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Dr. Fiona Chen
Dr. Fiona Chen, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 355
Experience:  Former IRS Revenue Agent
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I am confused as to which Colorado State Health Coverage

Customer Question

I am confused as to which Colorado State Health Coverage programs fulfill requirements to not be penalized when completing my federal tax form for this year. I signed up with Companion Life Principle Advantage Limited Benefit Health Insurance. I understand that I do not have full Health Care Coverage, however, was informed by the purchase representative that recent court rulings allowed for this plan when asked if it qualified for health insurance not included in the Obama Plan that would not have a tax penalty. My concern was to pay a tax penalty if my health plan did not qualify. I have since checked this out and other representatives claim that I may or may not have to pay a tax penalty based on this year's current income. Can you please tell me if I will or will not have to pay a tax penalty regarding my present health insurance coverage. If you determine that I will need to pay a tax penalty, what would be the amount? I have a family of five members: my wife, three children, and myself. My gross family income estimate for this year will be $74,000. My Net income estimate for this year will be $60,000.
One last question. We moved to Colorado in June of this year from California. I believe that my open enrollment period just ended. Can I still change to another health insurance group without tax penalty or am I stuck for this calenader year? I know that my currant health plan could be terminated without penalty on a month to month basis. Could I still enroll in an obama program and what would be my choices for Colorado Springs, Colorado that would meet a health insurance prgram without tax penalty.
I appreciate your time and help on the above questions!!!
***** *****nse
e-mail
Submitted: 3 months ago.
Category: Tax
Expert:  Dr. Fiona Chen replied 3 months ago.

Dear Customer,

Part I.

To report that you have minimum required health insurance, on Form 1040, page 2, line 61, we put in a check mark.

This issue only becomes a tax matter when a person does not have a full year coverage, or part of a family does not have a full-year coverage, and most of all when they applied on the Federal Exchange and obtained cash paid to the health insurance company for premium. Then, we use forms 8962 and 8965 to deal with the tax credit issue. What I am trying to say here is this is not an issue until it becomes an issue.

Your health plan is a high-deductible plan. But it is still a health insurance plan. That is all the law requires of us.

Part II.

According to Obama care program requirement, any and all health insurance plans have to provide the basic care requirements. Otherwise, they cannot be in business.

The question on the tax form is "Health care: individual responsibility". The instruction for the requirement is "minimum essential coverage" and not "full coverage". Below is citation and website link to Instruction of Form 1040, page 51.

https://www.irs.gov/pub/irs-pdf/i1040gi.pdf

Health Care: Individual Responsibility You must either: Have qualifying health care cover-age for every month of 2015 for your-self, your spouse (if filing jointly), and anyone you can or do claim as a depend-ent (you are treated as having coverage for any month in which you have cover-

age for at least 1 day of the month),

Qualify for an exemption from the requirement to have health care cover-age, or Make a shared responsibility pay- ment with your return and enter the amount on this line. If you had qualifying health care cov-erage (called minimum essential cover-age) for every month of 2015 for your-

self, your spouse (if filing jointly), and anyone you can or do claim as a depend-ent, check the box on this line and leave the entry space blank.

Part III.

By the end of the year, the health care insurance company will send you a form 1095-A to show whom has been covered in which month of the year. Then, you or your tax return preparer will type in to the software accordingly. I will do a draft tax return based on 2015 for your situation in terms of your income level and family size to ease your mind. I am sending this part to you first. Sometimes, when I typed in a long response, the whole thing can disappear on me. So, I will send you my next posting, soon.

Regards,

Fiona Chen, MPA, PH.D., CPA, ABV, CFF, CITP

Expert:  Dr. Fiona Chen replied 3 months ago.

Dear Customer,

Part III continues.

1) The year-end form you received could be 1095-B instead of 1095-A. Form -B is health care; Form-A is plan obtained through the Federal Exchange website. Below links are for your further refereneces.

https://www.irs.gov/affordable-care-act/individuals-and-families/health-care-law-and-your-tax-return

https://www.irs.gov/affordable-care-act/individuals-and-families/health-care-law-and-you

https://www.irs.gov/pub/irs-prior/f1095b--2015.pdf

2) https://www.irs.gov/pub/irs-pdf/i8965.pdf

In the above link, IRS publication, page 5, it is defined that the individual plan we purchase directly from an insurance company is qualified for health insurance responsibility.

3) It is strongly suggested that with your family size and income, when you apply for a health insurance plan through federal health care exchange market, you may qualify for premium tax credit. That is, the government will pay part of your health plan premium for you. Sometimes, your co-pay amount requirement will be reduced, too, when you sign up through the exchange. The credit is only available if you sign up through the exchange. Since you are thinking to change to a different plan, you may want to consider to give them a call. They are very knowledgeable and the phone service is 24/7. Of course, you may want to simulate on the website and compare. Personally, I found that the person who answers the phone can help and the person can even help us finish application on line.

When I simulated your family size and income level, it seems that signing up a health care plan through the federal exchange market would help. You may be able to sign up an insurance plan with lower payment and better service provisions. Start with the federal one first. Do not start with your state exchange first. Below is the contact information. Because you just relocated, I believe that they would allow you to apply for a new one. Please give them a call as soon as possible.

3) Even for an individual who does not have health coverage, the law provides allowances for exemption. The IRS has an on-line calculator for taxpayers to see whether they qualify for exemption. https://www.irs.gov/uac/am-i-eligible-for-a-coverage-exemption-or-required-to-make-an-individual-shared-responsibility-payment. For me, it is not very helpful. Read on the exemptions with link below. Short-term without coverage or coverage is too high to obtain, etc., and/or hardship are all possible exemption.

https://www.healthcare.gov/health-coverage-exemptions/forms-how-to-apply/

4) For a family of 5, filing jointly, adjusted gross income of 74,000, taxable income of 41,400 (after standard deduction of 12,600 and exemption of 5 for 20,000), without any exemption and without any minimum essential coverage or coverage exemption, the tax liability is 1,068. On the draft tax return, the income tax is 5,291 minus 3,000 child tax credit, add 1,068, then, the total tax is 3,359.

But I am almost sure that you have an insurance plan providing minimum essential coverage. I just read the plan on line. When in doubt, give them a call.

5) Call the federal health care market a call. From my basic draft, you may qualify for tax credit for the insurance premium. But that has to be applied through the federal exchange market. -- or your state. However, please start from federal first in terms of a knowledgeable phone call.

See below for the link and phone number.

Regards,

Fiona

https://www.healthcare.gov/

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