U.S. taxpayers who are resident abroad, and are hustling to complete their tax returns (U.S. IRS Form 1040) on time for the June 15 deadline may have cause to pause at Line 61 under “Other Taxes” —which states, “Health care: individual responsibility”. How to fill it in? To tick, or not to tick?
The voluminous instructions to IRS Form 1040 helpfully explain that a taxpayer must either:
You Say ‘Payment’, I Say ‘Penalty’
Introduced in 2014 as part of the implementation of the Affordable Care Act of 2010, the shared responsibility payment is a controversial charge imposed on non-exempt Americans who do not have healthcare insurance meeting certain minimum essential coverage requirements. The levy, which increases annually, is set, for the 2015 tax year, at the greater of:
What’s a Non-resident To Do?
Where does that leave a U.S. citizen who files as a non-resident—and who is likely to be covered by an employee health plan and/or by the national health care system of their country of residence?
Carol Hipwell, a Private Client Tax Director at the tax and accounting practice of Frank Hirth in London, England, explains: “Most U.S. citizens and resident aliens living abroad qualify for an exemption from the U.S. requirement to have qualifying health coverage. This exemption extends to individuals who have to file U.S. returns as non-resident aliens or who were non-resident aliens for any part of the year.” She adds that certain foreign health coverage might be treated as minimum essential coverage for purposes of the Affordable Care Act, but that overseas filers generally rely on the exemption instead.
The exemption for U.S. citizens living abroad is described on the U.S. IRS portal at this link.
Taxpayers claim the exemption by filing IRS Form 8965 (Healthcare Coverage Exemptions) with their IRS Form 1040.
Filing Deadline Extension
The general due date for the 2015 U.S. Individual Income Tax Return was April 18, 2015. (The usual filing date of April 15 was extended because April 15 fell on Emancipation Day). Taxpayers living outside the U.S. and Puerto Rico qualify for an automatic extension until June 15, 2016. No form is required to qualify for this extension, but U.S. embassy websites advise taxpayers to write ‘Taxpayer Resident Abroad’ on the top of the tax return.
By Joanna Norland, Technical Tax Editor, Bloomberg BNA
Access even more in-depth analysis and expertise with a free trial to the Premier International Tax Library.
All Bloomberg BNA treatises are available on standing order, which ensures you will always receive the most current edition of the book or supplement of the title you have ordered from Bloomberg BNA’s book division. As soon as a new supplement or edition is published (usually annually) for a title you’ve previously purchased and requested to be placed on standing order, we’ll ship it to you to review for 30 days without any obligation. During this period, you can either (a) honor the invoice and receive a 5% discount (in addition to any other discounts you may qualify for) off the then-current price of the update, plus shipping and handling or (b) return the book(s), in which case, your invoice will be cancelled upon receipt of the book(s). Call us for a prepaid UPS label for your return. It’s as simple and easy as that. Most importantly, standing orders mean you will never have to worry about the timeliness of the information you’re relying on. And, you may discontinue standing orders at any time by contacting us at 1.800.960.1220 or by sending an email to firstname.lastname@example.org.
Put me on standing order at a 5% discount off list price of all future updates, in addition to any other discounts I may quality for. (Returnable within 30 days.)
Notify me when updates are available (No standing order will be created).
This Bloomberg BNA report is available on standing order, which ensures you will all receive the latest edition. This report is updated annually and we will send you the latest edition once it has been published. By signing up for standing order you will never have to worry about the timeliness of the information you need. And, you may discontinue standing orders at any time by contacting us at 1.800.372.1033, option 5, or by sending us an email to email@example.com.
Put me on standing order
Notify me when new releases are available (no standing order will be created)