Very specific questions about obamacare and taxes; can someone who understands it help? Practical, not political.

[VaKim]

We did not sign up last year, but we will be exempt from the healthcare penalty this year because DH was laid off from February-October 2014. Here are the facts:

 

DH is a vet and covered by the VA, so he is exempt;

DD16 is covered by state medicaid (Virginia did not expand);

I am not insured and do not work;

DD20, who lives with us still, does not have insurance, is not in school, and does not work yet;

There is no way we could afford the insurance offered by DH's company he works for.

 

I know that kids up to 26 can be covered by their parents' insurance. However, as stated above, we do  not have insurance. 

 

Now, for the questions.

Can we still claim DD20 as a dependent on our taxes? I am assuming so, since she does not work and lives with us full time.

If we can and do claim her, are we then responsible for her insurance penalty next year (when we will not be exempt if nothing  drastic happens)? 

Are we required to claim her as a dependent?

If we aren't required to, and don't claim her, are we still responsible for her insurance penalty? (Of course she may be working and moved out by next year, but assuming no changes.)

 

And yes, I am quite ignorant regarding this stuff. I am kind of hoping if I ignore it long enough, it will go away. There is no way we can afford insurance (even with the subsidies) and still do things like eat. We are very seldom sick and pay cash when we do go to the doctor. 

 

 

[VaKim]

Anybody?

[Lanny]

I strongly suggest that you consider using the TaxACT service, for your 2014 return. At least for your Federal return. I've used that service for a number of years. I do not need to file a state return, so now I pay them for the Federal return. A state return is extra. The first year or 2 that I used TaxACT, I used their FREE service, but if you pay, it is much easier in subsequent years, because you can Import your previous data, etc. Also, the paid service has more help and features available. With TaxACT, for their very minimal fee, you can eFile any form the I.R.S. permits to be efiled. Their competitors charge a lot more!

 

You will need to step each person thru their step by step process, to see how this will work for you.  If you use TaxACT (or another service) there is much less chance you will make an error and be fined by the I.R.S.

[vonfirmath]

Check out your local H&R Block offices. I know my husband's office had a "Come in and get all your questions answered about the Affordable Care act and your taxes" open to the community time (last week) and they took special training on it.  They didn't charge anything.

 

[VaKim]

I strongly suggest that you consider using the TaxACT service, for your 2014 return. At least for your Federal return. I've used that service for a number of years. I do not need to file a state return, so now I pay them for the Federal return. A state return is extra. The first year or 2 that I used TaxACT, I used their FREE service, but if you pay, it is much easier in subsequent years, because you can Import your previous data, etc. Also, the paid service has more help and features available. With TaxACT, for their very minimal fee, you can eFile any form the I.R.S. permits to be efiled. Their competitors charge a lot more!

 

You will need to step each person thru their step by step process, to see how this will work for you.  If you use TaxACT (or another service) there is much less chance you will make an error and be fined by the I.R.S.

We have used TurboTax for years. Is TaxACT better somehow? 

[Lanny]

We have used TurboTax for years. Is TaxACT better somehow? 

 

@VaKim  Possibly (IMHO probably) better. Virtually positive TaxACT will be far less expensive, unless your return is extremely simple and you can use their free service or their most basic paid service. 

 

When I looked into several services (including TaxACT and Turbo Tax), several years ago, for me, at that time, the difference in prices I would need to pay both companies was huge.

 

The first 2 (?) years I used the FREE TaxACT service. Because I need to file a Schedule C, at that time I believe Turbo Tax would have charged me about $70.

 

Then, I began paying for the premium TaxACT Federal service (I do not need to file a State return) and last year that was about $7.95 or $8.95 as I recall. This year, for the 2014 return, it will go up about one dollar. For my return, with a Schedule C, Turbo Tax would be a lot more expensive.

 

I believe if one needs to file a Federal return and a State return, with TaxACT the total cost is about $20-22

 

When I did the research, 2 or 3 years ago, TaxACT was the only one that was a member of the BBB and their web site says their support staff is based in the USA, so that should eliminate language barriers.

 

For me, I will stay with TaxACT. You should look at the differences in cost, for the forms that you need to file.

 

Oh, TaxACT includes information that is helpful when preparing the FAFSA, which is something I will need to do in a few years.

