2014 Tax Returns Required for 2016 APTC Eligibility

Aug 4, 2015

  1. Yagents
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    Yagents Guru

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    I think Allen brought this up before, but I see this as a big problem that is buried in each of our books (& prospects), and will show it's ugly head during OEP. This is stating that 40% of your ON exchange 2014 subsidized clients have not filed a 2014 tax return yet. There is no escaping that 40% number. Nothing like doing an app, to find out APTC is rejected. This may be next years version of "income verification debacle" we had this year.

    Note to self,Add to list of questions: did you file a 2014 tax return?

    Yahoo!

    Consumers who got health care tax credits are required to file tax returns that properly account for them, even if they are unaccustomed to filing because their incomes are low. Unless they follow through, "they will not be able to receive tax credits to help lower the cost of their health insurance for 2016," Lodes explained.

    Treasury officials said 1.8 million households are at risk of losing subsidies for next year, and that number breaks down as follows:

    —About 710,000 households that have not filed a 2014 tax return, although they were legally required to account for health insurance tax credits that they received.

    —Some 360,000 households that got tax credits and requested an extension to file their returns. They have until Oct. 15.

    —About 760,000 households that got tax credits and filed their tax returns omitted a new form that is the key to accounting for the subsidies. Called Form 8962, it was new for this year's tax filing season.

    "I think it was definitely confusing for people," said Elizabeth Colvin of Foundation Communities, an Austin, Texas, nonprofit that helps low-income people with health insurance and taxes. "It could have been worse, quite honestly. I think a lot of tax preparers didn't know how to do these (forms) either."

    The 1.8 million households with tax issues represent 40 percent of 4.5 million households that had tax credits provided on their behalf and must account for them. The rest had their returns successfully processed by the IRS as of the end of May.
     
    Yagents, Aug 4, 2015
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  2. FLM2
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    The IRS extension ends on October 15th so everyone should have filed by the time OEP begins.

    If they haven't, it's probably best that they work with another agent, I don't need the agita.
     
    FLM2, Aug 4, 2015
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  3. AllenChicago
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    The 710,000 that have not filed were most likely in the 100% to 125% FPL range and in states that did not expand Medicaid. It's too bad the study didn't dig deeper into the demographics. I bet many of them had their subsidy terminated already because they didn't send in income verification documents to the Marketplace.

    What about the 760,000 taxpayers who omitted form 8962. Can they simply fill one out and mail in to the IRS, or will an amended return need to be filed? There might be penalties?

    Is this a correct interpretation? A taxpayer's first year in a Subsidized plan is this year, 2015. They shouldn't have a problem keeping their subsidy for 2016. But they had better file a 2015 return and include form 8962, or face subsidy suspension, starting 1/1/2017.
     
  4. Ann H
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    The IRS will send the tax filer a letter requesting the 8962 and the 1095A. An amended tax return would not be required for this.

    A penalty does not apply for neglecting to send the 8962. A penalty (and interest) would apply if the results of the 8962 showed that you owed more tax than you had already paid in.


    Unless the government provides a waiver, the subsidy suspension will probably happen this year for people who did not file a tax return by the October 15th extension deadline.
     
    Ann H, Aug 5, 2015
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  5. djs
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    djs Super Moderator Moderator

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    Of course..... Previously health insurance was issued based on risk of your health, now its issued based on your tax status.

    Wow, things have improved dramatically!
     
    djs, Aug 5, 2015
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  6. AllenChicago
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    Ann, are you saying that those who enrolled in a subsidized plan for the first time during 2015 (this years') open enrollment will have their subsidy suspended before December 31, 2015 if they didn't file 2014 taxes? I don't think they can be punished for what they didn't do the year before receiving Advanced Premium Tax Credits.
     
  7. Ann H
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    No, I guess that was pretty poor communication on my part.

    In your example 2015 was their FIRST year to receive a subsidy. You are correct. In that example, they have a little more time.

    If 2014 was their first year to receive the subsidy, the 2014 tax return should be filed by 4/15/2015, and cannot be extended later than 10/15/2015. So, if they want a subsidy in the future, they need to make sure their 2014 tax return is filed.
     
    Ann H, Aug 5, 2015
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  8. MaryDallas
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    Yes; I lost some pretty large premium clients the last few months. These were 2014 clients that did not file their taxes by April 15, 2015 and they are gone. Now they see how 'inexpensive' that $300-$400/mo. premium was. There is no way these people can pay $800+.

    No matter how many ways we communicate that it is necessary now to file by April 15, 2015 those that are accustomed to filing an extension still rely on those habits.

    There are more ways to lose clients now than to keep them it seems.
     
  9. AllenChicago
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    AllenChicago Guru

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    Thank-you for clarifying how the system works, Ann. Appreciate it!
    ac

    ----------

    What's crazy is that the non-existent people enrolled by the Government just to test the system at the end of 2013, are still fully insured and receiving their subsidies to this very day.
     
  10. sman
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    I bet some of those same "people" voted.
     
    sman, Aug 5, 2015
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