U.S. Tax Penalty for No Health Insurance

[TallGuyJohninBKK]

It also sounds like he could meet the 330 days test by having his 12 month period for the 2016 tax year begin June 1, 2016, and end May 31, 2017, and file his 2016 return in early June 2017 -- within the automatic 60 day extension period for expats.

 

That's presuming he also doesn't return to the U.S. anytime between now and the time he files his 2016 tax return.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Edited April 18, 2017 by TallGuyJohninBKK

[OliverKlozerof]

1 hour ago, Sheryl said:

sounds like youwouldmeet the "bona fide residence" test which is alternative too the 330 out of 365 days.

That's what I did. Also did that last year, but forgot!

[Goldbear]

Hi, I am looking for advice on this topic. I just technically retired from my job. I had job related health insurance for the first 5 months of this year. Right now I have Cobra health care coverage (continuation from my employer) but it's expensive ($700+ per month). I don't want to do that beyond this month. I am already residing in Thailand, though at the moment I am back in California getting rid of the last of my stuff. I was not out of the USA for 330 days. I want to buy health insurance in Thailand. I will be back in Thailand within two weeks. 

 

So based on that info, my questions are these:

--Will overseas health insurance (e.g., Signa Global), purchased in Thailand, qualify for the remaining months of 2017 under the Affordable Care Act? (so that I can avoid the penalty)

--If not, what will my approximate total penalty be when the taxes are done this next year?

 

If there is anything else that I didn't mention that's pertinent, I'd appreciate hearing it. 

 

Thank you!!!

 

[TallGuyJohninBKK]

I'm not certain on this, but when I looked earlier this spring, there were very few expat health plans that were considered to meet the requirements for ACA. There's a list of them on the ACA website.  And none of the Thailand-based insurance policies satisfy ACA, AFAIK.

 

For the 2016 tax year, the penalty for not meeting ACA requirements, by either lacking a qualified policy or not being sufficiently out of the U.S. to be exempt, was $695 if I recall correctly. Not sure if that will stay the same or change for the 2017 tax year, with all the B.S. ACA wrangling going on in Congress right now.

 

Keep in mind, for meeting the current 330 days requirement, that counting period doesn't have to start on Jan.. 1 of any particular tax year. You can start your 330 days at any point during the calendar/tax year, just so long as you've reached the 330 day mark by the time you file your taxes, presumably the next spring.

 

So, for example, expats get an automatic two month extension to file until mid June, typically. So, for 2016, a person could have started their 330 day count in June 2016 and have it run until say June 1, 2017, and then file their federal return just after that. And if they had remained outside the U.S. for that June 2016 to June 2017 period, then they'd be fine for ACA for the 2016 tax year.

 

PS... then for 2017, a person could start a new 330 day period at any point during that tax/calendar year, even back to Jan. 1, even though that new 330 day period would overlap with the one a person used for the prior 2016 tax year.

 

 

 

 

[Sheryl]

If you are settling in Thailand permanently you may also qualify as a tax payer abroad on the "bona fide residence" grounds. If so,    numbers of days in the US on temporary visits do not matter, and you are exempt from this  requirement.

 

To be ACA compliant a plan must include outpatient services,  which would make premiums insanely high and is unnecessary in Thailand.

 

"U.S. citizens whoare not physically present in the United States for at least 330 full days within a 12-month period are treated as having minimum essential coverage for that 12-month period regardless of whether they enroll in any health care coverage. In addition, U.S. citizens who are bona fide residents of a foreign country (or countries) for an entire taxable year are treated as having minimum essential coverage for that year."

https://www.irs.gov/pub/irs-pdf/p5187.pdf

 

[TallGuyJohninBKK]

5 hours ago, Sheryl said:

If you are settling in Thailand permanently you may also qualify as a tax payer abroad on the "bona fide residence" grounds. If so,    numbers of days in the US on temporary visits do not matter, and you are exempt from this  requirement.

 

To be ACA compliant a plan must include outpatient services,  which would make premiums insanely high and is unnecessary in Thailand.

