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What happens to a young adult who applies for premium tax credits the first year she is independent, and so she hasn’t filed a return in prior years?

Written by Hummingbird Insurance on . Posted in Frequently Asked Questions.

One challenge a young adult may face in her first year of independent tax filing is verifying income, since one of the prime sources of income data is a prior year tax return. However, other methods of verification are available; for instance, the Marketplace will have access to monthly wage data that can verify current income. In the case of someone who is self-employed or who has fluctuating income, additional documentation of income may be accepted.

The fact that a young adult has not filed in the past will not prevent her from receiving premium tax credits.  When she applies, if the Marketplace cannot verify her income right away, she will receive a provisional (temporary) eligibility determination based on the income information she puts in her application.  The Marketplace will then give her a period of time (usually 90 days) to provide additional documentation of income.  Current pay stubs, bank deposit records, or other documentation may be appropriate, depending on her situation.

I got health insurance last year through a Marketplace plan and also received advanced premium tax credits to reduce my monthly premium. What happens if I don’t file my federal income tax return this spring? What if I file but don’t include Form 8962?

Written by Hummingbird Insurance on . Posted in Frequently Asked Questions.

For any year when you received advanced premium tax credits, you are required to file a federal income tax return, including Form 8962.  If you fail to do this — it is called “failure to reconcile” — you may be unable to apply for premium tax credits for the following year.  If you file a federal income tax return but don’t include Form 8962, that is also considered a failure to reconcile and you may be prevented from applying for premium tax credits at the next Open Enrollment.
If this happens to you, be sure to remedy this failure as soon as you can.  You can still sign up for health insurance coverage for the coming year, but you won’t be able to get advance premium tax credits until you have filed your prior-year tax return with Form 8962.

I got a premium tax credit in 2017, but I usually don’t file a tax return and didn’t realize I was supposed to file a 2017 return this year. Now I’m trying to renew my premium tax credit for next year and the Marketplace says I can’t. What do I do now?

Written by Hummingbird Insurance on . Posted in Frequently Asked Questions.

You should file your federal income tax return for 2017 as soon as possible.  Then log into your Marketplace account, update your application information, and tell the Marketplace that you have filed your taxes by attesting to that question on the application.  Keep in mind that the Marketplace will check with the IRS during the coverage year to verify your return was filed and, if it cannot verify, will terminate your premium tax credit.

I never filed an income tax return before. Can I claim a premium tax credit this year?

Written by Hummingbird Insurance on . Posted in Frequently Asked Questions.

Yes in most cases. People who have not filed a tax return before can qualify for a premium tax credit. However, there is a requirement to file a return for the tax year in which you receive a premium tax credit.  If you got an advanced premium tax credit last year, you must file a federal income tax return for that year to be eligible to receive an advance premium tax credit next year.

How often during the year can I adjust my premium tax credit amount? What documentation is required to make an adjustment? How long after I request the adjustment will it take effect?

Written by Hummingbird Insurance on . Posted in Frequently Asked Questions.

There is no limit to the number of times a person may report income, family or insurance-eligibility changes to the Marketplace. Changes that are reported by enrollees will be verified by the Marketplace. Then the Marketplace will send you a notice (called a redetermination notice) showing your revised eligibility for premium tax credits and cost-sharing reductions. In addition, people can always ask the Marketplace to provide them with a monthly advance premium credit below the amount the Marketplace determines based on the household’s income if they want to minimize the chance of needing to owe money at the end of the year.

The adjustment will take effect by the first day of the month following the date of the redetermination notice. For example, if an enrollee reports a change in income on June 25 and the Marketplace verifies the change and sends a redetermination notice to the enrollee on July 3, the change will be implemented on August 1.

I estimate my income next year will be 140% of the federal poverty level, so I need a premium tax credit and I need to have it all paid in advance. If, by the end of the year, it turns out my annual income was even lower – 130% of the federal poverty level – so I could have enrolled in Medicaid, will I have to pay back the premium subsidy?

Written by Hummingbird Insurance on . Posted in Frequently Asked Questions.

No, your final premium credit amount will be determined based on your income for the year as reported on your tax return. The fact that it ended up being 130% of the poverty line does not mean you have to pay back the premium tax credit you received. In fact, your final credit amount will likely be larger than the amount you received in advance.

What’s the most I would have to repay the IRS?

Written by Hummingbird Insurance on . Posted in Frequently Asked Questions.

That depends on what your actual annual income turns out to be. If your income goes over 400% FPL you will have to repay the full advance premium tax credit amount you received. If your actual annual modified adjusted gross income is higher than what you projected but less than 400% FPL, there are repayment limits based on income. On your tax return, you will compare the actual amount of advance premium tax credit you received during the year to the amount you should have received based on your modified adjusted gross income, and then pay back the excess up to the repayment limit.

My income is uneven during the year. Some months I earn very little, other months are much better. I think my annual income will be low enough to qualify for subsidies next year, but I’m not sure. What if I’m wrong?

Written by Hummingbird Insurance on . Posted in Frequently Asked Questions.

It’s common for income to fluctuate, particularly if you are self-employed, perform seasonal work or have multiple jobs. To achieve the most accurate premium tax credit amount, you should report income changes to the health insurance Marketplace during the year, as they happen. Otherwise, if you claim a premium tax credit during the year based on estimated income and your actual income for the year edges over 400% FPL, you will need to pay back the full credit amount. To avoid this result, if you estimate your annual income will be close to 400% FPL, you could also consider waiting until you file your taxes to take all or a portion of the premium tax credit on your tax return instead of receiving advance payments.

What if I don’t know what my income will be next year?

Written by HummingbirdinsAdmin on . Posted in Frequently Asked Questions.

When you apply for the premium tax credit, you will be asked to estimate your expected income for the upcoming year. Often a good place to start is to consider what your income is this year, or what income you reported on your tax return last year. However, if your circumstances have changed since then, for example, if you recently lost your job, you should make your best estimate of what your income will be next year. The health insurance Marketplace will compare your income estimates against records at the Internal Revenue Service, Social Security Administration and other sources. If your estimate and official records don’t match, or aren’t sufficiently close, but you meet all other eligibility requirements, you might be asked to provide documentation to support your income projections.

In general, if the income amount shown on that official record is more than 25% or $6,000 (whichever is greater) higher than the amount you put on your application, you might receive a data match inconsistency notice from the Marketplace and you’ll need to provide more documentation.

If you don’t have that documentation handy, the Marketplace will provide subsidies for up to 90 days while you gather and submit your documentation for verification. It is very important that you provide any documentation requested by the Marketplace in a timely manner; if you don’t your subsidies might be reduced or terminated.

Keep in mind that if you estimate your income incorrectly and end up claiming more help than you are eligible for, you may have to pay back some or all of the premium tax credit you received. If you over-estimate your income and end up claiming less help than you are entitled to, the difference will be refunded to you when you file your income taxes the following year.

I’m raising my grandchild and claim her as a dependent. If I apply for Marketplace subsidies, will we be considered a household of two?

Written by HummingbirdinsAdmin on . Posted in Frequently Asked Questions.

Yes, you will be considered as a household of two for both Medicaid and premium tax credits. However, your grandchild will be considered as her own household for Medicaid and CHIP and your income will not count in determining her eligibility for these programs. Assuming she does not have her own income she will likely be eligible for Medicaid or CHIP and not eligible for premium tax credits for coverage in the Marketplace. You could of course purchase coverage for her in the Marketplace but you would not be eligible for a premium tax credit to help pay for her plan.  Whether you could include her on your policy would depend on what insurers offer in your Marketplace.