[P]eople who received premium subsidies in 2014 through Vermont Health Connect will soon receive forms they must file with their federal tax returns, according to state officials.
The Affordable Care Act’s premium assistance is a tax credit advanced to recipients monthly as a discount off their premium. Eligibility is calculated from a self-reported estimate of earnings, and must be reconciled with people’s actual income at tax time.
Taxpayers will use the 1095-A forms being mailed this week to fill out IRS form 8962, which will determine whether they correctly estimated their income and whether they should receive money back or pay more. People with employer-sponsored exchange coverage do not need to file an 8926.
People below the federal income tax filing threshold of about $10,000 for an individual or between $14,000 and $20,000 for a family are not affected because they do not have to file a return.
There are income-based limits for how much people who received too much in subsidies will be asked to pay back the federal government. Those limits are listed in the chart at the bottom of this article.
There are roughly 20,000 Vermonters who purchased health insurance through the exchange last year who are receiving subsidies, according to figures from the state.
Vermont Health Connect customers receiving premium subsidies should be prepared for the discount they have received all year to be reconciled with their actual 2014 income. That’s true for households with some family members on Medicaid, too, as long as at least one family member has commercial insurance through the exchange.
Consumer advocates, tax professionals and a federal report have highlighted concerns that the manual processes being used to make changes or cancel coverage through the exchange are likely to create problems during the tax reconciliation process.
Vermont plans to train staff at the Tax Department and the Vermont Health Connect call center to answer questions about the premium tax credits and shared responsibility payment.
Operators will direct people to tax preparation services from Volunteer Income Tax Assistance (VITA) clinics, local agencies and the Health Care Advocate’s Office, a project of Legal Aid, which will allocate some of its low income tax project resources to the advocate’s office. Legal Aid does not assist people with tax preparation.
The state also plans to hold information sessions for tax practitioners across the state so they can help their clients file properly. It had previously held such an event, but the IRS had not finalized the premium tax credit forms, potentially making some of the information already shared obsolete.
VITA, which is supported by grants from the IRS, has its volunteers take a test each year to qualify them to give tax advice, and this year’s test includes questions on the premium tax credits and shared responsibility payment, Tax Commissioner Mary Peterson said.
Households with incomes of $53,000 or less can qualify for tax help from VITA.
People who are above the income tax filing threshold must report that they had health insurance or they will owe a penalty, known as the shared responsibility payment.
The individual responsibility payment for not having health insurance is 1 percent of household income above the filing threshold or $95 per adult and $47.50 per dependent, capped at $285 for a household, whichever is greater.
