ACA Tax Household Question

[JosephDeacon]

I realize that most of us are not accountants, but I wanted to bounce this off the forum.

Have a client call who has a dental and vision plan with me. Purchased on-marketplace on his own. For 2016, his tax household was 3 including him, his wife and dependent daughter. All are enrolled in marketplace plan. The daughter was in college and worked part time. She graduated in May and now has a part time job, but works enough hours to qualify for employer sponsored coverage via the employer. To his knowledge, she has not enrolled and she is still on the marketplace plan with the parents.

The father states that he intends to claim her as a dependent for 2016, even though she will file her own federal tax return for year 2016.

Is this possible to do? His concern is that he will lose his subsidy for 2017 (which he will), which is around $750.00 per month.

Any thoughts from the forum? Thanks.

 

[taterpeeler]

he will loose subsidy now with the daughter having EC available.

 

[Yagents]

If her employer sends a 1095 to the IRS stating she has MEC, then..........

He could lose a PORTION of the subsidy. Probably the amount of her full premium alone. If they claim her, they also claim her income, which also turns into partial clawback.

It doesn't make the parents auto ineligible for APTC since they don't have access to MEC.

I'm not an accountant.

 

[Ann H]

It is actually possible for a child to file their own tax return for their own income, and yet be a dependent on the parents' tax return too. It is allowed if the child is under age 19, (or under age 24 and a full-time student for at least 5 months of the tax year), and if the parents provide more than 50% of the support for that child.

Being ELIGIBLE FOR an employer-sponsored MEC plan, that is minimum value (Bronze or 60% actuarial value), and affordable, prevents you from getting a subsidy for that person.

If the employer offers insurance to part-timers, then it's most likely a large employer.

Large employers are REQUIRED to report to the government every year about who is offered health insurance, and whether it was affordable and minimum value. Then the employer sends a 1095 to the employee and a copy to the IRS. Some interpret the law to mean they only have to report for full-time employees working more than 30 hours per week, but many employers report on everyone that is offered MEC.

Bottom line, if he thinks he will legally get a subsidy this way, he can apply for it, but he should know that he might have it clawed back when he files his tax return.

I'm not an accountant either, but my husband is, and I checked my facts with him before writing this. Disclaimer - neither of us are this client's accountant, and we don't know all of his facts. He needs to verify this with his own accountant.

 

[prencik]

It is actually possible for a child to file their own tax return for their own income, and yet be a dependent on the parents' tax return too. It is allowed if the child is under age 19, (or under age 24 and a full-time student for at least 5 months of the tax year), and if the parents provide more than 50% of the support for that child.

Being ELIGIBLE FOR an employer-sponsored MEC plan, that is minimum value (Bronze or 60% actuarial value), and affordable, prevents you from getting a subsidy for that person.

If the employer offers insurance to part-timers, then it's most likely a large employer.

Large employers are REQUIRED to report to the government every year about who is offered health insurance, and whether it was affordable and minimum value. Then the employer sends a 1095 to the employee and a copy to the IRS. Some interpret the law to mean they only have to report for full-time employees working more than 30 hours per week, but many employers report on everyone that is offered MEC.

Bottom line, if he thinks he will legally get a subsidy this way, he can apply for it, but he should know that he might have it clawed back when he files his tax return.

I'm not an accountant either, but my husband is, and I checked my facts with him before writing this. Disclaimer - neither of us are this client's accountant, and we don't know all of his facts. He needs to verify this with his own accountant.

I'm not an accountant either, but I agree. I have a client, in September 2014 their daughter got married, and they failed to report it to the Marketplace. When they filled their taxes, they had to return daughter's portion of the tax credit for 4 months. I know that their accountant had a hell of problem with their taxes, but I guess this will be a similar situation.

 

[JosephDeacon]

Thank you to all! This is what happens when you don't seek out experienced help and try to go at this on your own.

Kuddos to everyone and have a great weekend.