 

OT: I need to file my U.S. Federal return, before I file my Colombian return, which in comparison is an absolute nightmare. I have "Experts" (not a word I apply to people frequently) prepare my Colombian return and they earn what I pay them.

[Berley]

You can not claim your Dd20. Dependents must be either under age 19 OR under age 24 if a student. I'm not up to date on all the insurance penalties, but you can find lots of info at irs.gov.

[QueenCat]

You can not claim your Dd20. Dependents must be either under age 19 OR under age 24 if a student. I'm not up to date on all the insurance penalties, but you can find lots of info at irs.gov.

 

That's not accurate. You can claim anyone for whom you provide more than 50% of their support. They cannot claim themselves if they file their own tax report.

[Berley]

nm.  Have to leave.  WIll try to remember to respond later. :)

 

[SereneHome]

That's not accurate. You can claim anyone for whom you provide more than 50% of their support. They cannot claim themselves if they file their own tax report.

 

that's not accurate either.  50% test applies to  non-children.

 

For a child specifically, they have to meet 5 tests and age is one of those tests.  A 20 yr old who is not a full time student fails one of the tests.

[Ailaena]

Everything up there just got all kinds of muddled.

 

There is Qualifying Child and Qualifying Relative.

 

Your DD20 will qualify as a qualifying Relative since she is NOT a qualifying child, lives with you, made less than $3950, and receives more than half of her support from you.

 

eta a link:  http://www.libertytax.com/tax-resources/family/eligible-dependents-for-tax-purposes/

 

Specifically answering your questions:

 

Now, for the questions.

Can we still claim DD20 as a dependent on our taxes? I am assuming so, since she does not work and lives with us full time.

If we can and do claim her, are we then responsible for her insurance penalty next year (when we will not be exempt if nothing  drastic happens)? 

Are we required to claim her as a dependent?

If we aren't required to, and don't claim her, are we still responsible for her insurance penalty? (Of course she may be working and moved out by next year, but assuming no changes.)

 

And yes, I am quite ignorant regarding this stuff. I am kind of hoping if I ignore it long enough, it will go away. There is no way we can afford insurance (even with the subsidies) and still do things like eat. We are very seldom sick and pay cash when we do go to the doctor. 

 

 

You CAN claim dd on your taxes as a qualifying relative.

 

You WILL be responsible for her penalty if she does not qualify for an exemption.  She *should* qualify for medicaid due to no income, but if she doesn't because your state didn't expand, she qualifies for a hardship exemption https://www.healthcare.gov/fees-exemptions/hardship-exemptions/

 

She may also qualify for the regular low-income exemption which says:

https://www.healthcare.gov/fees-exemptions/apply-for-exemption/

If your income will be low enough that you won’t be required to file taxes:

• You don’t need to apply for an exemption. This is true even if you file a return in order to get a refund of money withheld from your paycheck. You won’t have to pay the fee for not being covered

It is unlikely she will receive a penalty if she is not making any income.

 

 

You are NOT required to claim her.  If you do not, you are not responsible for her insurance penalty.

 

 

You can go to H&R Block and they will answer all kinds of these question.  I can't imagine you guys made enough money to NOT qualify for a hardship of some kind.

 

[QueenCat]

that's not accurate either.  50% test applies to  non-children.

 

For a child specifically, they have to meet 5 tests and age is one of those tests.  A 20 yr old who is not a full time student fails one of the tests.

 

The person can be your child, and qualify as a dependent relative rather than dependent child, when they are over the age of 18. A 20 year old who is not a full time student could easily meet the qualifications. They have to live with you and make less than $3950/year.

[VaKim]

Thank you, everybody. Some of the answers were what I suspected, but wasn't sure of. And Lanny, I am going to check out TaxACT and see how it compares. Our taxes are always very simple though. We are always on the high end of low income with only W2s and sometimes the 1099 or whatever for unemployment. No investments, retirement, etc. Poor folks by American standards but rich compared to most of the world.  ;)

[Alessandra]

I find that the IRS website is super informative. If you start with the instruction book for Form 1040, there should be links to other forms/ instructions. The instruction books don't just have the rules, but have real life examples and also little worksheets, so that you can plus in your numbers and get an answer. There are also yes/no flow chart that guide you to answers.

 

The instruction booklets are clearly written for the layman, but it can be a challenge to find the right booklets in the website. The 1040 book can lead you to the right form, so is helpful even if you do not end up filing an actual 1040.

