Wednesday, November 19, 2014

Affordable Care Act (Obamacare) for the 2014 Tax Filing Season

This post is a follow up to the numerous posts I've written about the Affordable Care Act (ACA) over the last two years.  It's primary purpose is to let you know how to handle the upcoming tax year.  It's not about getting insurance, or using the marketplaces.  It's really about three things:

1.  What to do if you (or a member of your household) didn't have health insurance all of 2014.
2.  What to do if you had health insurance, and received a subsidy through the marketplace ( or a state exchange).
3.  What to do if you (and your household) had health insurance all year but did not receive a subsidy (Premium Assistance Tax Credit).

If you want more than this, feel free to check out the other ACA posts linked at the bottom of this post.

First, a quick definition:

Household: Your household includes you and your spouse (if filing Married Filing Jointly).  It also includes everyone you claim, or could have claimed on your tax return as a dependent, unless someone else claimed them, (or could have claimed them, and had a higher right to claim them).  What we mean about could have claimed and had a higher right is tie-breakers.  Tie breakers are used when two people can both claim a dependent, and can't agree who should claim them.  They generally go like this (in order):

Parents win over non-parents (step parent has equal weight as birth parent)
If both are parents (or non-parents) the one the child spends the most nights with wins
If the number of nights are the same, the higher income wins.

As a general rule, every member of your household as defined above has to have minimum acceptable health insurance in order for you to avoid having to pay a penalty (called a shared responsibility payment - but we're going to call it the penalty.)

1.  What to do if you (or a member of your household) didn't have health insurance for 2014:

Unless you don't have to file a tax return AND aren't going to file one, you'll find yourself on Form 8965.  This form is going to see if you qualify for an exemption or hardship, and then calculate your penalty if you don't qualify.

Some exemptions and hardships have to be granted through the marketplace at  I can't help a lot with these, so you should go to the website ASAP if you think you qualify.  These are:

a.  You are a member of a health sharing ministry, a recognized Indian tribe, incarcerated or a member of certain religious sects.
b.  You are experiencing circumstances that prevent you getting coverage
c.  You don't have access to affordable coverage based on your projected income
d.  You are not eligible for Medicaid solely because the state you live in does not participate in the ACA Medicaid expansion
e.  Your health plan was not renewed and you consider the other plans unaffordable

The others exemptions and hardships are claimed on Form 8965.  These are:

a.  Your premiums would be more than 8% of your household income
b.  You had only one coverage gap and it was less than three months
c.  You lived abroad the whole year (you get a little time in the U.S., but not much)
d.  Your income is below that which requires you to file a tax return
e.  For 2014 only - you could have signed up for an employer plan in 2013 that ended in 2014, but didn't (basically you missed a 2013 enrollment period for coverage in 2014.)
f.  You got coverage through the marketplace during the enrollment period but it didn't kick in before the start of 2014
g.  You got CHIP coverage but have a coverage gap at the beginning of 2014

If you don't qualify for a hardship or exemption, you use Form 8965 to calculate your penalty.  If you and your household were uncovered the entire year, your penalty is the LARGER of 1% of your income or $95 per adult and $47.50 per child in your household.  If there are a lot of people in your household such that the total would be more than $285, that's the maximum for family size.

If you had coverage for some of the year, it gets quite complicated, and you will end up filling out a checklist by months for each member of your household, and calculating the total number of "person-months" of non coverage, dividing it by the number of household members x 12, and then multiplying it by the penalty from the above paragraph.  This is OVERSIMPLIFIED and can change if people weren't in your household for a full year.  Here's a simplified example:

You and your spouse are the only members of the household.  You didn't have insurance for 4 months, and your spouse didn't have it for 5 months.  That's 9 "person-months" of non-coverage.  Two people times 12 months is 24 months, so you divide 9 by 24, and multiply it by the LARGER of  1% of your income or $190 ($95 times 2 adults).  Again, this is OVERSIMPLIFIED - your software or tax guy will probably make this easier to work out.

The important thing is that you need to know when you were covered and when you were not - for every member of your household.  If you had coverage for a single day during the month, you are considered covered the whole month.  Next year, your insurance company MUST send you a 1095 form (A, B, or C) showing your months of coverage.  This year it's optional, so you may have to figure it out yourself.  Know this information BEFORE you try to do your taxes.

