Your 2018 Health Plan Must Comply With ACA Rules…

February 27, 2018 By Michelle Andrews from Keiser Health News

Health plans that don’t meet the standards of the Affordable Care Act; work requirements for Medicaid coverage; changes to Medicare’s approved drug lists: As the ground continues to shift on health care coverage, I’m answering readers’ queries this week about these three different types of plans:

I lost my job last year and my employer coverage ended in January. I bought a new plan through the marketplace that went into effect last month. I just received policy information, and it states that because the plan does not cover major medical services, I may have to pay additional taxes to the government. I was told that the plan didn’t cover major medical, but wasn’t told about any taxes. Will I be fined next year?

It sounds like you bought a plan that doesn’t comply with the Affordable Care Act’s requirements, and if that’s the case you may indeed have to pay a penalty for not having comprehensive coverage when you file your taxes next year.

The tax reform law repealed the individual penalty for not having health insurance, but that provision doesn’t take effect until 2019. So, for 2018, you may be charged the greater of $695 or 2.5 percent of your household income.

The federal- and state-run marketplaces established by the ACA sell only comprehensive plans that cover 10 essential health benefits, including “major medical” services like hospitalization and prescription drugs.

But some insurance broker websites call themselves marketplaces too, says Sabrina Corlette, a research professor at Georgetown University’s Center on Health Insurance Reforms. And that can be confusing. These companies may sell other insurance products — like short-term or accident coverage — alongside comprehensive plans that comply with the law.

Ever since the health law was passed, “There have been opportunistic companies trying to take advantage of consumer confusion to make money,” Corlette says.

If you aren’t happy with your plan, you may still be able to switch. Losing your employer coverage qualifies you for a 60-day special enrollment period to pick a new plan. Since it appears you’re still in that window, you may be able to choose a comprehensive plan.

To ensure you’re using your state’s official marketplace, go to healthcare.gov and click on “see if I can change.” That will take you to your state marketplace, even if you live in one of the dozen or so states that run their own exchanges.

I’m in a state that is looking into work requirements for Medicaid. At sign-up time, can I simply tell the exchange that I intend to be ineligible for Medicaid by refusing to work and get the premium tax credit to buy a private plan on the insurance marketplace?

Federal health law regulations don’t clearly address the situation you describe, but the short answer is probably not, according to policy analysts.

In general, people who are eligible for employer coverage or Medicaid — the federal-state health program for people with little income — can’t qualify for federal tax credits that help pay for premiums on plans sold on the health insurance exchanges.

This year, Kentucky and Indiana became the first states to receive federal approval to require some Medicaid recipients to put in 80 hours each month at a paid job, school or volunteer work (among other activities), to receive benefits. Nearly a dozen other states have made similar requests.

States might argue that someone in your situation is eligible for Medicaid — you just have to fulfill the work requirements, says Timothy Jost, an emeritus professor of law at Washington and Lee University in Virginia, who is an expert on the health law.

There are other actions people could take — or fail to take — where this issue might come up. “You could argue that someone is not eligible because they haven’t completed the Medicaid application or provided the required documentation,” Jost says. “There are any number of requirements, but I can’t imagine someone saying they didn’t do those things and so they’re not eligible for Medicaid.”

Whatever the rules, it’s unlikely that many people will be in a position to consider taking this stance. To qualify for premium tax credits, your income must be between 100 and 400 percent of the federal poverty level (about $12,000 to $48,500 for an individual in 2018). But you’d also have to be eligible for Medicaid, generally with an income limit of 138 percent of poverty (about $16,750) in states that expanded coverage to adults. In addition, the Medicaid work requirements in your state would have to apply to you.

I picked a Medicare Part D drug plan that covered all the drugs I take. But as soon as I got my first Novolin R prescription filled, they notified me that they don’t cover it anymore. Can they just switch it like that?

Medicare drug plans can change their list of covered drugs, called formularies. If they’re doing so at the start of the new calendar year, as appears to have happened in your case, the plan may notify you of the change when you fill the prescription for the first time in the new year. At that time, the plan would typically give you a 30-day transition refill so you can switch to another drug that’s on the formulary or start the appeals process to continue taking your current insulin drug, Novolin R.

