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Jesse Handel
Jesse Handel, Tax Preparer
Category: Tax
Satisfied Customers: 262
Experience:  7 years tax preparation. IRS Registered Tax Preparer.
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Hello again. As before I am a self employed, sole proprietor

Customer Question

Hello again. As before I am a self employed, sole proprietor and receive 1099 from two companies that pay me for my services. I here the ACA has some some threshold of exchanges not costing more than 9.5% of employee income. Where do I fall in this trainwreck of the ACA?
Submitted: 10 months ago.
Category: Tax
Expert:  Jesse Handel replied 10 months ago.
Hello again and thank you for coming back to our website. We appreciate the opportunity to help you with your questions. I can't guarantee that the answers I can give you to your question will be the final answer, since this whole mess is being created and tweaked continually as we go along. By the first part of January, we will have solid information about how the ACA will work and how it will affect your taxes, but that won't help you much that late. Based on what we know now, you will be required to have health insurance by the end of 2013 and you will be asked on your tax return if you have health insurance; however, since the employer mandate was delayed until 2014, there won't be any way for the IRS to verify your answer. No companies are going to be reporting the health insurance status of taxpayers to the IRS until the 2014 tax year. I can't suggest that you lie to the IRS, but the IRS is counting on taxpayers to honestly answer the question about health insurance coverage based on the honor system.

With regards XXXXX XXXXX thresholds for the exchanges, let me do some research and find out the current status of the rules. I'll get back to you as soon as I have some more information. But, bear in mind that the rules are changing daily, so I can only give you the current answers and I can't guarantee the rules won't change many more times.

If you'll give me a half an hour or so, I'll get back to you with more information. Thanks.
Customer: replied 10 months ago.

no problem take your time. I am not a corporation just a local DBA or trade name filing and filing with a EIN and sometime with a SS depending what the preparer decides.

Expert:  Jesse Handel replied 10 months ago.
Hello again,

Based on the information you provided above, it looks like you live in New Jersey. Your health insurance options will be based on the health insurance exchange set up by the state of New Jersey. Your ability to qualify for subsidies for health insurance premiums will be based on the amount of income you reported on your 2012 tax return. Currently, the rules for the health insurance exchange in New Jersey are up in the air, because the state legislature has passed the bill but Governor Christie won't decide whether to sign the bill until after November 6. According to the announced plans for the New Jersey health exchange, Medicaid should cover an individual or family with income up to 200% of the federal poverty limit and subsidized individuals or families with incomes up to 399% (or nearly 4 times) the federal poverty limit. The federal poverty limit is based on the size of your family, but for an individual it is $14,440 up to $21,660 for a family of four.

The 9.5% of income threshold is an example amount that a family of four making $88,000 in income would pay for health insurance. Unless you earn over $200,000 per year, your premium will be based on age, number of people covered, health status, and other factors; but not based on income. If you earn more than $200,000 per year (or $250,000 per couple), then your medicare payroll taxes will increase from 1.45% to 2.45%. But that is separate from the amount you will pay for medical insurance.

Based on the current New Jersey health insurance exchange plan, the maximum you would pay would depend on the plan. You can go to this web address and get a list of all insurance plans in the New Jersey exchange and the premiums for each plan based on your number of family members, ages, and health. It's an eight page PDF file, but it will give you the plans and the premiums. New Jersey premiums

If you have any problems with this PDF file, let me know and I will provide further help.

There is also a health exchange program called "SHOP" that is designed for small businesses. I can't find much information about it and I think that it was part of the business mandate that was delayed until 2014. You might want to keep your eyes open for any information about that exchange, because you may be able to get a better deal with insurance through your small business (self-employed) than you can as an individual.

I hope this answers all of your current questions. Again, though, I warn you that all of this stuff is changing daily, so be aware that the numbers may change between now and the time that you sign up with the New Jersey health insurance exchange. Please let me know if I can provide any more information for you.
Jesse Handel, Tax Preparer
Category: Tax
Satisfied Customers: 262
Experience: 7 years tax preparation. IRS Registered Tax Preparer.
Jesse Handel and other Tax Specialists are ready to help you
Expert:  Jesse Handel replied 10 months ago.
I just barely heard on the news the proposal that is being discussed to cap health insurance premiums at no more than 9.5% of the worker's income. This proposal is only under discussion and hasn't been turned into a bill or a regulation. It may become something, but right now it's just a discussion point. Also, the reporter pointed out that under the proposal the 9.5% cap would only apply to health insurance for the worker himself or herself, not for any spouses or family members. I'm sorry that I didn't realize exactly what you meant by the 9.5% cap, but I hadn't heard about it until just now. It would be nice if that proposal was acted on by the government, but it's just a discussion point right now.

One thing I should have mentioned, since you are self-employed, if you aren't currently covered by any subsidized health insurance through an employer or through a spouse's employer; you can deduct 100% of your self-employed health premiums on your Schedule C. If you are covered by insurance, check with the insurance to see if they sell it to you any cheaper than they would sell it to anyone else. If they don't reduce your premium because you're an employee or your spouse is an employee, then you still qualify to deduct your premiums on your Schedule C.

If you qualify for this and you haven't been taking advantage of it, you should look into amending your last three years of tax returns; because it could save you a lot of money.

I'll try to remember to update my answer to you as I get new information for as long as the company I work for keeps this question open. I understand the confusion and fear that the ACA has created. As a tax professional, I'm reading everything I can find about the ACA and trying to keep up to date with each new change so that I can keep my clients updated. It's massively confusing even for professionals at this point. I hope that they will delay the individual mandate to 2014, the way that the government has already delayed the employer mandate. As far as I can tell, nobody including the IRS, the federal government, the state governments, the insurance companies, or individuals are ready to deal with these new rules. I hope you are one of the lucky people that find that you end up paying less for health insurance after the smoke clears.

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