Are you ready for Form 8965?

This is jumping the gun by a large margin, but draft info is out about the Affordable Care Act filing requirements on 2014 US tax returns. It looks at this early time (AND IS YET TO BE CONFIRMED) as though all expats will have a new form to file next year with their tax return, Form 8965. This form is to claim your coverage exemption code (which, at present, will be 'C').

The brick that is my tax return just got thicker. (Thanks guya for the tip on Treasury Tags!)

Please, someone, tell me I'm wrong about this.

General Instructions 5157 - Affordable Care Act:
http://www.irs.gov/pub/irs-pdf/p5157.pdf

Draft instructions for 8965:
http://www.irs.gov/pub/irs-dft/i8965--dft.pdf

From 5157:

What about U.S. citizens living abroad?

U.S. citizens living abroad are subject to the individual shared responsibility provision. However, U.S. citizens who are not physically present in the United States for at least 330 full days within a 12-month period are treated as having MEC 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 MEC for that year. In general, these individuals qualify for the foreign earned income exclusion under section 911.

Individuals may qualify for this rule even if they cannot use the section 911 exclusion for all of their foreign earned income because, for example, they are employees of the United States. Individuals that qualify for this rule need take no further action to comply with the individual shared responsibility provision during the months when they qualify. They will report their status with their federal income tax return on Form 8965. (emphasis mine)

U.S. citizens who meet neither the physical presence nor residency requirements need to have MEC, qualify for a coverage exemption, or make a SRP when they file their federal income tax returns. Note that MEC includes a group health plan provided by an overseas employer.


I'm sure there will be more information coming in the future. Again, this is a quick interpretation. If the pros have more to add, please do!

Very interesting; didn't read all of the Publication 5157, but I will......my tolerance for government agency paperwork is at a very low point these days. 

Unless something drastic happens in the next 2 months, I will meet the physical presence test and bona fide resident test for 2014,  plus I am covered under Medicare A.....I'm hoping that means just another piece of paper to add to my 'brick'.

So ... it looks as though we are supposed to fill in this IRS form now if we are exempt from the Affordable Health Care Act due to living abroad?  The instructions seem to have been updated from the draft form as of December 2014.

http://www.irs.gov/pub/irs-pdf/i8965.pdf

There are these pages from the IRS site that are dated this year (2015):

http://www.irs.gov/Affordable-Care-Act/Individuals-and-Families/Questions-and-Answers-on-the-Individual-Shared-Responsibility-Provision
See question 12. The last sentence states "Individuals who qualify for this rule should file Form 8965, Health Coverage Exemptions, with their federal income tax returns." Page Last Reviewed or Updated: 05-Jan-2015.

http://www.irs.gov/Affordable-Care-Act/Individuals-and-Families/ACA-Individual-Shared-Responsibility-Provision-Exemptions
Page Last Reviewed or Updated: 12-Jan-2015. "You will claim or report coverage exemptions on Form 8965, Health Coverage Exemptions, and attach it to Form 1040, Form 1040A, or Form 1040EZ. These forms can all be filed electronically."

For now, it seems the form will be required.

I don't have to worry about this for this last year, although I have thought about how it will come up on TurboTax.  Next year I will need to do something, but I will be carrying my health insurance with me when we go.....at least for a few years.

Yes the form is mandatory with every 1040 filed from 2014 onwards. The final instructions have been out for a while.

Good info, thanks for posting it.

Eyes glaze over at governmentalia.  Let me get this straight:  you only need form 8965 if you are claiming exemption?  Or does everybody living overseas do this?

I'm covered (with Medicare and medi-gap policy) so seems it wouldn't apply.  Under Romneycare in Mass. the insurer sent out a paper stating you were insured which you put in with your state stuff.  Is ACA going to be more complicated?

Eyes glaze over at governmentalia.  Let me get this straight:  you only need form 8965 if you are claiming exemption?  Or does everybody living overseas do this?

I'm covered (with Medicare and medi-gap policy) so seems it wouldn't apply.  Under Romneycare in Mass. the insurer sent out a paper stating you were insured which you put in with your state stuff.  Is ACA going to be more complicated?

The best option may be to wait for publications 54 and 17. See what they say regards health insurance from US employment, US health insurance from the exchanges, and US health insurance via Medicare and medigap. If you have a certificate, or whatever is needed to prove you're insured for US tax purposes, it may suffice to simply check the box on the appropriate line.

For all others, even though we're covered by the NHS and possibly also private insurance like BUPA, AXA, etc., it appears we have to complete form 8965. From a first glance, this may replace Schedule B as the simplest form to file. At maximum, maybe 6 boxes, and 2 minutes top? It is good to see the form has been reduced to a single page from the 3 or 4 in the "Draft".

Just to be clear, we have to file 8965 to avoid an automatic penalty being imposed on us by the IRS for not obtaining US health insurance that we can not register for on any US exchange, that most would not pay out for even if we could obtain it because we live abroad, and that we do not need since we have NHS and possibly private UK coverage. Only in America. The glass of wine at lunch and the bourbon next to me now has not improved my attitude regards ludicrous tax laws.

Guys, relax. Anyone meeting the requirements of the bona fide residence or physical presence tests (which we know well from Form 2555) gets an exemption. It does not matter what coverage you have, your residence abroad is sufficient.

You do need to fill in the Form 8965 to claim the exemption, but it is a single page and could not be much simpler. It should take you all of 30 seconds to complete.

Guys, relax. Anyone meeting the requirements of the bona fide residence or physical presence tests (which we know well from Form 2555) gets an exemption. It does not matter what coverage you have, your residence abroad is sufficient.

You do need to fill in the Form 8965 to claim the exemption, but it is a single page and could not be much simpler. It should take you all of 30 seconds to complete.

Agreed. Except for the year that an individual moves to or from the United States or goes overseas but never establishes a tax home in a foreign country...

And there's the 330 day test.

Agreed. Except for the year that an individual moves to or from the United States or goes overseas but never establishes a tax home in a foreign country...

A tax home in a foreign country is not required. Either physical presence or bona fide residence abroad is sufficient.

You guys don't know how lucky you are living in the UK and having the NHS.......no matter what the Daily Mail and the back ups in A&E say.

I'm currently navigating the pathways of the ACA. My current insurance comes from an ex-employer and is expensive so I applied to my state's health exchange to see if I could get cheaper insurance. The application website could not verify my SSN and after 6 weeks of unsuccessful phoning and visits to the downtown office I gave up and filled in a paper application. That worked, but my income level is low right now so I got shunted into the state's Medicaid program...I have 90 days of insurance while the state verifies my income, but if I give up my ex-employer's plan I can't get back into it until open enrollment next November....so I'm keeping it and currently doubly insured......

There's a good chance there will be changes to this within the next year or two for several reasons. The Republicans now control both chambers of Congress, the IRS is overwhelmed just from those who do live in the U.S. on questions regarding both the penalty/exemptions and the subsidies (and already under a budget/personnel shortage), and there is a case before the Supreme Court regarding the validity of the subsidies in states using the federal exchange*.

*If the Supreme Court rules in the plaintiff's favor that would cause major problems with the insurance industry in the affected states since the healthier people would likely drop the coverage (and be exempt from the penalty under the hardship clause) but the sicker ones would keep it at any cost, leading to the feared death spiral. To avoid that scenario if the ruling goes that way Congress and Obama would have to come up with some compromise plan. (This is one of the consequences of the Democrats shoving the law through the way they did - any errors in such a long and complicated bill would not be discovered until the Congress changed and it was politically too late to easily correct them.) You can search the Internet for "King vs. Burwell" to learn more about this case.