Health Care

Health Care

How do health care reform and taxes connect? The Affordable Care Act is single largest change to the tax code in two decades. Find help navigating the complexities of the new health care legislation, Medicare, Medicaid and other medical deductions.

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Pioneer
Posts: 1
Registered: ‎02-22-2018

short coverage gap

ARGH TIMING IS EVERYTHING, HU?

I just want to confirm we owe the ACA shared responsibility payment for my wife and step daughter for the 2017 tax year due to a one month gap and a whole year gap in 2016. I also believe it seems best for us to file jointly, since our combined standard deduction is greater then her filing H.O.H. w/dependent & me single.

 

HISTORY

According to my Fiance & her Daughter 2016 tax returns, they had to pay they're shared responsibility for no health insurance coverage and did not qualify for an exemption of 3 months or less for that tax year. I on the other hand, have maintained continuous medical coverage for over 19 years.

 

My Fiance & I got married on Dec 31, 2016, but filed separately for 2016 tax year due to benefits purposes (EIC, HOH, etc..). However, after our honeymoon, I enrolled them in my medical plan with HR near the middle of Jan. 2017, but the effective date of their medical coverage was not until Feb. 2017 according to our Health Plan Administrator (HPA). They said this was due to HR's administrative processing during the middle of the month. My 1095-C also arrived, but my dependents are not listed on that and my HR said they would receive their's separately.  That has not come in yet, and I believe they'll get a 1095-B per HPA.

 

QUESTION

Though I applied for medical benefits for both my dependents near the middle on Jan. 2017, the effective coverage is Feb. 2017 and for tax purposes I suspect we have go by that date, yes?. Therefore, we have a one month "back end gap" for tax year 2017 and excluded from short coverage gap due to the "front end gap" that started in Jan. 2016, yes? Thanks, and apologies if I made this too long. ;-)

 

Sire Andre

Highlighted
Council Member
Posts: 516
Registered: ‎04-06-2016

Re: short coverage gap

First, since you're married, you can either file only as Married Filing Joint or Married Filing Separate. 

 

You can NOT file HOH/Single if you're married.  SO, for 2016 since you were married during 2016, even though it was Dec 31st, you no longer had the option of filing single and having your wife file HOH. MFJ or MFS would have been your only legal options.  Also, EIC is not available to you if you file MFS. Generally, a couple will be better off filing MFJ than MFS because there are a lot of credits/deductions not allowed to someone filing MFS that are to a couple MFJ.

 

That said, EIC "abuse" is one thing that the IRS is really cracking down on, and it sounds like you (or your fiance/wife) may have accidentally claimed EIC that you weren't eligible for.  If the IRS catches you without you coming clean and amending your return, you will not be able to claim EIC again for 10 years.  So, this is something I'd recommend fixing, before the IRS fixes it for you.

 

To answer you questions: "Though I applied for medical benefits for both my dependents near the middle on Jan. 2017, the effective coverage is Feb. 2017 and for tax purposes I suspect we have go by that date, yes?. Therefore, we have a one month "back end gap" for tax year 2017 and excluded from short coverage gap due to the "front end gap" that started in Jan. 2016, yes?"

 

Yes, you have to go by the date the coverage started regardless of when you applied for benefits, so they'd have a one month gap in 2017.

 

If they had insurance at all in November 2016, they would have had a 2 month gap (Dec & Jan) for 2017 because they would get credit for November 2016 even if they only had insurance one day of the month and would qualify for the short coverage gap exemption. But, if they didn't have insurance for all of November and December (or further back) then they wouldn't qualify for the exemption because they would have been without insurance for at least 3 months and the short coverage gap exemption is for gaps of LESS than 3 months. 


Since you were covered all year, you'll only owe the shared responsibility payment for your spouse and her daughter.

 

Sorry to not have better news.  

 

Karen