Thursday, November 19, 2015

Four Things to Know about Advance Payments of the Premium Tax Credit



When you enroll in coverage through the Marketplace during Open Season, which runs through Jan. 31, 2016, you can choose to have monthly advance credit payments sent directly to your insurer. If you get the benefit of advance credit payments in any amount, or if you plan to claim the premium tax credit, you must file a federal income tax return and use a Form 8962, Premium Tax Credit (PTC) to reconcile the amount of advance credit payments made on your behalf with the amount of your actual premium tax credit.  You must file an income tax return for this purpose even if you are otherwise not required to file a return.

Here are four things to know about advance payments of the premium tax credit:

• If the premium tax credit computed on your return is more than the advance credit payments made on your behalf during the year, the difference will increase your refund or lower the amount of tax you owe. This will be reported in the ‘Payments’ section of Form 1040.

• If the advance credit payments are more than the amount of the premium tax credit you are allowed, you will add all or a portion of the excess advance credit payments made on your behalf to your tax liability by entering it in the ‘Tax and Credits’ section of your tax return.  This will result in either a smaller refund or a larger balance due.

• If advance credit payments are made on behalf of you or an individual in your family, and you do not file a tax return, you will not be eligible for advance credit payments or cost-sharing reductions to help pay for your Marketplace health insurance coverage in future years.

• The amount of excess advance credit payments that you are required to repay may be limited based on your household income and filing status.  If your household income is 400 percent or more of the applicable federal poverty line, you will have to repay all of the advance credit payments. The repayment limits are listed in the table below.
 
Repayment Limitation Table
Household Income Percentage of Federal Poverty Line
Limitation Amount for Single
Limitation Amount for all other filing statuses
Less than 200%
$300
$600
At least 200%, but less than 300%
$750
$1,500
At least 300%, but less than 400%
$1,250
$2,500
400% or more
No limit
No limit

For more information, see the Premium Tax Credit Questions and Answers at IRS.gov/aca. You can also use our Interactive Tax Assistant tool to find out if you are eligible for the premium tax credit.

IRS, States and Tax Industry Announce New Steps to Help Public Protect Personal Tax Data



WASHINGTON — The Internal Revenue Service, state tax administrators and the private-sector tax industry today announced a new campaign aimed at encouraging more people to protect their personal and financial data online and at home.

The “Taxes. Security. Together.” campaign is designed to raise public awareness that even routine actions on the Internet and their personal devices can affect the safety of their financial and tax data. The education campaign will complement the expanded series of protections the IRS, states and tax industry are putting in place for the start of the 2016 filing season to address tax-related identity theft. (See IR-2015-117 and Fact Sheet 2015-23.)

“Identity thieves are evolving, and so must we. Everyone has a part to play,” said IRS Commissioner John Koskinen. "The IRS, the states and the tax industry are putting in place even tougher safeguards for 2016. But, we need the public’s help. We need people to join with us and take an active role in protecting their personal and financial data from thieves.”

The campaign -- which will continue through the April tax deadline -- was announced today at an event hosted by the Federation of Tax Administrators, comprised of state revenue departments across the nation. The effort is part of the Security Summit, a collaborative effort started in March between the states, the IRS and the tax industry.

The joint consumer campaign includes several components, including YouTube videos, consumer-friendly Tax Tips each week and local events across the country. Several IRS publications have been added or updated to help taxpayers and tax professionals. The information will also be shared across IRS.gov, state web sites and platforms used by the tax software community and others in the tax community.

"The governments and industry are taking new steps to protect taxpayers. To build on this even further, we are joining forces to share important information across our websites - whether it's at the state level, in the tax industry or at the IRS. This is an unprecedented collaborative effort for tax administration," said David Sullivan, Tax Administrator for the Rhode Island Division of Taxation and immediate past president of the Federation of Tax Administrators.

It is clear that increasingly sophisticated identity thieves have access to excessive amounts of personal and financial data, which they buy and sell on the black market, and use this data to file fraudulent tax returns using victims’ names and Social Security numbers. While the IRS, states and tax industry are taking new steps to toughen their systems to protect taxpayers, there are also things people can do as well.