 

 

Sheryl, I'm not agreeing with you on these two comments above:

 

No. 1 - Lots of Thai health insurance policies can and do include outpatient services, if the person opts for that as part of their policy. But having a Thai-issued health insurance policy that includes outpatient coverage in no way makes that policy qualified under ACA. As I mentioned above, I've seen a list of ACA qualified policies for folks outside the U.S., and it's very short.

 

No. 2. Yes, a person can qualify for ACA exemption on the basis of bona fide residence (and there's a whole IRS thing that details what that means and how to achieve it). But in Goldbear's case, it sounded like he's just retired, so presumably not working in Thailand, and just in the process of moving, or recently moved to Thailand. For someone with that kind of status, he probably wouldn't qualify for bona fide residence right now.... But might down the road, depending on his circumstances.

Edited June 10, 2017 by TallGuyJohninBKK

[Goldbear]

TallGuyJohn, is the $695 amount the total penalty (i.e., not per month)? That wouldn't be too bad. 

 

I haven't hit 330 days no matter how I do the rolling period. 

 

Thanks to both of you for the responses. 

[TallGuyJohninBKK]

3 minutes ago, Goldbear said:

TallGuyJohn, is the $695 amount the total penalty (i.e., not per month)? That wouldn't be too bad. 

 

I haven't hit 330 days no matter how I do the rolling period. 

 

Thanks to both of you for the responses. 

See the details for the fee assessment below.

 

(In my case, I used TurboTax for 2016 tax year and at one point it wrongly counted me, just me, as not being exempt from ACA, and the TT software added the $695 fee into my tax return. It didn't get into any of the other calculations explained below. So I guess in my case, the $695 fee was going to be the higher of the two options).

 

But I have no idea what the status of that's going to be for the 2017 tax year, and whether the ACA rule will even still exist then... Stay tuned to the U.S. Congress for that.

 

Quote

 

The fee for not having health insurance in 2016 & 2017

The fee is calculated 2 different ways – as a percentage of your household income, and per person. You’ll pay whichever is higher.

Percentage of income

• 2.5% of household income
• Maximum: Total yearly premium for the national average price of a Bronze plan sold through the Marketplace

Per person

• $695 per adult
• $347.50 per child under 18
• Maximum: $2,085

Paying the fee

• Using the percentage method, only the part of your household income that’s above the yearly tax filing requirement is counted.
• Using the per-person method, you pay only for people in your household who don’t have insurance coverage.
• If you have coverage for part of the year, the fee is 1/12 of the annual amount for each month you (or your tax dependents) don’t have coverage. If you’re uncovered only 1 or 2 months, you don’t have to pay the fee at all. Learn about the “short gap” exemption.
• You pay the fee when you file your federal tax return for the year you don’t have coverage.

Estimating your fee

Use this IRS tool to estimate your individual responsibility payment.

 

 

https://www.healthcare.gov/fees/fee-for-not-being-covered/

[TallGuyJohninBKK]

11 minutes ago, Goldbear said:

I haven't hit 330 days no matter how I do the rolling period.

 

As Sheryl noted above, you can also gain exemption from ACA on the basis of having a "bona fide residence" outside the U.S. There's a whole, involved IRS discussion of just what that means and whether any person's situation meets that test.

 

I think in general, if you're employed outside the U.S. that certainly helps. But I think it's also possible to meet that test if you're retired and having lived in the same foreign country for a longish period of time.

 

Anyone wanting to explore that approach really needs to read the IRS documents on "bona fide residence."

 

[TallGuyJohninBKK]

30 minutes ago, Goldbear said:

I haven't hit 330 days no matter how I do the rolling period. 

 

The end of someone's 330 day period can be anytime up to just PRIOR to them filing their federal return (now in 2017) for the prior 2016 tax year. So, depending on your situation, you could explore requesting a further extension of your 2016 federal filing deadline if you were close enough to hitting your 330 days mark.

 

If you don't owe any taxes on your draft return, then there's really no penalty for requesting and using a further extension. And even if you do owe taxes and request an extension, you can still pay what you owe sooner and file later. More than likely that kind of approach would be more economical than getting hit with a $695 IRS ACA fee or similar.

