Health Care Reform-State Health Insurance Exchanges

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ACA June 6 2

State Health Insurance Exchanges

The Health Insurance Marketplace helps uninsured people find health coverage. When you fill out the Marketplace application online the website will tell you if you qualify for:

Private health insurance plans. The site will tell you whether you qualify for lower costs based on your household size and income. Plans cover essential health benefits, pre-existing conditions, and preventive care. If you don’t qualify for lower costs, you can still use the Marketplace to buy insurance at the standard price.
Medicaid and the Children’s Health Insurance Program (CHIP). These programs provide coverage to millions of families with limited income. If it looks like you qualify, the exchange will share information with your state agency and they’ll contact you. Many but not all states have expanded Medicaid in 2014 to cover more people.

Click and Read 2016 Health Care Reform State Health Insurance Exchanges Here

No Matter What State You Live in, You Can Use the Marketplace
Some states operate their own Marketplace. In some states, the Marketplace is run by the federal government.

Most people must have health coverage in 2015 or pay a fee. If you don’t have coverage in 2015, you’ll have to pay a penalty of $325 per adult, $162.50 per child, or 2% of your income (whichever is higher). The fee increases every year. Some people may qualify for an exemption to this fee. If you enrolled by March 31, 2015, you won’t have to pay the fee for any month before your coverage began.

You’re considered covered if you have Medicare, Medicaid, CHIP, any job-based plan, any plan you bought yourself, COBRA, retiree coverage, TRICARE, VA health coverage, or some other kinds of health coverage.

If you’re eligible for job-based insurance, you can consider switching to a Marketplace plan. But you won’t qualify for lower costs based on your income unless the job-based insurance is unaffordable or doesn’t meet minimum requirements. You also may lose any contribution your employer makes to your premiums.

If you have Medicare, you’re considered covered and don’t have to make any changes. You can’t use the Marketplace o buy a supplemental or dental plan.

Click and Read 2016 Health Care Reform State Health Insurance Exchanges Here

Any accounting, business or tax advice contained in the Tax E Man Blog or www.PatTax.net, including attachments, links and enclosures, are not intended as a thorough, in-depth analysis of specific issues, nor a substitute for a formal opinion, nor is it sufficient to avoid tax related penalties.

If desired, Pat Tax, Inc. would be pleased to perform the requisite research and provide you with a detailed written analysis. Such an engagement may be the subject of a separate engagement letter that would define the scope and limits of the desired.

The Tax E Man Blog, along with our website www.PatTax.net, are designed to be year round resources for tax consultation, preparation and representation services provided by Pat Tax, Inc. . Please feel free to contact us with any questions or concerns.

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Health Care Reform-Individual Insurance Requirement

ACA June 6

Requirement to Have Health Insurance

Beginning January 2014, nonexempt U.S. citizens and legal residents are required to maintain minimum essential coverage. Minimum essential coverage can include
government-sponsored programs, eligible employer-sponsored plans, plans in the individual market, grandfathered group health plans, and other coverage as recognized by the Secretary of Health and Human Services (HHS), in coordination with the Secretary of the Treasury.

Government-sponsored programs include Medicare, Medicaid, Children’s Health Insurance Program, coverage for members of the U.S. military, veteran’s health care, and health care for Peace Corps volunteers. Eligible employer-sponsored plans include governmental plans, church plans, grandfathered plans, COBRA coverage, retiree coverage, and other group health plans offered in the small or large group market within a state.

Click and Read 2016 Health Care Reform Individual Insurance Requirement Here

Health Insurance Portability and Accountability Act (HIPAA)

Excepted Benefits
Minimum essential coverage does not include coverage that consists of certain HIPAA excepted benefits. HIPAA excepted benefits include:
1) Coverage only for accident or disability income insurance,
2) Coverage issued as a supplement to liability insurance,
3) Liability insurance, including general liability insurance and automobile liability insurance,
4) Workers’ compensation or similar insurance,
5) Automobile medical payment insurance,
6) Credit-only insurance,
7) Coverage for on-site medical clinics, and
8) Other similar insurance coverage, specified in regulations, under which benefits for medical care are secondary or incidental to other insurance benefits. Other HIPAA excepted benefits that do not constitute minimum essential coverage if offered under a
separate policy, certificate, or contract of insurance include long-term care, limited scope dental and vision benefits, coverage for a disease or specified illness, hospital indemnity or other fixed indemnity insurance, or Medicare supplemental health insurance.