"People handle some of their most sensitive personal and financial information when they prepare their taxes on their home computer. But when they sit down, we want to help make sure they are preparing their taxes on a device that is secure. Tax time is two months away, but it's not too early for people to make sure they are doing the right things to protect themselves," said Bernie McKay, an executive vice president at Intuit, one of more than 20 members of the tax industry participating in the Summit process.

The IRS, states and tax industry are urging the public to take active steps to protect themselves. The partners are encouraging people to:
  • Use security software to protect computers. This includes a firewall and anti-virus protection. If tax returns or sensitive data are stored on the computers, encrypt the files. Use strong passwords.
  • Beware of phishing emails and phone scams. A common way for identity thieves to steal names and Social Security numbers, passwords, credit card numbers, bank account information is to simply ask for it. Clever criminals pose as trusted organizations that you recognize and send spam emails, calls or texts. Their email may ask you to update a bank account or tax software account and provide a link that to a fake website that is designed solely to steal your logon information. They may call posing as the IRS threatening you with jail or lawsuits unless you make an immediate payment. They may provide an attachment which, if you download, will infect your machine and enable the thief to access sensitive files or track your key strokes.
  • Protect personal information. Do not routinely carry your Social Security number. Properly dispose of old tax returns and other sensitive documents by shredding before trashing. Check your credit reports and Social Security Administration accounts at least annually to ensure no one is using your good credit or using your SSN for employment. Oversharing on social media also gives identity thieves even more personal details.
“These are all basic, common sense steps that you no doubt have heard many times if you are a regular Internet user. But there are 150 million households that file taxes, and problems still happen. Security software still gets turned off. And there are still, on a regular basis, victims who are tricked by these clever phishing schemes. Not only can this harm the individuals attacked, this can have a direct impact on tax administration," Koskinen said.

The partners are asking all tax preparers and businesses to share information with employees, clients and customers. See www.irs.gov/taxessecuritytogether for more information. There also is IRS Publication 4524, Security Awareness for Taxpayers, which provides a brief overview of steps people can take.

In March, Koskinen convened an unprecedented meeting of IRS, state tax officials and the tax industry to determine what additional steps could be taken. On October 20, the Security Summit participants provided an update to the public.

For the 2016 filing season, there will be new standards for logging onto all tax software products such as minimum password requirements, new security questions and standard lockout features. The software industry will provide more than 20 additional data elements from the tax return submission to the IRS and, in turn, to the states to help identity fraudulent returns. All parties agreed to information sharing on a weekly basis to help quickly identify and adjust to new and emerging tax-related fraud schemes.

The IRS also continues to work to help victims of identity theft and pursue criminals using identity information to file fraudulent tax returns. IRS Criminal Investigation has worked on thousands of identity theft cases. Since 2013, nearly 2,000 identity thieves have been convicted, with the average sentence running well over three years.

Tuesday, November 17, 2015

Resources Available to Help Insurance Providers and Employers Understand ACA Filing Requirements



The IRS will receive and process information returns reporting on individual’s health insurance coverage from insurance companies, self-insured companies, and large businesses and businesses that provide health insurance to their employees.

ACA information returns and transmittals are electronically filed through the ACA Information Returns system, also known as AIR. For information regarding the AIR system and filing Affordable Care Act Information Returns go to the Affordable Care Act Information Returns Program webpage.

The following resources are available:
  • ACA Assurance Testing System / AATS Information
  • AIR Program – Did You Know?
  • AIR Program Overview
  • AIR Schemas and Business Rules
If you encounter an issue or limitation that prevents an information return from being submitted electronically through AIR, and the solution is not posted on IRS.gov for the AIR webpage, call the phone number listed in Publication 5165, Guide for Electronically Filing Affordable Care Act Information Returns for Software Developers and Transmitters. The AIR staff will then work on making the appropriate corrections or which are temporary changes to allow the return to be transmitted electronically.

More Information:

The IRS will hold the next live ACA AIR webinar for transmitters, software developers, and issuers and payers on November 17, 2016 at 3:00 p.m. EST.  See the following page for webinar details and information regarding webinar registration.

