These slides seek to provide a basic understanding of the connection between tax filing and health coverage, where people can go for tax assistance, and additional resources to answer tax-related questions. They are not intended to provide comprehensive policy guidance for every specific situation.

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Here’s a quick overview of what these slides cover:

First, they start with the basics in terms of what’s new on people’s taxes this year.

Then as they go through the intersections between enrollment issues and taxes, they’ll walk through the actual tax forms involved in this process to help people get a better understanding of what the changes to the tax filing process will look like. But the intent is not to turn everyone into tax experts, and the reality is that most consumers will experience this process without ever directly interacting with some of these forms.

After reviewing these news forms, you may wonder how regular people going to actually navigate these new changes. It’s crucial to remember that there are a ton of tax assistance options and resources to help people complete their taxes, and the slides close by reviewing the range of help available.

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The Affordable Care Act is made up of many provisions, but some of its most significant ones related to financial help involved making new changes to the tax code. That’s why starting this year, consumers will see some changes to their tax returns.

The main areas related to enrollment work that involve new tax-related changes are the new coverage reporting requirement, the premium tax credit for marketplace coverage, and claiming exemptions/implementing the fine for those without coverage.

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So what does the federal government really want to know in terms of reporting your health insurance status?

The requirement to maintain health insurance specifies that you need to have the right kind of coverage, (“minimum essential coverage” also known as MEC). Now the good news is that nearly every type of coverage is minimum essential coverage (any type of employer coverage, Medicare, a plan someone buys through the individual market (whether on the marketplace or not), and Medicaid.

Everybody on your tax return must have that coverage (such as your spouse or child), and you need to be covered for each month of the year. If you don’t have minimum essential coverage each month, and don’t have an exemption, you will have to pay a fine on the tax return.

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Reporting health coverage is a very easy process for most consumers.

Here’s the deal, over 3 quarters of people just get to check a box on their tax return to report their health coverage status (including people with Medicaid, employer-based coverage, and Medicare), and then they’re done with any ACA-related requirements. You can see up top on the slide that “full-year coverage box”.

Marketplace enrollees receiving financial help will need to do more however than just checking the box.

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Marketplace coverage is different because the federal government is helping make private coverage more affordable for millions of Americans. As part of this, the federal government needs to confirm that it’s paying the right amount.

It’s important to remember that when people say premium subsidies, they’re really referring to premium tax credits.

We know that most enrollees received advance payments of these tax credits during the year, with the amount being paid of their behalf to their health insurance plan directly tied to their household income (among other factors).

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So how do marketplace enrollees figure out what they need to do on their taxes?

Every marketplace enrollee (whether or not they received financial help during the year) gets a new tax form (form 1095-A) sent by the marketplace itself through the mail. In federally-facilitated marketplaces (FFMs), the 1095-A is also available online through their HealthCare.gov account. Some state-based marketplaces (SBMs) make the form available online also.

If they received advance payments of the premium tax credit during the year, that will be listed below in Part III of the form (the amount for each month is listed). Consumers must then transpose this information onto Form 8962 (which we’ll review in a few slides).

This form isn’t too different than a W-2 that you’d receive from a job. There’s a bunch of information in the boxes on the form, and then consumers must take that information and enter it onto the tax return.

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Form 8962 is the new form where marketplace enrollees will actually claim the premium tax credit.

On the first part of the form, consumers need to input the basic info about their household income, family size, and federal poverty level (this will be calculated by tax preparation software that they are using) just like the Get Covered Calculator and the marketplace uses when consumers are applying for coverage when they enroll.

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The second part of the form is where the where the actual “reconciliation” of premium tax credits occurs.

Just like taxpayers reconcile their taxes withheld with their actual tax liability through other tax forms and get refunds or make additional payments when they file, starting this year, individuals getting financial assistance for Marketplace coverage will follow the same process.

So it may seem complicated, but this is just figuring out the monthly amounts people paid in premiums, and how much financial help they could qualify for each month, which is then added together.

As we continue, we’ll cover the important role that tax preparation assistance can play, but for most consumers they’ll basically never even see these forms. They’ll input the information and tax preparation software will handle the rest.

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So let’s walk through an example about how the reconciliation process works.

Remember that we’re comparing the financial help someone received in 2014 through the marketplace with what they were actually eligible to receive based on the information on their tax return to figure out what they owe the IRS or what additional money the IRS owes them as a result.

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Let’s say that someone received $5000 in financial help during last year to help pay for their marketplace coverage. Remember that money went to their insurance plan for their monthly premiums, not the consumer themselves, so some consumers may not recognize that they were receiving financial help.

