Affordable Car Act (ACA) Shared Responsibility Forms

Shared Responsibility Payment Forms

Any gap in qualifying insurance coverage of three months or more for you or your dependents can impact you tax return this year and require you to pay an individual-shared-responsibility payment. Certain subsidized information about your coverage and cost is reported on your income tax return and is obtained from the information you provide or that is provided to yo by either your provider(s) or employer on IRS Form 1095 forms.

Exemptions

You may be exempt from this payment if, for example:

• Affordable coverage options are not offered by your employer
• The gap in insurance coverage is three or fewer consecutive months
• You belong to a group that is explicitly exempt from participating in the Affordable Care Act by the Internal Revenue Service (IRS) such as a health sharing ministry.  There are others that you may want to research.

Form 1095-A

Insurance companies participating in health care exchanges should provide you with the Form 1095-A, a health-insurance-marketplace statement. This form includes:

• Your name
• The amount of coverage you have
• Any tax credits you were entitled to
• If you used them to pay for your health insurance and the amount you paid for coverage

You use this information to complete your income tax filing, adjust any tax credit payments and claim any premium tax credits that may be due.

Form 1095-B

Employers with fewer than 50 full-time employees that offer health coverage, as well as health care insurance providers, send the Form 1095-B to members of their health insurance plans, as of the 2016 tax year. This form includes:

• The type of coverage you have
• Your dependents covered
• The period of the coverage

This form is used to verify on your tax return that you and your dependents have at least Minimum Essential Coverage (MEC). If you had a break in health care coverage for the tax year, you may have to pay an individual shared responsibility payment.

Form 1095-C

Form 1095-C shows the coverage that is offered to you by your employer, as of the 2016 tax year. It is used by larger companies with 50 or more full-time or full-time equivalent employees. This form provides information of the coverage your employer offered and whether or not you chose to participate. You can use this to complete your tax return.

Uncollected Social Security and Medicare Taxes on Employees

Employers....Beware... There is a new form —

Form 8919, Uncollected Social Security and Medicare Tax on Wages — that employed (and I mean "not literally") workers are encouraged to file if they perform services for a firm that did not withhold FICA from pay and the worker believes he was (is) actually "employed" as an employee.

The form is a whistleblower alert to the IRS to let them know they may want to review the worker’s status at the employer level to determine whether ro not taxes should be withheld and matched.  Of course filing the form is not necessarily something that a worker might want to file while actively working for the firm. But who knows?
 

Deducting Obamacare Premiums as a Medical Expense

If you originally purchased health insurance on your own through a healthcare marketplace and you paid for this insurance with after-tax dollars, the money you paid toward your monthly premiums could be taken as a tax deduction on your Schedule A.  Of course, like all medical expenses the ability to deduct health insurance is subject to the 10% AGI limitation (7.5% for individual's 65 or older). 

If you are self-employed, any additional health insurance payments (premium tax credits)(PTC) you incur would be treated as you treated your original self-employment health insurance payments, subject to the same rules. Realize that these amounts are not paid in the same year as the original premiums were paid. They are paid at the time the return is filed or in teh year following the year the original premiums were incurred. 

So you would only be able to claim any extra health insurance payments as deductible, if your original insurance payments were deductible to you on your tax return. If you took a standard deduction. for example, you would not be able to claim the extra amounts in the following year. If you could not deduct your original health insurance premiums on your tax return then any pay backs on your tax return would not be deductible.

So if you underpaid for your insurance and you had to pay more towards your health insurance (by paying back a portion of your premium tax credit (PTC) ) then that payback could be considered additional health insurance premium payments and you can included that amount as a medical expense in the year actually paid.  So as an example, if the repayment is on your 2016 tax return, you could include this additional insurance payment on your 2017 tax return.

Have a Business Purpose When Lending To Family and Friends

In Scheurer, TC Memo. 2017-36 the Tax Court found that a taxpayer was not entitled to a business bad debt deduction for funds he advanced to a business operated by a friend. The taxpayer attempted to claim a bad-debt deduction for "loans." Given the true nature of the lender and debtor's relationship as one of many factors to be considered, the Tax Court refused to find that the loans were bona fide.  

Background

The taxpayer, who apparently worked as a financial adviser, purported to have loaned a close personal friend money to keep his robocall operation afloat. The taxpayer was aware of the friend’s poor credit rating which prevented him from obtaining a commercial loan. The taxpayer also purported to have entered into a partnership with the friend to provide merchant processing services for his business.

The financial situation of the friend’s business worsened over time, and the taxpayer and his partnership ended their involvement with the operation. On his return for that tax year, the taxpayer claimed a business bad debt deduction attributable to funds he had allegedly advanced to his friend’s business that went unpaid. Apparently, he did not report any income, expenses, or other pass-through items on his return for the merchant-processing operation.  Only after being notified of a deficiency did the taxpayer attempt to claim a loss attributable to prepaid expenses made by his partnership.

Tax Court’s analysis

The Tax Court held that the taxpayer was not able to substantiate the advanced payments being received by the company or show facts that would indicate that there was a reasonable expectation of repayment. The court could not find any evidence to support that the taxpayer’s alleged loans were debts created or acquired in connection with either the trade or business of lending money, or, alternatively, that of a financial adviser.

In addition, the partnership’s voluntary payment to taxpayer’s friend’s business was not a valid partnership expense that could give rise to a net partnership loss that could flow through to the taxpayer. The court found that the partnership’s expenses were not paid to further the partnership’s business but rather to assist the taxpayer’s friend’s business -- a personal expense. 

The court ended up re-characterizing the payments as either capital contributions or as gifts.

References: CCH's December 2017 Federal Tax Weekly