 

And, of course, all the IRS advice is free.

[Lanny]

Thank you, everybody. Some of the answers were what I suspected, but wasn't sure of. And Lanny, I am going to check out TaxACT and see how it compares. Our taxes are always very simple though. We are always on the high end of low income with only W2s and sometimes the 1099 or whatever for unemployment. No investments, retirement, etc. Poor folks by American standards but rich compared to most of the world.  ;)

 

You do not need to pay TaxACT (or probably the other tax services) unless and  until you actually want them to eFile your return.

 

The reason I strongly suggest using TaxACT or another of the tax services, is that they will help you, very quickly, regarding any questions you have about ObamaCare tax penalties, who qualifies for an exemption, who is a Dependent, etc. They have  flow charts and their processes ask you questions and depending on your answers, they walk you through everything.

 

This is *much* easier than trying to understand the I.R.S. regulations yourself. They complete all the forms you need to file for you. 

[VaKim]

You do not need to pay TaxACT (or probably the other tax services) unless and  until you actually want them to eFile your return.

 

The reason I strongly suggest using TaxACT or another of the tax services, is that they will help you, very quickly, regarding any questions you have about ObamaCare tax penalties, who qualifies for an exemption, who is a Dependent, etc. They have  flow charts and their processes ask you questions and depending on your answers, they walk you through everything.

 

This is *much* easier than trying to understand the I.R.S. regulations yourself. They complete all the forms you need to file for you. 

Yes, that is why I have been using TurboTax. But it does look like TaxACT may be quite a bit cheaper, with the same services.

[Lanny]

Yes, that is why I have been using TurboTax. But it does look like TaxACT may be quite a bit cheaper, with the same services.

 

 

Yes!   Possibly less expensive with more services.   I just went to their web site:

http://www.taxact.com/

 

It looks like they will eFile your Federal return free for you. If you want them to compute and file your State return they will probably charge you 8 or 10 dollars or something like that.

 

After using their free service for 2 or 3 tax years, I then began using their "Deluxe" service. Faster for me and it lessens the possibility I will make an error and there is more help available.

 

They will try to find any Credits, etc., that your family might qualify for.

[Berley]

I just now had time to come back to respond and get more specific about the rules.  I see that others have explained it well already, so I won't repeat it.  The IRS website is actually the very best place to go for specific info about this.  It's more helpful than you would think. :)  If you search for "Qualifying Child" or "Qualifying Relative", you should find everything you need.  Most of it is quoted above. 

[LucyStoner]

TurboTax actually has some nice functionality built in to check any possible healthcare penalties for next year. They have also added a benefits check once you file and you can apply for certain things like food stamps and energy assistance from their portal. I am an accounting student, work as a bookkeeper/tax preparer and am a Volunteer Income Tax Assistance "certified advanced" preparer person and frankly I prefer Turbo Tax to for tax situations like yours to all the other programs I've seen or used. That's just one gals opinion though. Do not go to HR Block or such and pay too much. They really charge low income people too much. The AARP and United Way and other nonprofits likely have free tax prep sites if you decide you need help beyond free Turbo Tax. Keep that money for you!

 

 

It sounds that you will be exempt. Check number 3 below. You live in a state that didn't expand Medicaid and your income sounds like you would be qualified for Medicaid had they done so.

 

The following groups are not liable for the ACA penalty tax if they do not get adequate health insurance. The list does not include all groups who would not owe the tax.

 

1. Individuals with income below the income tax filing threshold

2. Individuals for whom the cost of getting health insurance (net of ACA subsidies) would exceed 8% of household income in 2014 (That percentage would rise in subsequent years if premium growth exceeds income growth.)

3. Individuals in states that did not accept the ACA’s Medicaid expansion who would have qualified for Medicaid under the expansion

4. Members of Indian tribes

5. Members of certain religious faiths

6. Members of a health care sharing ministry

7. Individuals not legally in the U.S. (undocumented aliens)

8. Incarcerated individuals

 

A calculator that may be helpful:

 

http://taxpolicycenter.org/taxfacts/acacalculator.cfm

[LucyStoner]

Yes, that is why I have been using TurboTax. But it does look like TaxACT may be quite a bit cheaper, with the same services.

You probably are eligible to use Turbo Tax for free online.