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But ultimately, their actual income was a bit higher than anticipated for the year, so they were actually eligible for less financial help (only $4,800 for the year).

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Thus, as a result of this comparison during the reconciliation process on the tax return, the consumer is entitled to a lower amount of financial help. The consumer will owe $200 back to the IRS, and if getting a refund, this would just come off the top.

The Department of Treasury does not expect that the amount of settling up through reconciliation will exceed the refund for many taxpayers.

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It’s important to remember that there are protections for lower income taxpayers in terms of how much they owe back as a result of reconciliation. These repayment limits are designed to prevent unnecessary surprises at tax time for individuals.

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And there are some particularly helpful protections for people right around the federal poverty level.

There are special protections for marketplace enrollees whose income falls into the Medicaid threshold by the end of the year. So if someone in Texas had income at 110% of the FPL when they signed up, but their income dropped to 98% FPL at the end of the year, they won’t owe money and could actually qualify for an additional credit on their tax return.

And if Medicaid enrollees experience a sudden increase in income towards the end of the year (such as through a December bonus), they would not have to owe any money back either, as there is no reconciliation process related to Medicaid. When reporting that change through the marketplace, they would then be able to transition to a marketplace plan with tax credits.

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Exemptions and the fine are another new and important process handled through the tax return. As you can see, the fine amount increases significantly from 2014 to 2015. The amounts are pro-rated on a monthly basis for people with partial year coverage, which will be shown in more detail later.

A very small fraction of taxpayers will pay the fine if they made a choice to not obtain coverage they could afford. Many consumers can qualify for an exemption to avoid the fine.

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There are many exemptions available to consumers, so it’s important that uninsured consumers learn about which exemptions might be applicable to them.

Some of these exemptions are available on the tax return, others through the marketplace, and some are even automatic. At this stage, it makes the most sense for consumers to claim an exemption on their tax return because that avoids any extra paperwork. If needed, they can apply separately through the marketplace.

In addition to these exemptions listed, undocumented consumers can also claim an exemption on their tax return.

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On the new tax form for exemptions (form 8965), consumers first have the opportunity to input exemptions they were granted from the marketplace. When the marketplace grants consumers an exemption, it will provide them an “exemption certificate number” code that they need when filing their taxes.

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The rest of the form allows consumers to claim an exemption on the tax return itself.

If you’re claiming a full year exemption based on income below the filing threshold, you can just check a box. Below, you can also include the code for the type of exemption and check a box if exempt for a full year. In cases where you are only eligible for an exemption for certain months, you will need to denote which ones.

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Let’s walk through a practice problem to see how the fine for partial year coverage would work. In this situation, assume Gary is the only member of his tax household. To figure out how much Gary owes, we need to figure out whether the flat dollar amount or percentage of household income is greater.

The filing threshold for a single person for 2014 is $10,150.

He owes the greater of (7/12) * (95), which is $55 OR (7/12) * (.01) * (23,000-10,150), which is $75.

Since $75 is the greater amount, that is what he is fined. As a result, if Gary would otherwise have been receiving a $2,000 federal refund, he will get $1,925 instead.

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Consumers aren’t alone when it comes to filing their taxes and navigating these new intersections with the ACA.

Last year, 91 percent of taxpayers relied on some form of tax preparation services to do their taxes. Studies confirm that low-income taxpayers file with the aid of tax preparers, including nearly two-thirds of people who claim the earned income tax credit (EITC).

All the major tax preparation companies are equipped to help them navigate these new ACA requirements when they file their returns. And for those looking for entirely free options, the Volunteer Income Tax Assistance (VITA) program offers in-person free tax preparation services to people that meet certain income thresholds. You can find a VITA site at http://irs.treasury.gov/freetaxprep/. The Free File program also provides free online software options to consumers with incomes below $60,000.

You should make sure to help protect consumers from those individuals, whether they be disreputable tax preparers or payday lenders, that unfortunately use tax filing season to pray on unsuspecting consumers. Please make sure that you are only referring people to places that operate legitimate tax operations.

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If looking for further information, you can see specific resources related to exemptions on Enroll America’s website as well as the recording and slides from a joint webinar we recently held with Intuit TurboTax. The Center on Budget and Policy Priorities also has put together numerous helpful and in-depth policy resources related to taxes on their website through their Beyond the Basics series (some of which were used in preparing these slides).

These resources and more can be found at http://www.enrollamerica.org/resources/webinars/successfully-navigating-the-tax-filing-moment/?utm_source=EA_homepage&utm_medium=sidebar_1&utm_campaign=EA_homepage.

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