2.  What to do if you had health insurance, and received a subsidy (Premium Assistance Tax Credit) through the marketplace.

First of all, if you didn't have this coverage the whole year, for every member of your household, you'll need to read the section above as well as this section.

If you're thinking of filing Married Filing Separately, read this post NOW!

If you got a subsidy, you'll use Form 8962 to figure out the subsidy you qualified for, and compare it to the subsidy that was sent to your insurance company.  If you didn't get enough, you'll get the extra on your tax return.  If you got too much, you might have to pay some back!  As long as your income is less than 4 times the poverty level, this repayment is capped at between $300 and $2500, depending on your income.

You'll receive a Form 1095-A from your insurance provider detailing the coverage you received, who you received it for, how much it cost, and how much your subsidy was.  You'll use this form, and the information from your tax return, to fill out Form 8962 and calculate your credit amount.  If any other member of your household is required to file a tax return, you will need information from their return as well.  Your tax preparer or software should handle it smoothly, but you MUST wait to get Form 1095-A before you can file your 2014 tax return.

3.  What to do if you (and your household) had health insurance all year but did not receive a subsidy (Premium Assistance Tax Credit).

The only thing you really need to do is to make sure it qualifies as minimum essential coverage.  Chances are good that it does, unless you got some special coverage that doesn't cover all the required things.  Insurers may, but are not required, to send you a 1095 form (A, B, or C) telling you if you are covered.  Next year they will be required to send it.  Here's some good details to help you be sure:

a.  If you're active duty military, your coverage and the Tricare for your family counts
b.  Medicare Part A counts
c.  Medicaid counts (with very limited exceptions)
d.  Retired military Tricare coverage counts
e.  Most employer sponsored coverage is going to count - check with your employer.
f.  Insurance through the marketplace counts
g.  Most student health plans count
h.  Most private insurance plans count, and they should have told you when you bought it if it doesn't
i.  Children's Health Insurance Program (CHIP) counts
j.  Comprehensive VA coverage counts (but not limited coverage for specific disabilities)
k.  State high risk pools count (but next year they might not, depending on the coverage)
l.  Peace Corps coverage counts
m.  DOD NAF insurance counts

If the above list doesn't fully tell you if it counts, your health insurance provider can tell you if it counts.  If it turns out the coverage doesn't qualify, read the first section and figure out your penalty.  If it does qualify, you'll just indicate that you and your household were covered all year and you'll be done.   
Your tax guy or software is only going to ask you if you had coverage (though a professional can help you determine if it qualifies for minimum essential coverage), but you will pretty much need to know before you try to prepare your taxes for 2014.

Links to my posts and other helpful stuff:
IRS information

Monday, November 17, 2014

2014 Boomer Deduction Instructions for Turbo Tax (Store bought or downloaded)

These are specific instructions for entering information from the Boomer Deduction Worksheet into Turbo Tax using their home software tax preparation.  I used the Deluxe version linked below (which offers a 10% bonus if you use some of your refund to buy an Amazon gift card).  If you normally purchase the software, please use the link to help defray the costs and enormous effort this takes.  Also please consider making your Amazon purchases using the search box to the right and/or donating to the site.

TurboTax Deluxe 2014 Fed + Fed Efile Tax Software + Refund Bonus Offer


This is NOT an endorsement of Turbo Tax!  I also make no promises about the accuracy or reliability of the information presented, it is for assistance and education ONLY.  You MUST do your own due diligence to ensure your taxes are right.  I feel that the assistance of a trained professional is critical in preparing taxes for military members.  Feel free to contact me for questions at  Realize still that even if I answer your questions, I make no promises and bear no liability for the accuracy of the answers.  The only way I take ANY liability is if you see me to prepare your taxes in my professional capacity under my employer for whom I work as a tax professional.  Making a donation to this site (which I encourage and appreciate if you make extra money from the massive amount of work and expense this takes) does not constitute paying me for my advice.

Glad that's over!

