Tax Planning

Obtaining and Claiming a Health Coverage Exemption

Obtaining and Claiming a Health Coverage Exemption

The Affordable Care Act requires you and each member of your family to have minimum essential coverage, qualify for an insurance coverage exemption, or make an individual shared responsibility payment when you file your federal income tax return.

If you meet certain criteria, you may be exempt from Health Coverage Exemptionthe requirement to have qualifying health coverage. If you are exempt, you will not have to make a shared responsibility payment when you file your 2014 federal income tax return this year. For any month that you do not qualify for a coverage exemption, you will need to have minimum essential coverage or make a shared responsibility payment.

How you get a coverage exemption depends upon the type of exemption for which you are eligible. You can obtain some exemptions only from the Marketplace, while others may be claimed when you file your tax return.

You may be exempt if:

  • The minimum amount you must pay for the annual premiums is more than eight percent of your household income
  • You have a gap in coverage that is less than three consecutive months
  • You qualify for an exemption for one of several other reasons, including having a hardship that prevents you from obtaining coverage, or belonging to a group explicitly exempt from the requirement

Coverage exemptions are claimed or reported on Form 8965, Health Coverage Exemptions.

8965If you are granted a coverage exemption from the Marketplace, they will send you a notice with your unique Exemption Certificate Number or ECN. You will enter your ECN in Part I, Marketplace-Granted Coverage Exemptions for Individuals, of Form 8965 in column C. If the Marketplace hasn’t processed your exemption application before you file your tax return, complete Part I of Form 8965 and enter “pending” in Column C for each person listed.  If you claim the exemption on your return, you do not need an ECN from the Marketplace. With the tax filing season underway, most exemptions for 2014 are only available by claiming them on your tax return.

If your income is below your filing threshold and you are not required to file a tax return, you are eligible for an exemption and you do not have to file a tax return to claim it. If you choose to file a tax return, you will use Part II, Coverage Exemptions for Your Household Claimed on Your Return, of Form 8965 to claim a health coverage exemption.

Other IRS-granted coverage exemptions may be claimed on your tax return using Part III, Coverage Exemptions for Individuals Claimed on Your Return, of Form 8965.

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Make the Most of a Health Savings Account

If you have a health insurance policy with a high deductible, you may be eligible to contribute to a health savings account. An HSA provides a triple tax break: Contributions are tax-deductible (or pretax if made through your employer), the money grows tax-deferred, and you can use it tax-free for medical expenses. HSAYou can contribute up to $3,350 if you have individual coverage or $6,650 if you have family coverage in 2015, plus up to $1,000 if you’re 55 or older. Many banks and brokerage firms offer HSAs, and you can open an account anywhere as long as you have an HSA-eligible health insurance policy. You aren’t required to use the HAS administrator that your insurer or employer has a relationship with, but doing so may streamline the claims-paying process, and it could be the only way to get an employer contribution. Look for HSA administrators by going to

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Year-End Tax Planning Letter

Once again another year is behind us and income taxes are fast approaching. We are looking forward to seeing you again as we assist you with your income tax preparation over the next several months. We have compiled a list of planning tips and suggestions in our year end letter and recommend that you take some time to read through it. With the implementation of the Affordable Care Act, virtually every taxpayer will be impacted by the laws and regulation changes that have take place in Congress this year. Fox Logo

For your copy of our Year End Tax Planning Letter click here.

We appreciate your business and wish you all the best for the Holidays this year!

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Year End Tax Tips For Employees

As year-end approaches, taxpayers generally are faced with a number of choices that can save taxes this year, next year or both years. Employees too are faced with these choices. To help our clients who are employees take advantage of these special tax saving opportunities, we have put together a list of items to consider.

Please review the list and contact us if you need additional information on one or more of the items.2014-to-2015-clock_countdown

Health flexible spending accounts. Many employees take advantage of the annual opportunity to save taxes by placing funds in their employer’s health flexible spending arrangement (health FSA). You save taxes because you use pre-tax dollars to pay for medical expenses that might not be deductible. They would not be deductible if you don’t itemize. Even if you do itemize, some medical expenses would not be deductible because of the 10% adjusted gross income floor beneath medical expense deductions. Additionally, participating in a health FSA can also save on FICA taxes.

