Report Life Changes to the Marketplace

If you enrolled in insurance coverage through the Health Insurance Marketplace , you are required to report changes to the Marketplace when they happen, like changes to your household income or family size, because they may affect your eligibility for the advance payments of the premium tax credits.

Changes in circumstances that you should report to the Marketplace include, but are not limited to:

• increases or decreases in your household income, including lump sum payments like a lump sum payment of Social Security benefits
• marriage or divorce
• the birth or adoption of a child
• starting a job with health insurance
• gaining or losing your eligibility for other health care coverage
• changing your residence

For the full list of changes you should report, visit HealthCare.gov.

Reporting changes will help you avoid getting too much or too little advance payment of the premium tax credit.  Getting too much means you may owe additional money or get a smaller refund when you file your taxes. Getting too little could mean missing premium assistance to reduce your monthly premiums.  Therefore, it is important that you report changes in circumstances that may have occurred since you signed up for your plan.

When you report a change, you may be eligible for a Special Enrollment Period.  For more information, visit HealthCare.gov.

Tax Preparedness Series: Most Retirees Need to Take Required Retirement Plan Distributions by Dec. 31

WASHINGTON — The Internal Revenue Service today reminded taxpayers born before July 1, 1945, that they generally must receive payments from their individual retirement arrangements (IRAs) and workplace retirement plans by Dec. 31.

Known as required minimum distributions (RMDs), these payments normally must be made by the end of 2015. But a special rule allows first-year recipients of these payments, those who reached age 70½ during 2015, to wait until as late as April 1, 2016 to receive their first RMDs. This means that those born after June 30, 1944 and before July 1, 1945 are eligible for this special rule. Though payments made to these taxpayers in early 2016 can be counted toward their 2015 RMD, they are still taxable in 2016.

This is the second in a series of weekly tax preparedness releases designed to help taxpayers begin planning to file their 2015 return.

The required distribution rules apply to owners of traditional, Simplified Employee Pension (SEP) and Savings Incentive Match Plans for Employees (SIMPLE) IRAs but not Roth IRAs while the original owner is alive. They also apply to participants in various workplace retirement plans, including 401(k), 403(b) and 457(b) plans.

An IRA trustee must either report the amount of the RMD to the IRA owner or offer to calculate it for the owner. Often, the trustee shows the RMD amount on Form 5498 in Box 12b. For a 2015 RMD, this amount is on the 2014 Form 5498 normally issued to the owner during January 2015.

The special April 1 deadline only applies to the RMD for the first year. For all subsequent years, the RMD must be made by Dec. 31. So, for example, a taxpayer who turned 70½ in 2014 (born after June 30, 1943 and before July 1, 1944) and received the first RMD (for 2014) on April 1, 2015 must still receive a second RMD (for 2015) by Dec. 31, 2015.

The RMD for 2015 is based on the taxpayer’s life expectancy on Dec. 31, 2015, and their account balance on Dec. 31, 2014. The trustee reports the year-end account value to the IRA owner on Form 5498 in Box 5. Use the online worksheets on IRS.gov or find worksheets and life expectancy tables to make this computation in the Appendices to Publication 590-B, Distributions from Individual Retirement Arrangements (IRAs).

For most taxpayers, the RMD is based on Table III (Uniform Lifetime Table) in IRS Publication 590-B. So for a taxpayer who turned 72 in 2015, the required distribution would be based on a life expectancy of 25.6 years. A separate table, Table II, applies to a taxpayer whose spouse is more than 10 years younger and is the taxpayer’s only beneficiary.

Though the RMD rules are mandatory for all owners of traditional, SEP and SIMPLE IRAs and participants in workplace retirement plans, some people in workplace plans can wait longer to receive their RMDs. Usually, employees who are still working can, if their plan allows, wait until April 1 of the year after they retire to start receiving these distributions. See Tax on Excess Accumulations in Publication 575. Employees of public schools and certain tax-exempt organizations with 403(b) plan accruals before 1987 should check with their employer, plan administrator or provider to see how to treat these accruals.

Find more information on RMDs, including answers to frequently asked questions, on IRS.gov.

ACA and Employers – Know if Coverage You Offer Meets Requirements

Under the Affordable Care Act, certain employers, based on workforce size – called applicable large employers – are subject to the employer shared responsibility provisions. The vast majority of employers fall below the workforce size threshold and, therefore, are not subject to the employer shared responsibility provisions.

If you are an employer that is subject to the employer shared responsibility provisions, you may choose either to offer affordable minimum essential coverage that provides minimum value to your full-time employees and their dependents, or to potentially owe an employer shared responsibility payment to the IRS.  Many employers already offer coverage that is sufficient to avoid owing a payment.

Here are definitions of key terms to help you understand these requirements:

Affordable coverage: If the lowest cost self-only only health plan is 9.5 percent or less of your full-time employee’s household income then the coverage is considered affordable. Because you likely will not know your employee’s household income, for purposes of the employer shared responsibility provisions, you can determine whether you offered affordable coverage under various safe harbors based on information available to the employer.

Minimum essential coverage: For purposes of reporting by applicable large employers, minimum essential coverage means coverage under an employer-sponsored plan. It does not include fixed indemnity coverage, life insurance or dental or vision coverage.