 

As I mentioned to Sheryl above, if you're not working and/or don't have a business in Thailand and you're just moving now or just have recently moved to Thailand, you're probably not going to be eligible to qualify, at least for this year, under the "bona fide residence" exemption. Though that could come into play once you've been settled in Thailand a bit longer. But so would the 330 days exemption -- as long as any of this ends up remaining tax law in the U.S.

 

Also since you mentioned about working in the U.S. and having COBRA coverage, take note of the partial coverage provisions that I posted on above:

 

Quote

 

If you have coverage for part of the year, the fee is 1/12 of the annual amount for each month you (or your tax dependents) don’t have coverage. If you’re uncovered only 1 or 2 months, you don’t have to pay the fee at all. Learn about the “short gap” exemption.

 

 

Edited June 10, 2017 by TallGuyJohninBKK

[TallGuyJohninBKK]

Goldbear, I'm confused now about what tax year you're asking about, the 2016 tax year or the 2017 tax year filing you won't do until mid year 2018?

 

It sounds like you were working in the U.S. for the 2016 tax year with coverage. And from your post above, it sounds like you had job coverage for the first 5 months of 2017 and COBRA coverage now into June or July.  So right now, if you did nothing, it would seem you'd only be on the hook for 5 or so months of non-coverage for 2017 -- Aug to Dec.

 

If you've already been spending some time in Thailand earlier in 2017 and plan to be back here full time soon, you could pretty easily cover the 330 day period for the 2017 tax year -- by running a June 2017 to June 2018 period, and then doing your 2017 federal filing just thereafter.

[jmd8800]

9 hours ago, TallGuyJohninBKK said:

I'm not certain on this, but when I looked earlier this spring, there were very few expat health plans that were considered to meet the requirements for ACA. There's a list of them on the ACA website.  And none of the Thailand-based insurance policies satisfy ACA, AFAIK.

 

 

 

 

 

This is pretty interesting. I'd be interested in such a plan as I have pre-existing conditions and would check to see if the pre-existing conditions would be covered under an ACA approved plan.

 

I am considered a California resident for ACA purposes. I wonder if these same policies apply. Do you have a link to the approved plans?

[Goldbear]

TallJohnBKK, that is a great idea. I am talking about the 2017 tax year. 

[taxout]

1. As the IRS says, " U.S. citizens who are bona fide residents of a foreign country (or countries) for an entire taxable year" may qualify for an exemption. But the poster here cannot qualify under this exemption in 2017 because he wouldn't meet the entire-taxable-year requirement.

 

2. As said above, the poster can probably link together months in 2017-18 to satisfy the 180-day test. If there's a problem doing that for some technical reason, then he can also file with the IRS and ask for a hardship exemption.  You need to be resident in a particular state to get Obamacare; no insurer will take you on with a Thai address. Since the poster can't get qualifying insurance living in Thailand, he should qualify for a hardship exemption. Sort of like living in a county where no insurer is offering Obamacare.

[gk10002000]

On 4/9/2017 at 5:16 AM, OliverKlozerof said:

FYI...
When I decided to try taxact.com instead of turbotax.com this year (about half price), one thing I was worried about was if I could still connect to my Charles Schwab investment account to automatically import all necessary tax info. 
While taxact.com does have this feature, they oddly don't list Schwab (one of the major players in the field), in their list of companies you can link to. Their workaround is to export a CSV file from Schwab, then import that into taxact.com. 
They have a page with instructions about how to do this from a variety of companies' sites. However, as you might expect, something probably changed between the time they wrote these instructions and now. Anyway, I was able to create an export file. But, when you import it, you have to manually try to assign the field names to match the fields required by taxact.com, which is not real clear. 
In other words, the process is nowhere as smooth as it was with turbotax. Still, because I'm a computer consultant and have had to do this kind of export-import-field assignment before, I got it to more-or-less work after a few minutes. 
Then, toward the end of the return there's an option to basically, "check everything." So, it now tells me that, because I did the CSV import, I have to check the "basis" (which I guess is the purchase price of an investment?), and choose the correct "reporting category." They say they have a Stock Assistant feature that may help with this.
Then, just at this point, a message pops up saying that, as they will take their servers offline in 5 minutes for maintenance, I need to sign off and log back on in 15 minutes.
Would it be worth an extra USD$40 not to have to hassle with this? Probably. But you never know until you try. ;-)

 

Yes, the basis refers to a few years ago when the Investment firms and the IRS started changing how they report the cost basis on the 1099 Div.  Used to handle everything on the Schedule D.  Now you often have to also file the 8949.  Depends on when you first bought the equity.

