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LdiJ

Senior Member
What is the name of your state (only U.S. law)? NA for this thread.

Today I did a CE seminar about the nuts and bolts of the tax changes as they pertain to Obamacare. By nuts and bolts I am talking about what and how things have to be reported on tax returns.

For about 80 to 85% of taxpayers its as simple as checking a box saying that everybody in your family had insurance for the whole year...at least for 2014. For the rest of the taxpayers its ugly...and for 2015 and forward for everybody else its also ugly.

And its really, seriously ugly for divorced and separated parents who trade off tax exemptions for the children...and obtain insurance on the exchange.
 


TheGeekess

Keeper of the Kraken
What is the name of your state (only U.S. law)? NA for this thread.

Today I did a CE seminar about the nuts and bolts of the tax changes as they pertain to Obamacare. By nuts and bolts I am talking about what and how things have to be reported on tax returns.

For about 80 to 85% of taxpayers its as simple as checking a box saying that everybody in your family had insurance for the whole year...at least for 2014. For the rest of the taxpayers its ugly...and for 2015 and forward for everybody else its also ugly.

And its really, seriously ugly for divorced and separated parents who trade off tax exemptions for the children...and obtain insurance on the exchange.
This is no surprise. :cool:
 

quincy

Senior Member
What is the name of your state (only U.S. law)?

... For the rest of the taxpayers its ugly...and for 2015 and forward for everybody else its also ugly. ...
Although I don't expect you to repeat your seminar here, LdiJ (although that would be interesting), could you provide a few details of some of the "ugliness" that taxpayers can expect if they were uninsured?

I am curious.

Thanks. :)
 

RRevak

Senior Member
Although I don't expect you to repeat your seminar here, LdiJ (although that would be interesting), could you provide a few details of some of the "ugliness" that taxpayers can expect if they were uninsured?

I am curious.

Thanks. :)
Ditto this as i'm tentatively looking at being uninsured until March of next year. Same with my youngest daughter :(
 

LdiJ

Senior Member
Although I don't expect you to repeat your seminar here, LdiJ (although that would be interesting), could you provide a few details of some of the "ugliness" that taxpayers can expect if they were uninsured?

I am curious.

Thanks. :)

The "discount" that one receives for purchasing health insurance on the exchange is not actually a discount. Its a tax credit that you receive in advance, that is paid directly to the insurance company. On your tax return you have to reconcile the credit. The estimated credit is based on your 2013 (for this year) income/dependents as reported on your tax return, but the actual credit is based on your 2014 income/dependents.

So, divorced dad ordered to provide health insurance for the children. He and mom are ordered to get the exemption for the children every other year. He buys insurance on the exchange and receives a credit of 8k towards the insurance. However, for 2014 its mom's year to claim the children. Therefore, when dad does his taxes he ends up not being eligible for the credit he has already received and has to pay it back. (with limitations) Mom on the other hand, because she does get to claim the children is eligible for the credit, and its a refundable credit, so she gets a big additional refund. Now, there is a method where mom and dad can agree to share the credit...but they have to seriously agree and cooperate to make it work...

Then, there is the situation where mom and dad are not divorced or separated. Dad is unemployed at the beginning of the year and purchases insurance on the exchange and gets a large credit. Dad finds a job mid year making decent money and mom and dad no longer qualify for the credit. Mom and dad have to pay back (with limitations) the credit when they do their taxes.

For those who are uninsured, it is necessary to report information on your tax return on a monthly basis and you must fill out a separate form for each person in your family. So, if you are a family of 6, and you do not have health insurance, you must fill out 6 forms, detailing on a month to month basis the situation with health insurance for each member of the family. The same applies if you were only partially insured. You pay a penalty for not having insurance. Now, there are lots of potential exemptions from the penalty, but those exemptions have to be proven on a month to month basis...and won't necessarily apply across the board for every member of your family.

A 55 year old grandmother making 50k a year does not have health insurance and is not required to pay a penalty because even on the exchange health insurance is not "affordable" (more than 8% of her annual wages). However, her adult daughter and grandchildren move in mid year and she ends up supporting them. Therefore she claims them as dependents on her tax return. That changes the size of her family for the purpose of health insurance and therefore she is no longer eligible for the exemption, and is penalized for not having health insurance. Her financial situation did not improve, it actually got much worse, but suddenly its "affordable".

Your teenage child works part time and makes enough money that they actually have to pay a small amount of tax. Because they are your dependent you have to include their wages on your tax return as part of the calculation for your insurance tax credit/penalty/affordability.

