HSA for America

What to Do If Your
Health Insurance Tax Credit
Gets Audited

Millions Could Lose Health Care Premium Subsidies
- Are You At Risk?

August 1, 2014
Vol. 10, Issue 8

Have you received a notice from the federal exchange or state marketplace requesting additional information to verify your income or citizenship? You’re not alone! A recent New York Post article reveals that the government has come across 2.9 million “inconsistencies” from applicants who signed up for health plans and are receiving tax credits to help reduce their monthly premium. What does this mean to you?

Urgent Action Required to Keep Your Health Plan!

Once the rush of health plan applications started settling down, the government began auditing information to ensure information provided by applicants was correct. Inconsistencies with dates of birth, income, or citizenship status has now triggered some 2.9 million applicants to receive letters requesting further documentation.

If you’re one of the unfortunate individuals who received one of these dreaded letters requesting additional income or citizenship information, it’s imperative that you respond to this request as soon as possible. If you don’t respond to the request in a timely fashion, you risk losing your premium tax credit, facing a large tax bill, and/or even having your policy cancelled.

Your supporting documentation can either be uploaded via your account (or state marketplace account) or mailed (you’re asked to include the page you received in the mail that includes a bar code corresponding to your records for faster processing). The big question is - what do you need to send?

Self-employment Income. It seems that self-employment income has been the most difficult for many individuals to provide. Now that your health insurance coverage and tax credits depend on it, it’s even more important that you keep impeccable business records if you haven’t done so in the past.

Along with certain tax documents, you may also be asked to provide a self-employment ledger.

A self-employment ledger is simply a tracking sheet you should keep each month documenting the following:

  • Each payment received, from whom the payment was received and the date
  • Grand total of gross receipts (payments received)
  • Grand total of business expenses incurred
  • Document net profit (subtract business expenses from gross receipts)

If you don’t use a program such as Quickbooks to track these figures for you, you’ll want to set up an Excel spreadsheet or a simple chart to document these figures. You may need to refer to prior bank statements to build your new ledger for 2014. One example of a self-employment ledger is noted here.

Immigration Status/U.S. Citizenship. If you’ve been asked to prove your immigration status (or that of a family member), the following documents will be accepted:

  • U.S. Passport
  • Certificate of naturalization (N-550/N-570)
  • Certificate of citizenship (N-560/N-561)
  • State-issued enhanced driver’s license (these are available in Michigan, New York, Vermont and Washington)
  • Document from a federally recognized Tribe

If you’re unable to provide one of the above documents, you can send two documents from an extensive list of choices to fulfill this requirement (including U.S. birth certificate, adoption decree, military records, school records, medical records, driver’s license or marriage or divorce records). To view the full list of acceptable documents, refer to your letter (or federal exchange or state marketplace website) for further details.

Employer-sponsored Coverage/Minimal Essential Coverage. You may be asked to provide documentation from your employer that insurance benefits either are or are not available to you or your family, or that the benefits provided do not meet minimal standards. Documentation may include:

  • Completed Employer Coverage Tool (worksheet from and cover letter from employer

  • Letter from your employer documenting:

    • The date you are (or your family member is) eligible for employer coverage (if applicable)

    • Attestation that your employer doesn't offer coverage

    • Attestation that the coverage provided does not meet minimum value standards

    • If the employer offers a plan that meets the minimum value standards, send in documentation of the cost of the employee's share of the premium for the lowest-cost self-only plan that meets the minimum value standards (factoring in wellness incentives)

What Do I Do Once I Submit My Additional Information?

Be sure to keep a copy of the letter you receive and any documentation that you forward - I would hate to think that the government might “lose something” (said with much sarcasm!) While you’re waiting for your information to be processed, you are allowed to keep your health plan and premium tax credit, but you must continue paying your premium.

According to a New  York Post article, the government has only been able to verify 425,000 of the 2.9 million inconsistencies to date, so I expect this to be a very lengthy, painstaking process.

Preparing for the Future

For those that are self-employed, I expect that you’ll remain the target of ongoing investigation. To avoid any complications, I highly recommend you keep diligent business records - regardless of how large or small your business is. As a business owner myself, I understand the need to minimize net profit to reduce taxes, but now that your health coverage and premium tax credits are dependent upon this information, recordkeeping is now more crucial than ever.

For as little as $20 a month, there are several cloud-based accounting software programs available for small businesses such as FreshBooks, QuickBooks, Kashoo, Outright, and Xero (these were rated the top 5 in 2013). Some of these also have the ability to add payroll processing and quarterly tax filing/deposits.

You’ll receive a notice once the government has processed your information. In the meantime, I wish those of you who are self-employed a prosperous year and hope all of you are able to safely navigate the government red-tape unscathed!

To your health and wealth!

"Three generations: Wiley Long II, III and IV"

Wiley Long
President - HSA for America



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