IRS Health Care Tax Tip 2015-51 provides links to in depth recorded webinars on the information reporting requirements.

The ACA Information Returns (AIR) Program webpage can be accessed by typing AIR in the IRS.gov search window.

Information about these and other tax provision can be found at IRS.gov/aca.

AIR uses Quick Alerts, an IRS e-mail service, to disseminate information quickly regarding AIR issues to subscribers. This service keeps tax professionals up to date on AIR issues throughout the year.

Thursday, November 12, 2015

Plan now to Use Health Flexible Spending Arrangements in 2016; Contribute up to $2,550; $500 Carryover Option Available to Many



IR-2015-126, Nov. 12, 2015
WASHINGTON ― The Internal Revenue Service today reminded eligible employees that now is the time to begin planning to take full advantage of their employer’s health flexible spending arrangement (FSA) during 2016.
FSAs provide employees a way to use tax-free dollars to pay medical expenses not covered by other health plans. Because eligible employees need to decide how much to contribute through payroll deductions before the plan year begins, many employers this fall are offering their employees the option to participate during the 2016 plan year.
Interested employees wishing to contribute during the new year must make this choice again for 2016, even if they contributed in 2015. Self-employed individuals are not eligible.
An employee who chooses to participate can contribute up to $2,550 during the 2016 plan year. Amounts contributed are not subject to federal income tax, Social Security tax or Medicare tax. If the plan allows, the employer may also contribute to an employee’s FSA.
Throughout the year, employees can then use funds to pay qualified medical expenses not covered by their health plan, including co-pays, deductibles and a variety of medical products and services ranging from dental and vision care to eyeglasses and hearing aids. Interested employees should check with their employer for details on eligible expenses and claim procedures.
Under the use or lose provision, participating employees often must incur eligible expenses by the end of the plan year, or forfeit any unspent amounts. But under a special rule, employers may, if they choose, offer participating employees more time through either the carryover option or the grace period option.
Under the carryover option, an employee can carry over up to $500 of unused funds to the following plan year—for example, an employee with $500 of unspent funds at the end of 2016 would still have those funds available to use in 2017. Under the grace period option, an employee has until 2½ months after the end of the plan year to incur eligible expenses—for example, March 15, 2017, for a plan year ending on Dec. 31, 2016. Employers can offer either option, but not both, or none at all.
Employers are not required to offer FSAs. Accordingly, interested employees should check with their employer to see if they offer an FSA. More information about FSAs can be found in Publication 969 , available on IRS.gov.

Wednesday, November 11, 2015

Three Tax Considerations during Marketplace Open Enrollment



When you apply for assistance to help pay the premiums for health coverage through the Health Insurance Marketplace, the Marketplace will estimate the amount of the premium tax credit that you may be able to claim.  The Marketplace will use information you provide about your family composition, your projected household income, whether those that you are enrolling are eligible for other non-Marketplace coverage, and certain other information to estimate your credit.

Here are three things you should consider during the Health Insurance Marketplace Open Enrollment period:

1. Advance credit payments lower premiums - You can choose to have all, some, or none of your estimated credit paid in advance directly to your insurance company on your behalf to lower what you pay out-of-pocket for your monthly premiums.  These payments are called advance payments of the premium tax credit or advance credit payments.  If you do not get advance credit payments, you will be responsible for paying the full monthly premium.

2. A tax return may be required - If you received the benefit of advance credit payments, you must file a tax return to reconcile the amount of advance credit payments made on your behalf with the amount of your actual premium tax credit.  You must file an income tax return for this purpose even if you are otherwise not required to file a return.

3. Credit can be claimed at tax time - If you choose not to get advance credit payments, or get less than the full amount in advance, you can claim the full benefit of the premium tax credit that you are allowed when you file your tax return. This will increase your refund or lower the amount of tax that you would otherwise owe.

For more information about open season enrollment, which runs through January 31, 2016, visit Healthcare.gov. See our Questions and Answers on IRS.gov/ca for information about the premium tax credit.