[gk10002000]

Just adding that in case you were a veteran, you could be eligible to be enrolled in the VA medical program and that is considered ACA compliant.  No monthly premiums even if you make too much to get the totally free care rating, but you would have to pay co-pays.

[TallGuyJohninBKK]

19 hours ago, jmd8800 said:

This is pretty interesting. I'd be interested in such a plan as I have pre-existing conditions and would check to see if the pre-existing conditions would be covered under an ACA approved plan.

 

I am considered a California resident for ACA purposes. I wonder if these same policies apply. Do you have a link to the approved plans?

 

I don't know how to answer your questions... Generally speaking, a person is either A) living in the U.S., or B] living in a foreign country.

 

If you're living in the U.S., you could access the Marketplace plans for that state.

 

If you're living in a foreign country, you're exempt from ACA under either the physical presence or bona fide residence tests. And legally, technically speaking, wouldn't be eligible for domestic ACA coverage (although perhaps some people do manage to do that).

 

There are some foreign insurance policies that apparently do meet ACA requirements, but I don't know what that means in terms of covering pre-existing conditions.

 

Here's some of the info I've seen on that latter issue:

 

https://obamacarefacts.com/questions/foreign-insurance-count-minimum-essential-coverage/

 

http://expatfinancial.com/cigna-aca-global-health-plan/

 

And the Cigna ACA policy brochure.

Cigna-ACA-Global-Health-Plan-Brochure.pdf

 

I've never spent a lot of time looking into foreign ACA qualified insurers, because I've always been focused on the exemption issues instead.

 

 

 

 

 

[khlongtoey]

On 4/8/2017 at 7:57 AM, OliverKlozerof said:

I was in the U.S. for 40 days. I'm leaning toward obeying the letter of the law. So, I guess I'll end up paying a penalty. Oh well. I guess, according to the intent of those who wrote the ACA, those of us who have enough dough in the bank, or for other reasons choose to "insure ourselves," have to contribute to the pool of money that helps others not so fortunate.

IIRC there is a maximum allowed penalty , which is probably far less than what one's premiums would be, though if you would have qualified form Medicaid  (<$18000/yr),  your insurance is actually Free,    so sounds like you might as well sign up for healthcare to me ,  you can claim 'a special occurance' and possibly join now, or wait till the next open enrollment,  of course depends which state you claim residence , the one's not taking federal money will be lower than $18k, but sounds like you still qualify if you have no income

[jmd8800]

6 hours ago, TallGuyJohninBKK said:

 

I don't know how to answer your questions... Generally speaking, a person is either A) living in the U.S., or B] living in a foreign country.

 

If you're living in the U.S., you could access the Marketplace plans for that state.

 

If you're living in a foreign country, you're exempt from ACA under either the physical presence or bona fide residence tests. And legally, technically speaking, wouldn't be eligible for domestic ACA coverage (although perhaps some people do manage to do that).

 

There are some foreign insurance policies that apparently do meet ACA requirements, but I don't know what that means in terms of covering pre-existing conditions.

 

Here's some of the info I've seen on that latter issue:

 

https://obamacarefacts.com/questions/foreign-insurance-count-minimum-essential-coverage/

 

http://expatfinancial.com/cigna-aca-global-health-plan/

 

And the Cigna ACA policy brochure.

Cigna-ACA-Global-Health-Plan-Brochure.pdf

 

I've never spent a lot of time looking into foreign ACA qualified insurers, because I've always been focused on the exemption issues instead.

 

 

 

 

 

Thanks for the links.

 

I am focused on coverage more than compliance with the ACA. I have not found international policies that cover pre-existing conditions so I keep coverage under CoveredCA (California ACA coverage) with the expectation I could fly to CA if necessary. Of course... what if I can't fly to California?

