication No. 05-10536, which explains this in enough detail to make your eyes water).
To help cover any gaps that exist in coverage, insurance companies offer Medicare supplement or Medigap policies. These policies help cover copayments, coinsurance, deductibles or both. These plans range in benefits and are distinguished by a letter in the alphabet (plans A through N). Learn more here: http://www.medicare.gov/supplement-other-insurance/compare-medigap/compare-medigap.html
The costs for all these coverages are also rising dramatically. According to the 2012 and 2013 Medicare Board of Trustees Report, premiums have increased annually by an average rate of 7.87 percent for Part B; 7.12 percent for Part D; and 5 percent for Medigap insurance.
Out-of-pocket costs may include dental care, vision, hearing and medication costs not covered by the average prescription drug plan. Keep in mind that long-term care expenses are not covered by any of the Medicare or Medigap programs. We have a separate tool that helps us plan for the effects that long-term care expenses can have on your financial plan. There are also long-term care insurance products available, but that is a discussion for another day.
In summary, rising health care costs are likely to have a profound effect not only on retirees, but on our nation as a whole. One way we can better prepare ourselves is to plan for these costs and account for them in our financial plans. One phrase we throw around often is, “People don’t plan to fail, they fail to plan.” We cannot control what the government is going to do, where taxes will be in the future, or where health care costs will be when we retire, but if we sit down and make reasonable assumptions and plan for the unexpected, not only will we be better off as families, but we will be better off as a community and a nation.
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