General Instructions:
  • Make sure you fill out the 2014 Boomer Deduction Worksheet, found HERE, first.
  • The information and answers to various questions apply to the Boomer Deduction only.  It is possible that some yes's or no's may be different for you if you have complementing or overlapping situations.
  • I don't write everything from each page, but I generally start at the top of the page.  Sometimes the page title will use information, such as your name or your car make, so mine won't match.  If the page title is long, I may discontinue with a ... but you should be able to tell where I am.
  • If I skip pages, I'll write "more pages" so just keep clicking continue and answering questions until you get to the next page I talk about.
  • I'll indicate new pages on their software by separating information with three asterisks - ***
  • I'll indicate that you should be entering something or clicking a button by using the # sign
Page Instructions:

After logging in and creating an account, you will enter personal information (use 2 Crew FBM Submariner as your occupation), as well as information from your W-2's and other documents, advancing using the continue or Yes/No buttons.  Eventually you will get to the Deductions and Credits portion and then shortly you will get to the pages that matter:

How Do You Want to Enter Your Deductions and Credits?

# You can click "Walk me Through Everything" and go through all the questions, making sure to answer "Yes" to the "Did You Use Your Own Money to Pay Job Expenses for 2014" question, and then continuing until you get to the Employment Expenses Related to W-2" screen.  You can also click "I'll Choose What I Work On" and click the "Start" button next to "Job Related Expenses".

Employment Expenses

# Yes
Teacher Expense

# No
Employment Expenses Related to W-2?

# Yes
Other Types of Expenses

# Yes
More Pages
Tell Us About the Occupation You Have Expenses For.

# 2 Crew FBM Submariner
Do Any of These Uncommon Situations Apply?

# None of the Above
Home Office Expenses?

# No
Any Vehicle Expenses or Sales?

# Yes
Tell Us About Your Vehicle

# Enter asked for information (should be auto or truck <6000# unless really BIG)
Do You Own...

# Answer as applicable
When Did You Acquire...

# Enter date
When Did You Start Using ...

# If on Boomer when car acquired use choice one, otherwise use choice two.
Are You Still Using...

# Yes
Is Your ... an Electric Vehicle

# Click Yes or No
Did You Purchase New?

# Yes or No
Did You Trade In Another Vehicle to Purchase...

# Yes or No

If you click Yes it will ask for the purchase price excluding the trade in

# Enter what you paid in cash or with a loan for the car
Personal Use of Your...

Was your ... available during non-working hours?

# Yes

Do you have another vehicle available for personal use?

# Answer Yes if the household has 2 or more vehicles
Mileage Records for Your...

Did you keep track of your mileage when you used this vehicle for business?

# Yes (The command letter and Boomer Deduction Worksheet should be sufficient)

Did you document your business miles for this vehicle?

# Yes
How Do You Want to Enter Your Mileage?

# I'll enter the total miles I drove for the year

Total miles driven for year

# Enter in the box ALL the miles driven by the vehicle for ANY reason (12/31 minus 1/1 odometer)

Miles driven for JOB

# Enter in box the number from Line (N) on the Boomer Deduction Worksheet

Commuting miles

# Enter in box the total miles driven to and from work when NOT on off-crew or Refit Assist

Round trip average daily commute

# Enter in box how far to and from the pier
Was Your ... Used for Hire?

# No
How Many Vehicles Did You Use for Business in 2013?

# Click the 0-4 box
Rural Mail Carrier

# No

Comment: Take a look at the refund amount, you should start seeing this number change soon, and you can see how much this Boomer Deduction is helping - keep an eye on it.  You can thank me later :)
Did You Use the Standard Mileage Rate?

# Yes
You've Got a Standard Mileage Deduction of...

Do you want to see if your actual vehicle expenses give you a bigger deduction?

# No
Vehicle Summary

# If you used more than one vehicle you will need to click Add Vehicle and go through the process again.  You will need to make sure to divide the Business Mileage from the Boomer Deduction Worksheet between the vehicles as needed.

# Click Done
Did You Buy or Own Any Items for Use on Your Job?

# This is generally NO for military.  You can't take haircuts or cell phones as a general rule, and uniforms are generally reimbursed or non-deductible if they can be worn off base.
Do You Have any Leftover Deductions from 2012?