 

A Thai policy would cover me for everything but my pre-existing conditions, so I will probably buy a Thai policy and maintain the CoveredCA policy as well. I'm not sure that one has to be inside the USA for any length of time to maintain an ACA policy.

 

For me the best would be complete coverage, including preexisting conditions,  in USA/Thailand under one policy. I know.... wishful thinking on my part.

 

 

[Blue bruce]

I hate to disagree but you do not automatically have medicare. When you turn 65  you must sign up for medicare and the premiums are deducted from your social Security check. I am a U.S citizen and have been receiving medicare and S.S. for 6 years

[Langsuan Man]

4 hours ago, Blue bruce said:

I hate to disagree but you do not automatically have medicare. When you turn 65  you must sign up for medicare and the premiums are deducted from your social Security check. I am a U.S citizen and have been receiving medicare and S.S. for 6 years

Part A is automatic, since no deductions are taken out of your SS for it,  Part B  requires you to register and there is a 10% per year penality if you don't and decide later on that you do 

[Jingthing]

On 6/12/2017 at 2:01 AM, jmd8800 said:

Thanks for the links.

 

I am focused on coverage more than compliance with the ACA. I have not found international policies that cover pre-existing conditions so I keep coverage under CoveredCA (California ACA coverage) with the expectation I could fly to CA if necessary. Of course... what if I can't fly to California?

 

A Thai policy would cover me for everything but my pre-existing conditions, so I will probably buy a Thai policy and maintain the CoveredCA policy as well. I'm not sure that one has to be inside the USA for any length of time to maintain an ACA policy.

 

For me the best would be complete coverage, including preexisting conditions,  in USA/Thailand under one policy. I know.... wishful thinking on my part.

 

 

Don't count on ACA lasting much longer.

The republicans are actively working on a bill that would kill it.

It might not ever happen, but I've been following this very closely, and I think the odds are that it will.

If you're older and getting significant ACA subsidies to purchase your ACA plan, the replacement almost definitely will have those INCOME based subsidies taken away and replaced by much, much smaller age based subsidies. 

This would hit people over 50 and particularly 60 to 64 the hardest.

Currently under ACA the full non-subsidized cost can be 3 times younger people. The current replacement has that five times.

So factor that plus most of the subsidies gone and you're talking a FORTUNE to purchase this coverage that you can't even use in Thailand.

Good luck. 

 

Just for one example. This article refers to Florida but it's a national issue and the points I touched on here (income subsidies gone and age multiples up) are explained in detail in it:

 

http://www.orlandosentinel.com/news/os-aarp-trumpcare-hits-florida-hard-20170316-story.html

Nationally, combining the “age tax” with the reduced flat tax credits would leave health insurance customers age 50 to 64 paying up to $8,400 a year in higher costs for the same coverage they have today, said Lina Walker, vice president for health security at the AARP Public Policy Institute.

“The effect would be particularly harmful to people who need access to quality, affordable health insurance — older Americans and those who have lower incomes,” Walker said.

And generally, those making the least would be impacted most. By 2026, for instance, a 64-year-old earning $26,500 a year would see the cost of coverage increase by $12,900.

Edited June 13, 2017 by Jingthing

[chubby]

I'm talking about Medicaid, not Medicare.

 

In my State anyone below $18k   MAGI,  gets put into Medicaid, and doesn't use the exchanges,   Medicaid is Free, though, can be problematic to find Doctors and get Authorizations, depending whom is administering it.

 

However, in some ways, the coverage is actual more comprehensive,  it may be you have to show residency to get it, which you may not want for other reasons,  like state taxes , etc

[Jingthing]

9 minutes ago, chubby said:

I'm talking about Medicaid, not Medicare.

 

In my State anyone below $18k   MAGI,  gets put into Medicaid, and doesn't use the exchanges,   Medicaid is Free, though, can be problematic to find Doctors and get Authorizations, depending whom is administering it.

 

However, in some ways, the coverage is actual more comprehensive,  it may be you have to show residency to get it, which you may not want for other reasons,  like state taxes , etc

There are two kinds of Medicaid.

