Estimate Affordable Care Act Credits and Payments Using New IRS Tool

by John Darer® CLU ChFC CSSC RSP CLTC

The IRS has introduced, an online tool to help individuals and employers to estimate Affordable Care Act (ACA) Credits and Payments, through its Taxpayer Advocacy Service.

IRC 5000(a) provides, in part:

(a) Requirement to maintain minimum essential (medical) coverage

An applicable individual shall for each month beginning after 2013 ensure that the individual, and any dependent of the individual who is an applicable individual, is covered under minimum essential coverage for such month.

 

(b) Shared responsibility payment

 

(1) In general

If a taxpayer who is an applicable individual, or an applicable individual for whom the taxpayer is liable under paragraph (3), fails to meet the requirement of subsection (a) for 1 or more months, then, except as provided in subsection (e), there is hereby imposed on the taxpayer a penalty with respect to such failures in the amount determined under subsection (c).

(2) Inclusion with return

Any penalty imposed by this section with respect to any month shall be included with a taxpayer’s return under chapter 1 for the taxable year which includes such month.

 

(c) Amount of penalty

(1) In general the amount of the penalty imposed by this section on any taxpayer for any taxable year with respect to failures described in subsection (b)(1) shall be equal to the lesser of

(A) the sum of the monthly penalty amounts determined under paragraph (2) for months in the taxable year during which 1 or more such failures occurred, or

(B) an amount equal to the national average premium for qualified health plans which have a bronze level of coverage, provide coverage for the applicable family size involved, and are offered through Exchanges for plan years beginning in the calendar year with or within which the taxable year ends.

The Taxpayer Advocate Service has developed several tools for individuals and businesses to assist with estimating their Affordable Care Act (ACA) related credits and payments.

The Premium Tax Credit Change Estimator can help you estimate how your premium tax credit will change if your income or family size changes during the year. This estimator tool does not report changes in circumstances to your Marketplace. To report changes and to adjust the amount of your advance payments of the premium tax credit you must contact your Health Insurance Marketplace. Be sure to report all changes directly to that Marketplace because they can affect both your coverage and your final credit when you file your federal tax return.

The Individual Shared Responsibility Payment Estimator can help you estimate the amount you may have to pay if you did not have minimum essential coverage during the year. This tool can only provide an estimate of your individual shared responsibility payment. To determine the payment when you file your tax return, use the Shared Responsibility Payment Worksheet in the instructions for Form 8965.

Because these tools provide only an estimate, you should not rely upon them as an accurate calculation of the information you will report on your tax return. You should use these estimators only as a guide to assist you in making decisions regarding your tax situation.