Click and Read 2016 Health Care Reform Individual Insurance Requirement Here

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Health Care Reform-Premium Assistance Credit

2016 Health Care Reform

Premium Assistance Credit

Health Care Reform created a refundable premium assistance credit for eligible individuals and families to subsidize the purchase of health insurance through an exchange.

Eligible individuals enrolled in the plan report their income to the exchange. Based on the income reported, the individual receives a premium assistance credit. The credit is paid directly to the insurance plan. The individual then pays the insurance plan the difference between the credit amount and the total premium charged.

2016 Health Care Reform Premium Assistance Credit

Eligibility
Initial eligibility for the premium assistance credit is based on the individual’s income for the tax year ending two years prior to the enrollment period. Individuals (or couples) who experience a change in marital status or other household circumstance, experience a decrease in income of more than 20%, or receive unemployment insurance, may update eligibility information or request a redetermination of their credit eligibility.

The premium assistance credit is available for individuals (single or joint filers) with household incomes between 100% and 400% of the federal poverty level (FPL) for the family size involved who do not receive health insurance through an employer or a spouse’s employer.

Note: Individuals below 133% of FPL are generally eligible 2016 Health Care Reform Premium Assistance Credit for Medicaid coverage under the new law.

2016 Health Care Reform Premium Assistance Credit

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Health Care Reform Cost Sharing Subsidy for Individuals with High-Deductible Plans

2016 ACA

Cost Sharing Subsidy for Individuals with High-Deductible Plans

Out-Of-Pocket Expense Limits
The health care reform law provides for a cost-sharing subsidy to reduce the maximum annual deductible and out-of-pocket expense limits for high-deductible health
plans for individuals and households between 100% and 400% of the federal poverty level (FPL). A high deductible health plan is currently $6,450 for self-only coverage in 2015 and $12,900 for family coverage in 2015. High-deductible health plans are those plans that
qualify the taxpayer to contribute to a health savings account (HSA) (or allow an employer to contribute to the HSA of an employee).

2016 Health Care Reform Cost Sharing Subsidy for Individuals with High-Deductible Plans

Note: The individual does not have to contribute to an HSA to qualify for the subsidy. The individual merely has to have a high-deductible health plan and fall within the FPL income range.

Note: Individuals below 133% of FPL are generally eligible for Medicaid coverage under the health care reform law.

2016 Health Care Reform Cost Sharing Subsidy for Individuals with High-Deductible Plans

Calculation of Subsidy
For individuals with household income of more than 100%, but not more than 200% of FPL, the out-of-pocket limit is reduced by two-thirds. For those between 201%
and 300% of FPL, the out-of-pocket limit is reduced by one-half, and for those between 301% and 400% of FPL, the out-of-pocket limit is reduced by one-third.

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Repairs vs Improvements

2016 Repairs vs Improvements

Repairs vs. Improvements

Internal Revenue Code section 162 generally allows a current business deduction for the cost of repairs and maintenance incurred during the year. On the other hand, Internal Revenue Code section 263 requires the capitalization of amounts paid to acquire, produce, or improve tangible property. Since repairs and improvements often have very similar characteristics, it can be tricky to classify the expenditures. However, correct classification is important because the cost of repairs can generally be deducted in the year paid, while improvements must be capitalized and the deduction taken over several years through depreciation.

Click and Read Repairs vs Improvements Here

An improvement requiring capitalization occurs with an addition to or partial replacement of property that results in a betterment of the unit of property, restores the unit of property, or adapts the unit of property to a new use. The cost of an improvement must be capitalized and depreciated over a certain number of years as if the improvement were separate property.