# No
Any Other Expenses?

# Enter Line (K) amount from the Boomer Deduction Worksheet on the Travel Expenses Line
# Enter Line (M) amount from the Boomer Deduction Worksheet on the Meal and Entertainment Expenses Line
# Enter any other lines as appropriate (though for military it is generally only professional publications)
Job Related Expenses

# In the Description Line put "Laundry and Cleaning"
# In the Amount Line put Line (L) amount from the Boomer Deduction Worksheet
Reimbursements for Your Expenses

# No
Any Special Situations?

# No
Job Related Expense Summary


That's it!  Hopefully this worked for you.  Feel free to ask any questions at  I will try to answer quickly but I do get busy during tax time, so don't feel slighted if it takes a while.  Feel free to ask questions in the comments, that way we can help everyone.  Please share with your fellow Boomer Sailors!  If you want me to do your taxes, I can do them via mail or email with no payment until you are satisfied and with secure online review and approval.  I will also check tax returns for free, and, if I find errors, I will tell you the difference and offer to fix for a price (if I check and find no errors I back it up with my companies standard guarantee.)  I encourage you to take advantage of that, I have seen some bad things on Military Tax Returns (I am a retired submarine Master Chief BTW.)

These posts have more info on the Boomer Deduction, with links to references.  If you do your taxes yourself, make sure to do your due diligence.

Please make Amazon purchases using the link or DONATE - this was a pain!  And I had to pay $107 for the software just to test it!

Sunday, November 16, 2014

2014 Boomer Deduction Worksheet

Military Submariners serving on two crew ballistic missile or guided missile boats are eligible to deduct lodging and other expenses when their "Tax Home" (the sub) is unavailable. Sometimes this is called the FBM Deduction. There are many discussions of what exactly is deductible, but this worksheet will work in most situations and make it easy to determine what amounts to enter on various forms or enter into tax prep software. If you find this worksheet useful, and it saves you money on taxes, consider making a donation.

Here are links to instructions for entering the results in popular tax software programs:
I'm working on these as we speak, but, if you want to get started, Turbo Tax and Amazon will give you a 10% kicker to any refund you have deposited as an Amazon Gift Card.  Here's a link:

TurboTax Deluxe 2014 Fed + Fed Efile Tax Software + Refund Bonus Offer

Boomer Deduction Worksheet for Tax Preparation - 2014
Numbers are for entries into software or initial form entries.

(A) Days of Refit assist in 2014 __________
(B) Days of Off Crew in 2014 __________
(C) Distance from Home to Off Crew Bldg __________
(D) Distance from Home to Waterfront __________
(E) Rent (do not include any mortgage info here)*__________
(F) Average Monthly Utilities __________
(G) Do you go home for lunch every day? __________
(H) Number of people (including wife and kids) sharing your residence___________

(I) Total Days with boat unavailable (A) + (B) = _____________
(J) Monthly Housing Costs (E) + (F) = ______________

Form 2106 Computation Worksheet Entries:
(K) Lodging and Incidental Expenses ((I) / 30 x (J))/H = _____________
(L) Laundry and Cleaning Expenses (I) / 7 x $10 = ______________
(M) Meal Expense (I) x Per Diem Rate from Table below = ______________

(N) Business Mileage:
If (G) is NO:
( (A) x (D) x 2 ) + ( (B) x (C) x 2 ) = ______________

If (G) is YES:
( (A) x (D) x 4 ) + ( (B) x (C) x 4 ) = ______________

Per Diem Rates (assumes reasonable distance form base):
Glynn County, GA $56
Other GA Counties around Kings Bay $46
Florida (around Jacksonville) $51
Kitsap County, WA $46
King County, WA $71
Pierce County, WA $61
Other counties look up in IRS Pub 1542 or
*You deduct mortgage interest, taxes and mortgage insurance premiums directly on Schedule A

Sunday, October 19, 2014

Reenlistment Bonus, Social Security, Compensation Repayment and Taxes

If you received income, that you thought you were entitled to, like Military Bonuses, VA payments, AFLAC type income replacement, Social Security and many others, and you paid taxes on it, and THEN someone took it back, you are entitled to get the taxes you paid on it back (sort of):

Each year that you pay back taxed money (they will garnish wages and take tax returns - FYI) you will be able to claim that on your tax return for the current year.