If you have set aside funds in your employer’s health FSA, check your balance so that you have sufficient time to incur additional reimbursable expenditures to prevent loss of any unused amount under the use-it-lose-it feature of these plans. Keep in mind that you cannot get tax-free reimbursements for aspirin, antacids and other over-the-counter items unless your healthcare provider gives you a prescription for them. Your plan should have a listing of qualifying items and any documentation from a medical provider that may be needed to get a reimbursement for these items.

To avoid the lose-it-use it rule, you must incur qualifying expenditures by the last day of the plan year unless the plan allows an optional grace period. Any grace period cannot extend beyond the 15th day of the third month following the close of the plan year (e.g., March 15 for a calendar year plan). A new exception to the use-it-or lose-it rule permits health FSAs to allow a carryover of a participant’s unused health FSA moneys, up to a $500 (or lower plan) maximum.

Examining your year-to-date expenditures now will also help you to determine how much to set aside for next year. Don’t forget to reflect any changed circumstances in making your calculation.

Adjustments to state withholding. If you expect to owe state and local income taxes when you file your return next year, ask your employer to increase withholding of state and local taxes (or pay estimated tax payments of state and local taxes) before year-end to pull the deduction of those taxes into this year.

Adjustments to federal withholding. If you face a penalty for underpayment of federal estimated tax, you may be able to eliminate or reduce it by increasing your withholding. You should especially review your withholding to ensure that enough tax is withheld if you hold multiple jobs, you and your spouse both work, or you can be claimed as dependent by another person.

401(k) contributions. The pre-tax and Roth 401(k) contribution limit for 2014 is $17,500. Employees age 50 or older by year-end are also permitted to make an additional contribution of $5,500 (for a total limit of $23,000). Review and make appropriate adjustments to your contributions to your employer’s 401(k) retirement plan for the remainder of this year. Figure your contribution rate for next year as well. Keep in mind the amount you need to save for the age at which you plan to retire.

Additional Medicare Tax: Just a reminder that, as part of the Affordable Care Act, an additional Medicare tax went into effect in 2013 and applies to wages and compensation (as well as self-employment income) paid in excess of an applicable threshold (above $250,000 for taxpayers filing married-filing-jointly and above $200, 000 for single filers). Employers are obligated to withhold on wages and compensation in excess of $200,000 for all affected employees, without having to determine the employee’s ultimate filing status or wages or compensation paid by another employer during the year. If you may be subject to this tax, but the amount withheld may be over or under the amount of your projected tax liability, you may wish to modify your Form W-4, accordingly.

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the theory and system of setting up, maintaining, and auditing the books of a firm; artof analyzing the financial position and operating results of a business house from a study of its sales, purchases, overhead, etc. (distinguished from bookkeeping).


[uh-koun-ting] noun


the theory and system of setting up, maintaining, and auditing the books of a firm; art of analyzing the financial position and operating results of a business house from a study of its sales, purchases, overhead, etc. (distinguished from bookkeeping).

a detailed report of the financial state or transactions of a person or entity: an accounting of the estate.

the rendering or submission of such a report.
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By becoming educated on the what our tax liability is and what things affect it we can then adjust our daily lives to reduce the tax liability that we have.

Generally when we think about tax preparation we link it to April 15th, or perhaps a few weeks leading up to the 15th.  We scramble to get everything prepared for our tax preparer and we desparately try to relive the entire year in an attempt to find anything that we can do reduce our tax liability. 

The reality of the matter is that our taxes are accruing everyday, not just leading up to the 15th of April.  So it would be wise for us to prepare for our taxes or our tax situation all year long.  By becoming educated on the what our tax liability is and what things affect it we can then adjust our daily lives to reduce the tax liability that we have.  That’s not to say that you will eliminate your taxes or pay anything less then you should.  It just means that you won’t overpay or have to scramble and the end of the year.  When we scramble we often have to guesstimate on what amounts we spent or contributed and that leaves us more vulnerable in the event of an audit.  For some tax saving tips and advice visit the Fox Peterson Learning Center at

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