Example: Nina has a truck she uses for her contracting business. Her truck was damaged and the cost to repair it is considered a deductible repair cost. Routine maintenance on the truck such as engine tune-ups and oil changes are also currently deductible expenses. In 2015, Nina added a hydraulic lift to her truck, which improved its functionality. The expense of adding the lift is an improvement that must be capitalized and depreciated over the truck’s remaining useful life.

Click and Read Repairs vs Improvements Here

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Hobby vs Business

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Hobby vs Business

Hobby or Business?

If an individual, partnership, estate, trust, or an S corporation engages in an activity that is not conducted as a for-profit business, deductions are limited to the amount of income from the activity. This rule does not apply to corporations, other than S corporations. If an activity is considered a for-profit business, deductions can exceed income, allowing the resulting loss to offset other income.

Click and Read Hobby vs. Business Here

Determination

In determining whether an activity is a hobby or a business, all facts and circumstances are taken into account. No one factor can make the determination. The following list is not intended to be all inclusive.

Manner in which the taxpayer carries on the activity. Factors that may indicate a business include maintaining complete and accurate books and records, carrying on the activity substantially similar to other profitable activities of the same nature, and
changing operating methods and techniques to improve profitability.
The expertise of the taxpayer or his or her advisors. Factors that may indicate a business include knowledge of the taxpayer, or consultation with those who are knowledgeable about a particular industry, then using that knowledge to try and make a profit.
The time and effort expended by the taxpayer in carrying on the activity. Factors that may indicate a business include spending a lot of time and effort in the activity, particularly if the activity does not have substantial personal or recreational aspects.
Taking time away from another occupation may also indicate a profit motive. Spending little time will not be counted against the taxpayer if qualified employees
are hired to carry on the activity.
Expectation that assets used in the activity may appreciate in value. Even if no profit is made from operations, if the value of land or other assets in the activity appreciate so that an overall profit is made from a sale, the activity may be considered a business.
The success of the taxpayer in carrying on other similar or dissimilar activities. If the taxpayer was successful in the past turning an unprofitable venture into a profitable venture, the current activity may be a business even if it has not yet made a profit.
The taxpayer’s history of income or losses with respect to the activity. Early losses during start-up will not count against the taxpayer, but continued
losses after the customary start-up stage that are not explainable may indicate a hobby. Losses sustained due to unforeseen circumstances, such as casualty or
thefts beyond the taxpayer’s control, will not count against the taxpayer. Any series of profitable years are strong evidence the activity is a business.
The amount of occasional profits, if any, which are earned. The amount of profits in relation to the amount of losses, and in relation to the taxpayer’s investment
in the activity, may indicate intent. An occasional small profit one year, mixed with large losses in other years or large taxpayer investments, may indicate
the activity is a hobby. Substantial occasional profits mixed with frequent small losses or investment may indicate a business. An opportunity to earn substantial ultimate profits in a highly speculative venture also indicates a profit motive.

Click and Read Hobby vs. Business Here

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Moving Expenses

Deductibility Tests

Moving expenses may be deductible on Form 1040 if a taxpayer moves to a new home because of a new principal workplace. The following tests must be met.

Closely Related to the Start of Work Test

The move will be considered closely related to a new work location if the move is within one year of the date the taxpayer started working at the new location, and the distance from the new home to the new job location is not more than the distance from the old home to the new job location.

Click and Read Moving Expenses Here

Distance Test

The new principal workplace must be at least 50 miles farther from the taxpayer’s old home than the old workplace was. For example, if the old workplace was three miles from the old home, the new workplace must be at least 53 miles from the old home. If the taxpayer did not have an old workplace, the new workplace must be at least 50 miles from the old home. Members of the Armed Forces do not have to meet this distance test.

Time Test

Employees must work full time in the general area of the new workplace for at least 39 weeks during the 12 months after the move. Self-employed taxpayers must work full time in the general area of the new workplace for at least 39 weeks during the first 12 months and 78 weeks during the first 24 months after the move.

