The IRS has issued final/temporary and proposed rules, and a raft of guidance and draft forms related to reporting requirements for employers and individuals under health care reform. The rules and guidance are designed to help individuals and businesses calculate both their penalties if they don’t have health coverage, and subsidies, if they are eligible, to help them pay for coverage. The draft forms give an idea of the format in which IRS will be asking companies and individuals to report on the health coverage they had in tax year 2014.
Forms on Health Coverage Reporting
Under the Affordable Care Act, the IRS will be providing forms to be used by employers and insurers to report on the kind of health coverage they offer to their employees. Employers, their tax preparers and developers of tax software will use the forms. On July 24, the agency posted draft versions of the forms, which it noted are not to be relied on or filed. The government invites comments from the public on them, at http://www.irs.gov/uac/Comment-on-Tax-Forms-and-Publications.
They include:
- Form 1094-B: Transmittal of Health Coverage Information Returns;
- Form 1095-B: Health Coverage;
- Form 1094-C: Transmittal of Employer-Provided Health Insurance Offer and Coverage Information Return; and
- Form 1095-C: Employer Provided Health Insurance Offer and Coverage.
New Revenue Procedures
In Revenue Procedure 2014-46, the IRS announced that a single individual who failed to get health insurance will face a tax penalty of no more than $204 for each month he or she lacked coverage in 2014. The maximum amount for a family with five or more members is $1,020 in 2014, the agency said on July 25.
Under the ACA, penalties for failing to get health insurance cannot exceed the national average premium for bronze level of coverage offered through exchanges, the health care reform law says. Penalties may vary depending on the number of uncovered dependents (and spouse) in the taxpayer’s household. In the revenue procedure, the IRS announced the national average bronze-level premium amount, and some of the methods it used to get it.
Revenue Procedure 2014-37 updates the table used to calculate an individual’s premium tax credit for health insurance bought through an exchange. It also updates the required contribution percentage to determine whether an individual is eligible for employer-sponsored minimum essential coverage. Individuals cannot get tax credits if they have an offer of minimum essential coverage from their employer; but they are not considered to have such an offer if the employee has to pay more than 9.5 percent of his or her salary to pay for that coverage. That percentage share drops for low-income workers (all the way to 2 percent for the lowest earners).
The revenue procedure increases those percentages, which are found at 26 U.S.C. Section 36B(b)(3)(A)(i), for many eligible subsidy applicants. In other words, it makes it more difficult for some subsidy applicants to assert that their employer’s MEC was too expensive, thereby allowing fewer of them to file for subsidies.
The IRS also issued Revenue Procedure 2014-41 on how taxpayers may compute the deduction under Code Section 162 for health insurance costs for self-employed individuals and the premium tax credit under Code Section 36B.
New Rules
Also on July 25, the IRS issued a final-temporary rule on the health insurance premium tax credit, for individuals seeking help paying for health insurance purchased on exchanges. The rules address: (1) circumstances in which a married taxpayer may claim a premium tax credit on a separate return; (2) adjusted figures taxpayers will use to determine whether they are eligible for tax credits; (3) reconciliation of advance credit payments and the premium tax credit; (4) reconciliation for divorced or separated taxpayers; (5) reconciliation for married taxpayers filing separately; and (6) deductions for self-employed individuals. This rule will be officially published on July 28, 2014.
And the agency issued a proposed rule, modifying Code Section 36B to incorporate the changes made in the final-temporary rules, which are proposed to apply for taxable years ending after Dec. 31, 2013. That proposed rule will be open to public comment.