They will send you a letter detailing the amount they took for the year (maybe - you should track the amount they take to the dollar, just in case.)

With this you can do a "Claim of Right" deduction or credit.

If the amount is less than $3000, it is an itemized deduction (which sucks if you don't itemize).

If the amount is more than $3000, you can either take the deduction above, or a credit for the taxes paid on the original tax return, whichever is better.

The credit gets complicated and will require a fair amount of record keeping if you repay over multiple years.  Essentially you will recalculate the tax return for the year of the bonus, and figure out the taxes you paid on money you repaid.  You then get that amount back on the current year's tax return.  It's refundable, so you will get the money no matter what.

I strongly encourage ensuring that in any year they take money that you pay at least $3000. This is the only way to be sure to get all the taxes you paid back.

Each year you do the credit, you have to refigure the tax return including the changes from any previous credit calculations.

Make sure you find a copy of your tax return for the year of the bonus.

You can get a transcript from by setting up an account or having them mail you one.  The transcript is all you should need, so don't get the full copy since that can cost money.  Here's a direct link to the right page: TRANSCRIPT

Each state handles claim of right in their own way, so you might need assistance with the State.

Thursday, October 16, 2014

Everyday Taxes

My book is finished and just needs verification that numbers are current.  Expect availability for e-readers by December and physical books soon after.

Thursday, October 2, 2014

Open a Roth IRA Today! And Not For the Reason You Think

This article is not about Roth IRA's in detail.  It's about one little, under appreciated rule about Roth IRA's.  Many of the requirements for avoiding taxes and penalties on Roth IRA withdrawals involve a five year rule.  You have to have a Roth IRA for at least five years in order to take advantage of many exceptions.

The weird thing is that the rule isn't based on individual Roth IRA accounts, it's based on the first time YOU opened ANY Roth IRA account.  So, when you're starting out investing, throw a little money into a Roth IRA, just to get the clock started.  It doesn't have to be much, and, to be honest, it will probably not actually matter in the long run, but, if it does, you'll be happy you did it.

Obviously this should not be interpreted as investment advice, or an argument as to what IRA is better for you.  It's just a little helpful hint that has a small chance of saving you some grief someday.

Thursday, September 18, 2014

Obamacare, Affordable Care Act and Married Filing Separately - Warning

If you are receiving an Affordable Care Act subsidy (called the Premium Tax Credit), Married Filing Separately (MFS) is NOT an option for you.  With only one exception (domestic abuse, discussed later under Note 1) if you file MFS, you are ineligible for the Premium Tax Credit, and will have to pay your half of the subsidy back when you file taxes (the person you are married to pays the other half, unless you received all the subsidy on your own in which case you pay it all back.

You need to pay attention to this as the end of the year approaches.  If you are not divorced or LEGALLY separated as of December 31st, 2014, you are married for tax purposes, and your only choice for filing status is Married Filing Jointly (MFJ), MFS or (under a difficult to meet standard - see Note 2 below) Head of Household (HH).  If you can't file MFJ in this case, and don't meet the requirements for HH, you will have to pay back the subsidy (subject to limits based on income - but you'll pay some or all of it back).

Keep this in mind when considering changing your marital status, whether through divorce, marriage or separation toward the end of this year.  Also take it into account when deciding how to file with your soon to be ex-spouse.

Note 1 - If you are forced to file MFS due to domestic abuse, you have to meet the following requirements, and indicate that you meet them on the tax return to avoid the repayment: You must be forced into filing MFS due to domestic abuse (unable to file MFJ) and you must be living apart from your spouse at the time you file the tax return.

Note 2 - Make sure to research this if you think this applies, what follows is just the bare bones and there are lots of tricky parts.  If you are married at the end of 2014, but live apart from your spouse for the last 6 months of the year and payed more than 50% of the cost of maintaining a home for you and your dependent child you might be able to file HH by being considered unmarried for tax purposes.

If you want more than just tax information on the Affordable Care Act, check this book out:

Affordable Care Act For Dummies