Exceptions: The time test does not apply if the job ends because of disability, the employer transfers the employee, the employee was laid off for other than willful
misconduct, the taxpayer is a member of the Armed Forces, the taxpayer meets certain requirements for retirees or survivors living outside the U.S., or the taxpayer is a decedent.
Although the move must be closely related to the start of work in a new location, there is no requirement that a new job be in the same line of work as the old job. A taxpayer
starting work for the first time qualifies.

Click and Read Moving Expenses Here

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Crowdfunding

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Crowdfunding

Crowdfunding is used to solicit financial contributions from a large number of people, referred to as backers, over the internet. The financial contributions are used for a wide variety of projects including business ventures, social causes, and support for individuals with a special need. By using the internet, projects can gain access to funds outside of traditional sources such as banks or capital markets. A number of organizations,
referred to as platforms, have developed to connect someone seeking funds with those who have an interest in contributing. The use of crowdfunding has developed rapidly in the last twenty years with billions of dollars being raised each year by this method and hundreds of projects being launched on a daily basis.

Click and Read Crowdfunding 2016 Here

Typical Projects
Crowdfunding for creative efforts such as music, gaming, and movie projects have raised some of the largest amounts of money. High tech projects are also very common. Some examples include Pebble E-Paper Watch, Formlabs 3D Printer, and Oculus Rift. The Tile app for finding lost items received support from crowdfunding. The ALS (amyotrophic lateral sclerosis) Ice Bucket challenge is an example of a recent highly successful campaign
to raise money to battle an incurable disease.

Click and Read Crowdfunding 2016 Here

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Foreign Bank and Financial Accounts

Crowdfunding Picture

Foreign Bank and Financial Accounts

If you have a financial interest in or signature authority over a foreign financial account, including a bank account, brokerage account, mutual fund, trust, or other type of foreign financial account, exceeding certain thresholds, the Bank Secrecy Act may require you to report the account yearly to the Department of Treasury by electronically filing a Financial Crimes Enforcement Network (FinCEN) 114, Report of Foreign Bank and Financial Accounts (FBAR).

Click and Read Foreign Bank and Financial Accounts Here

Who Must File

United States persons are required to file an FBAR if:

The United States person had a financial interest in or signature authority over at least one financial account located outside of the United States, and
The aggregate value of all foreign financial accounts exceeded $10,000 at any time during the calendar year reported.

United States person includes U.S. citizens; U.S. residents; entities, including but not limited to, corporations, partnerships, or limited liability companies, created or organized in the United States or under the laws of the United States; and trusts or estates formed under the laws of the United States.

Click and Read Foreign Bank and Financial Accounts Here

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Divorce and Taxes

Divorce and Taxes

Filing status. Filing status is based on your status as of December 31. If you are divorced under a final decree by the last day of the year, you are considered unmarried for the whole year and you cannot choose Married Filing Jointly as your filing status. If you are still married at the end of the year (your divorce is not yet finalized), then you must file as Married Filing Jointly or Married Filing Separately, or Head of Household, if qualified.
You cannot file as Single if you are married.

Joint responsibility. You may be held jointly and individually responsible for any tax, interest, and penalties due on a joint return filed before your divorce. This responsibility may apply even if your divorce decree states that your former spouse will be responsible for any amounts due on previously filed joint returns. Name change. If you changed your names because of divorce, be sure to report the change to your local Social Security Administration office before filing your tax return. The name you enter on your tax return must be the same as what is on your Social Security card.

Click and Read Divorce and Taxes Here

Exemptions. If you obtained a final decree of divorce or separate maintenance during the year, you cannot take your former spouse’s exemption. This rule applies even if you provided all of your former spouse’s support.

Dependents. In most cases, a child of divorced or separated parents is the qualifying child of the custodial parent (the parent with whom the child resides for the greater number of nights during the year). If the parents divorced or separated during the year and a child lived with both parents before the separation, the custodial parent is the one with whom the child lived for the greater number of nights during the rest of the year.

Click and Read Divorce and Taxes Here

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State Health Insurance Exchanges

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