The traditional Medicaid for the very, very poor and with that MEANS TESTS are usually applied. In other words, you can't have any real money in the bank. 

 

Then there is "Obamacare" EXPANDED Medicaid which applied to less poor people that are under the level eligibility for highest level subsidized ACA premium payments. That only applies in some states. Not means tested. Many states (largely southern ones) don't offer that. Sounds like you're talking about EXPANDED Medicaid. 

 

Expanded Medicaid is expected to be completely phased out if "trumpcare" passes but there is debate about how long the phase out period will be. 

 

Also, you are correct in pointing out that Medicaid and Medicare are entirely different programs. 

Edited June 14, 2017 by Jingthing

[chubby]

5 minutes ago, Jingthing said:

There are two kinds of Medicaid.

The traditional Medicaid for the very, very poor and with that MEANS TESTS are usually applied. In other words, you can't have any real money in the bank. 

 

Then there is "Obamacare" EXPANDED Medicaid which applied to less poor people that are under the level eligibility for highest level subsidized ACA premium payments. That only applies in some states. Not means tested. Many states (largely southern ones) don't offer that. Sounds like you're talking about EXPANDED Medicaid. 

 

Expanded Medicaid is expected to be completely phased out if "trumpcare" passes but there is debate about how long the phase out period will be. 

 

Also, you are correct in pointing out that Medicaid and Medicare are entirely different programs. 

Yes, yes, expanded Medicaid, hence problem solved for this guy, instead of not "buying" insurance, if he has a next time,  sign up, assuming he doesn't want to avoid state taxes.

 

Yes, I am aware Medicare is not Medicaid, thanks.

[Jingthing]

1 minute ago, chubby said:

Yes, yes, expanded Medicaid, hence problem solved for this guy, instead of not "buying" insurance, if he has a next time,  sign up, assuming he doesn't want to avoid state taxes.

 

Yes, I am aware Medicare is not Medicaid, thanks.

The republicans are seriously talking about adding more difficulties in expanded Medicaid such as required work searches and additional restrictions. Also it is not offered at all in many states. I don't think it's realistic to count on expanded Medicaid going forward as a long term option for expats or residents. Expanded Medicaid is a core part of Obamacare and there is action right now in congress seriously attempting to kill Obamacare. 

[chubby]

49 minutes ago, Jingthing said:

The republicans are seriously talking about adding more difficulties in expanded Medicaid such as required work searches and additional restrictions. Also it is not offered at all in many states. I don't think it's realistic to count on expanded Medicaid going forward as a long term option for expats or residents. Expanded Medicaid is a core part of Obamacare and there is action right now in congress seriously attempting to kill Obamacare. 

Yes, I think like Bill Clinton, their answer is to "block grant" Medicaid, as they did with Welfare,  which means the the Chump supporters in the states that didn't "have a gun to their head per the SCOTUS" , will continue to suffer, for their ignorant use of Fox "news", of neoliberalism by the Carlos Slim's and Bezos MSDNC,etc.  Though, the corporate Romneycare , is a Devil's Bargin.......; Obama blew it , when no public option was allowed, coupled with Kennedy's Brain Tumor ......

Edited June 14, 2017 by chubby

[Jingthing]

I agree if trumpcare is ever passed (at least possible, more like probable) that Medicaid state block grants is the direction they will go. That's been pretty consistent in their messaging. The effect is money choking the program, limiting the number of people that can get on it. That's regular Medicaid. Expanded Medicaid would most likely be phased out entirely. Right now they're talking about how many years for the phase out rather than keeping it. 

Edited June 14, 2017 by Jingthing

[chubby]

Let Them Eat Cake

[Jingthing]

3 minutes ago, chubby said:

Let Them Eat Cake

The irony of it is that trump's base includes many of the people that will be the hardest hit from these changes. 

 

The "good" news on the other hand related to the topic title here is that health insurance mandate and penalties for non-compliance would go away. For expat "lifers" that means they wouldn't need to ever worry about qualifying for exemptions to the mandate. 

Edited June 14, 2017 by Jingthing