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The Affordable Care Act has become a major topic of debate, and now it is become a major topic of discussion among both taxpayers and accounting professionals. If you are currently working as an accountant, or you are studying accountancy to enter the field, knowing how the Affordable Care Act changes in legislation will affect your clients and their obligations to the Internal Revenue Service is imperative. As a very long piece of legislation that is more than 100 pages long, you cannot expect to comprehend the ins and outs of the Act, but you will need a general understanding of critical pieces of information that tax professionals must know. Here is the critical information all accountants should know:
What Types of Expanded Coverage Are Offered By the Affordable Care Act?
In a perfect world, the ACA would overhaul the healthcare system in a way that would bring health insurance to every American immediately. Unfortunately, this ideal situation is not possible, and the overhaul must be implemented in several different phases. Each of these phases is expected to be complete by 2018, with the first phase being implemented on January 1, 2014.
One of the keys to the ACA is expanding coverage for those who are dependent, low income, and who have been denied coverage. You should be familiar with the fact that young adults can remain on their parents’ plans until 26, that pre-existing conditions cannot disqualify individuals from coverage, and that Medicaid will be offered to individuals with incomes below $15,302 starting 2014. Not everyone will be required to buy their own individual plan.
Buying Affordable Health Insurance and Receiving Subsidies
The option to buy affordable health insurance took effect on October 1, 2013. Taxpayers have the option to buy coverage from a marketplace, but anyone who is uninsured has until March 1, 2014 to buy coverage without being penalized. When taxpayers buy individual coverage, they may receive a government subsidy for complying with the law if they make less than $94,200 per year. While many subsidies that come in the form of a tax credit are delayed, those who receive this subsidy will see it applied to their health insurance premiums immediately when coverage is purchased. This is even a greater incentive to buy in 2014.
The Penalties for Failing to Purchase Coverage
Not everyone will comply with the ACA, and those who do not purchase coverage will be penalized in 2015. When taxpayers who are uninsured file their taxes, they will be penalized $95 per adult and $47.50 per child. The penalty can be as high as 1 percent of the household income if this amount is higher than the fixed penalties. For those who delay the process of getting insurance, the penalty will increase annually. No penalty will be assessed to individual who have a gap in coverage that lasts less than 3 months.
It is important to familiarize yourself with the fact that some taxpayers are exempt from the Affordable Care Act all together. If your client currently has coverage, they have a qualifying financial hardship, or they are a Native American, they are not required to comply and will not be penalized. Be sure to educate yourself on the deadlines and other important details, and become knowledgeable on the Affordable Care Act.
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