Minimum value coverage: An employer-sponsored plan provides minimum value if it covers at least 60 percent of the total allowed cost of benefits that are expected to be incurred under the plan.

Under existing guidance, employers generally must use a minimum value calculator developed by HHS to determine if a plan with standard features provides minimum value. Plans with nonstandard features are required to obtain an actuarial certification for the nonstandard features. The guidance also describes certain safe harbor plan designs that will satisfy minimum value.

Review Your Health Coverage Exemption Options

The individual shared responsibility provision requires you, your spouse, and your dependents to have qualifying health insurance for the entire year, report a health coverage exemption, or make a shared responsibility payment when you file. If you are applying for an exemption from the Marketplace, you should prepare early by reviewing your options and determining if you are eligible for an exemption from the requirement to have coverage.

How you get a health coverage exemption depends on the type of exemption. The IRS has posted a chart listing the types of exemptions and how to obtain them on IRS.gov/aca. You can obtain some exemptions only from the Marketplace while others you may claim when you file your tax return. You can get some exemptions by either applying for the exemption from the Marketplace or claiming it on your return.

Marketplace Exemptions

If you are eligible for an exemption from the Marketplace, you apply for it by filling out an exemption application that you then send to the Marketplace. If the Marketplace grants your coverage exemption, they will send you a notice with your unique Exemption Certificate Number. Keep this notice with your other important tax information. You will use the ECN when you file your tax return. Be sure to apply early so that you will receive this notice before you file your tax return. Hardship exemptions are among those exemptions that you must request through the Marketplace. To qualify for a hardship exemption you must have experienced circumstances that prevented you from obtaining coverage under a qualified health plan. Those circumstances include homelessness, eviction, foreclosure, domestic violence, death of a close family member and unpaid medical bills.

For more information about obtaining exemption from the Marketplace, go to HealthCare.gov.

IRS Exemptions

For a health coverage exemption that you qualify to claim on your tax return, you do not need to call or obtain the exemption from the IRS in advance. All you need to do is complete Form 8965, Health Coverage Exemptions Part III and file it with your tax return. Use a separate line for each individual and exemption type claimed on the return.

If you do not have coverage and your income is below the filing requirement threshold for your filing status, you and your family are exempt and you will not have to make a shared responsibility payment. In this situation, you do not have to file a return to claim the coverage exemption. However, if you choose to file a return, then you will use Part II of Form 8965, Coverage Exemptions for Your Household Claimed on Your Return. Exemptions that you can claim on your tax return include exemptions for lack of affordable coverage, a short coverage gap, non-citizens not lawfully present in the United States, and certain citizens living abroad.

Find out if you qualify for an exemption by using our interactive tool, Am I required to make an Individual Shared Responsibility Payment. For information about claiming and reporting exemptions, visit IRS.gov/aca.

Employees Should Take Time to Check Withholding

WASHINGTON — The Internal Revenue Service reminds taxpayers that the earlier in the year they check their withholding, the easier it will be to get the right amount of tax withheld.

Besides wages, income tax is often withheld from other types of income, such as pensions, bonuses, commissions and gambling winnings. Ideally, taxpayers should try to match their withholding with their actual tax liability. If not enough tax is withheld, they will owe tax at the end of the year and may have to pay interest and a penalty. If too much tax is withheld, they will lose the use of that money until they get their refund.

This is the first in a series of weekly tax preparedness releases designed to help taxpayers begin planning to file their 2015 return.

When Should Taxpayers Check their Withholding?

·         When a taxpayer gets a big refund, or finds that they have an unexpected balance due.

·         Any time there are personal or financial changes that might affect their tax liability, such as getting married, getting divorced, having a child or buying a home.

·         When there are changes in federal tax law that might affect their tax liability.

How to Check the Amount being Withheld

Use the IRS Withholding Calculator on IRS.gov. This easy-to-use tool can help figure the taxpayer’s federal income tax withholding so their employer can withhold the correct amount from their pay. This is particularly helpful if they've had too much or too little withheld in the past, their situation has changed, or they started a new job.

Taxpayers may also use the worksheets and tables in Pub 505: Tax Withholding and Estimated Tax, to see if they are having the right amount of tax withheld.  

How to Change the Amount being Withheld

Events during the year may change a taxpayer’s marital status or the exemptions, adjustments, deductions, or credits they expect to claim on their return. When this happens, taxpayers may need to give their employer a new Form W-4, Employee's Withholding Allowance Certificate to change their withholding status or number of allowances.

Generally, taxpayers should give their employer a new Form W–4 within 10 days after either:

·         A divorce, if they have been claiming married status, or

·         Any event that decreases the number of withholding allowances they can claim.

Other Considerations

• Taxpayers, who bought 2015 insurance coverage through the Health Insurance Marketplace, should report changes in circumstances to the Marketplace when they happen. Reporting changes in income or family size will help taxpayers avoid getting too much or too little advance payment of the premium tax credit. Receiving too much or too little in advance can affect the amount of their refund or how much they may owe when they file their tax return. For help getting it right, see this change in the circumstances estimator. 

• Taxpayers may need to include Additional Medicare Tax and Net Investment Income Tax when figuring withholding and estimated tax. Taxpayers may request that employers deduct and withhold an additional amount of income tax withholding from wages on Form W-4 if they are affected by these taxes.

Find more information on this and other tax topics by visiting: www.irs.gov/Individuals.