To go that route, you would need to get your doctor to “make the case for why that formulary drug is not the right drug” for you, says Casey Schwarz, senior counsel for education and federal policy at the Medicare Rights Center, an advocacy group.

Small Business Tax benefits of Putting Spouse on Payroll

1. Build up tax-favored funds for retirement.

If you meet the tax-law requirements, your company can deduct contributions made to a qualified retirement plan on your spouse’s behalf. The annual limits are quite generous. If your company has a defined contribution plan, you can deduct contributions up to 25% of compensation or $54,000, whichever is less.

With a 401(k) plan, another dollar limit applies: Your spouse can defer up to $18,000 to the plan in 2017 (plus an extra $6,000 if he or she is age 50 or older). Your company can match those contributions wholly or partially up to tax-law limits.

2. Shift taxable income away from the company.

If you operate a C corporation, any compensation you pay to your spouse would have to stay with the company. Assuming your corporation is in a higher tax bracket than your personal tax bracket, you’ll save tax overall if your spouse draws a salary.

3. Get more tax mileage from business trips.

Generally, you can’t deduct the travel expenses attributable to your spouse if he or she accompanies you on a business excursion. However, if your spouse is a bona fide company employee and goes for a valid business reason, you may deduct his or her travel costs, including air fare, lodging and 50% of the meal expenses. The benefit is also tax free to your spouse.

4. Cure health insurance coverage ills.

If you’re already paying more to cover your spouse under your company health insurance plan, hiring him or her shifts the expense to your company. Typically, your company can deduct your spouse’s full health insurance cost.

5. Join the employer-paid life insurance group.

Your spouse is entitled to the same group-term life insurance coverage as your other employees.

Abusive Tax Avoidance Transactions (ATAT)

According to the IRS, the definition of ATAT is “An abusive tax avoidance transaction includes the organization or sale of any plan or arrangement promoting false or fraudulent tax statements or gross valuation misstatements, aiding or assisting in the preparation or presentation of a return or other document to obtain tax benefits not allowed by law, and actions to impede the proper administration of Internal Revenue laws. This general definition includes both tax shelters as defined in various sections of the IRC and other types of abusive tax promotions. These strategies may be organized and marketed, often through the internet. The definition is not merely limited to activities that reduce tax liability but may also include transactions that conceal assets and/or income from Collection.”

That, to me, is a lot of words that could be simply states as “any transaction that lacks a legitimate business purpose other than avoidance of paying to income and other taxes”. Let’s see if we can find a hypothetical example. Let’s assume that a group of business people who are citizens and tax residents of Country “A”, and Country “A” does not tax income earned outside the country until it is brought back into Country “A”. So if an internet business is established by residents of Country “A” but in a country that does not impose income tax (Country “B”), the profits of the business are not taxed anywhere but somehow the money needs to go back into the pockets of the stakeholders of the business but they don’t want to pay tax to country “A” or anyone for that matter. So if the business on Country “B” remits the profits to the stakeholders who live in Country “A” it gets taxed. But let’s assume that Country “A” has a treaty with Country “C” that exempts from income tax any dividends paid from a company formed in Country “C” to a stakeholder of that country who lives in Country “A”. So they set up a blocker that is owned by the original Country “A” stakeholders and that entity now owns the entity in Country “B”. So far that sounds like just sound tax planning.

But what if the money use to invest in the internet company comes from different people in different countries. As it is an internet company who knows who does what and bills for a variety of “services” are received from around the world and that money is paid to them via some international payment company similar to a global form of PayPal. Not you have hundreds of payments going around the world into different bank accounts in different countries and in different currencies (including crypto currencies).

To me none of the above transactions are actually legitimate business purpose transactions and only structured for the purpose of earning profits without paying tax and distributing those profits in a manner in which they are not taxed. That, in my mind is Abusive Tax Avoidance.

 

 

New York Individual Return Driver’s License Requirement

NYS is once again reminding taxpayers that tax returns (INCLUDING EXTENSIONS) MUST include information from their state driver’s license, including the NY document ID number (only NY has such a number), or provide other information. So even if you are filing an extension for additional time to file, NY and many other states will REJECT the extension or tax return AND NOT ACCEPT YOUR PAYMENT, This means that you will be charged late filing and late payment penalties if they reject your extension and payment.

Here is a copy of their notice: