The Affordable Care Act and Income Taxes

 This year the Affordable Care Act (commonly called “Obamacare”) requires everyone to have health insurance or to pay a Shared Responsibility Payment (commonly called a penalty).  This transaction, along with the receipt and reconciliation of federal subsidies to help make health insurance more affordable, all takes place within the user-friendly environment of filing your federal income taxes.

OK – not so user-friendly.  In the spirit of tax forms everywhere, the new forms for filing are equal in complexity to the law that they were invented to enforce.  The good news – once we tax preparers figured them out, they’re really not so bad.

Here’s what the Affordable Care Act means as you file your 2014 tax returns.

1.  If you have health insurance from any source other than the Marketplace (healthcare.gov), all you have to do is check a box.  Done.

2.  If you have health insurance through the Marketplace, the Marketplace sends you a form 1095-A.

This lists the subsidies (if any) that were paid directly to the insurance carrier to supplement your monthly payment.  Did you receive too much in subsidies?  Too little?  You’ll reconcile this on form 8962 of your tax return.  If you were paid too much, the overpayment will be subtracted from your refund (or added to the amount owed.)   If you were paid too little, the amount underpaid will be refunded to you (or subtracted from the amount owed.) 

3.  If you did not have health insurance, your Shared Responsibility Payment (SRP) will be calculated on a worksheet that accompanies form 8965 of your tax return.  The SRP is calculated on a monthly basis for each month you or any of your dependents did not have health insurance.

But wait!  There are a number of exemptions to the requirement for health insurance.  If you or any of your dependents qualify for an exemption, it is recorded on form 8965.  If your income is below the level for filing income taxes, or if your income is below 138% of the federal poverty level in a state that didn’t expand Medicaid, you qualify.  You also qualify if your coverage gap is fewer than three months, or if your coverage gap is a result of the less-than-stellar initial rollout of healthcare.gov.  The full list of exemptions and their codes can be found at http://www.irs.gov/pub/irs-pdf/i8965.pdf.  Note that this list of exemptions applies only to your 2014 return; the exemptions and the process for qualifying for exemptions are expected to change for the 2015 tax season.  The SRP is expected to go up for the 2015 tax season.

This year’s tax season has been eye-opening to me as a preparer as well as to our clients.  Some, who knew last year that they were too poor to qualify for subsidies on the marketplace, were relieved that they would be granted an exemption while our state legislature makes decisions on dealing with the coverage gap from not expanding Medicaid.  Some clients found out during our tax preparation session that they would be assessed the Shared Responsibility Payment this year and next year, and that they were too late to enroll for 2015 coverage, as open enrollment closed on February 15.

Will Utah implement a program to cover the uninsured that are too poor for healthcare.gov but too wealthy for Medicaid as it currently exists.  Will the federal government extend the open enrollment period for healthcare.gov to make it align with tax season?  The adventure continues…

Shopping Small

 I took up counted cross-stitch – again – last year.  It was part of my endeavor to finish what I start (Finishing the Unfinished), and in the process I found I really enjoy cross-stitching.  It gives me something to do with my hands while I’m watching television or listening to the radio.  And it gives me something to show for my time.

The unfinished cross-stitch was the sampler in the lead photo.  I started it in 1990.  How do I know?  I had stitched the year into the sampler well before I put it away, not to look at it again until 2014.  After I finished it I gave it to my dear friend Monika, who laughed with me at the start date.  After all, we were far too young to have known each other for that long!

Since then I have started – and finished – several other cross-stitch projects.  So I was delighted when Monika introduced me to Craftcenter of Fine Stitchery, a cross-stitch shop on the east side of Salt Lake City.  This specialty store carries patterns, threads, fabrics, and other supplies, and has stitched examples of many of the patterns they carry on display. 

I was enchanted.  The ladies in the shop (I suspect at least one was an owner) were very knowledgeable about all things cross-stitch and were delighted to answer my many questions.  They reminded me how to use a frame I’d bought some thirty years ago, and taught me how to make a French knot.  Really taught me – she handed me the needle, thread and fabric and coached me as I made two or three.

Their patterns were about the same price as those I found in the big box craft store, but they had a far more extensive selection.  Pattern prices were also comparable to those I’d found online, but in the shop I could actually look at the pattern and the supply list, rather than merely select from the multitudes of cover pictures.  Their threads and fabrics are a bit more expensive than those of the big box craft store, but again, they have a far greater selection of both. 

   

I am now their customer for life.  I want this shop to stay in business.  I want them to be there for me when I have questions.  That’s one of the wonderful things about small business – any small business.  And that’s why, from now on, when I’m stitching small I intend to shop small.