If someone claims their significant other as a dependent because their significant other didn't work...they are now responsible if their significant other is uninsured.

This changes the whole dynamics of taxes as regards to dependents. It creates a whole additional level of battle for divorced and separated parents. It makes tax returns infinity more complicated to prepare.

I am a bit frustrated by the whole situation because this is the first that we have been able to see the nuts and bolts of the situation and its worse than I imagined.
 

quincy

Senior Member
Yikes!

I definitely don't envy the extra work you and your tax-preparing cohorts will have this year.

Thank you for providing the excellent examples, LdiJ. They have led me to a better understanding (and anyone who can lead me to a better understanding of taxes is a bit of a miracle worker :)).
 

TheGeekess

Keeper of the Kraken
....

I am a bit frustrated by the whole situation because this is the first that we have been able to see the nuts and bolts of the situation and its worse than I imagined.
Like Nancy Pelosi said, it would have to be passed before we could see what was in it. :cool:
 

davew128

Senior Member
Admittedly I haven't paid close attention to it. I assume there is third-party reporting of insurance coverage?
 

CdwJava

Senior Member
LdiJ said:
Your teenage child works part time and makes enough money that they actually have to pay a small amount of tax. Because they are your dependent you have to include their wages on your tax return as part of the calculation for your insurance tax credit/penalty/affordability.
Yoiks!!

I am SOOOO glad that my dependent children are covered on my employer's insurance and not the exchange!

But, I do have one son who supports himself to the tune of about 80% of his expenses such that I can't claim his as a dependent for taxes, but he is still covered by my insurance as he is a full-time student who pays for school with FAFSA and part time work. By the time he is too old to cover on insurance, he should be the property of the USAF and half way through med school on their dime.
 

cbg

I'm a Northern Girl
Just a reminder that under the Federal ACA the right to cover a child until age 26 is not tied to student status. While you are not required to do so (it's between you and your kid) you MAY continue to cover him until age 26 regardless of whether he is a student or not.
 

RRevak

Senior Member
Yoiks!!

I am SOOOO glad that my dependent children are covered on my employer's insurance and not the exchange!

But, I do have one son who supports himself to the tune of about 80% of his expenses such that I can't claim his as a dependent for taxes, but he is still covered by my insurance as he is a full-time student who pays for school with FAFSA and part time work. By the time he is too old to cover on insurance, he should be the property of the USAF and half way through med school on their dime.
I was also just told the military is no longer offering to pay for school. At least this is what my marine friend was told. He was told upon his enlistment that they would but just before he was set to get started they said they were no longer paying college expenses for any college period. This was within the last year and a half. Its one of the reasons he is no longer a soldier.
 

davew128

Senior Member
I was also just told the military is no longer offering to pay for school. At least this is what my marine friend was told. He was told upon his enlistment that they would but just before he was set to get started they said they were no longer paying college expenses for any college period. This was within the last year and a half. Its one of the reasons he is no longer a soldier.
No, your friend was NEVER a soldier. He was a MARINE. You would do well to know the difference. :mad:
 

CdwJava

Senior Member
I was also just told the military is no longer offering to pay for school. At least this is what my marine friend was told. He was told upon his enlistment that they would but just before he was set to get started they said they were no longer paying college expenses for any college period. This was within the last year and a half. Its one of the reasons he is no longer a soldier.
As of last month, they were still offering the medical scholarships, so ... Of course there is no guarantee that the program will be in effect two years from now. But, as they have been for many years, there is no reason to expect that they will eliminate them entirely.

The max they appear to pay for college right now is $2,500 per semester, if memory serves, but the medical grad school scholarship program is different.
 

davew128

Senior Member
One thing that just strikes me as wrong is that the person claiming a dependent gets hit with a penalty if that that dependent doesn't have coverage EVEN IF that person isn't legally responsible for the welfare of that dependent such as in the significant other example.
 

LdiJ

Senior Member
One thing that just strikes me as wrong is that the person claiming a dependent gets hit with a penalty if that that dependent doesn't have coverage EVEN IF that person isn't legally responsible for the welfare of that dependent such as in the significant other example.

I have problem with that and I also have a problem with the problems it will pose to the divorced and separated parents.

For 2014 the exchange will issue 1095-A's for people insured with the exchange. For 2015 and forward private insurance and employer insurance will have to issue 1095-B's and 1095-C's. At that point you will no longer be able to just click the button that says that everyone is insured.
 

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