# Obamacare exemption for expats



## chrisddickey

My understanding is that expats from the USA don't have to buy Obamacare, and don't have to pay the Individual Mandate fee/tax/penalty. What I can't figure out is what forms to file to NOT pay that fee.

My situation is that I am retired early (not eligible for Medicare) and live abroad. All my income is US based unearned income. I don't have any foreign bank accounts or foreign earned income. Up until now I have always filed exactly as if I was living in the US. Except this coming years taxes are asking if I have a US based health plan. 

An IRS publication that the forum will not let me post a link to says "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 minimum essential coverage for that 12-month period."

However I downloaded the TaxAct Federal Free filing preview edition today, and it is insisting that I owe the penalty, and I can't figure out how to claim the living abroad exemption. It lists only 8 or so standard exemption reasons, and not being in the US is not one of them. 

My understanding is that I don't owe the Individual Responsibility payment. However I don't know how to convince TaxAct (or for that matter the IRS) of that fact. 

Do I just say that I have insurance, and if the IRS contacts me for what that insurance is, just try to explain it to them? (this seems like a recipe for trouble). 

Do I say I don't have health insurance, but claim some form of exemption somewhere? What form? where?

I expect that there are going to be a lot of people looking for this information soon, but I like to get a jump on my taxes and have a rough idea what they will be by year end so I can make an estimated payment. 

If anybody can give me any guidance I would appreciate it. 
Thanks.


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## Bevdeforges

I think the key thing is that, if you live overseas and qualify for the Foreign Earned Income Exclusion (even if you don't take it - or have no foreign earned income that qualifies for the FEIE) you are deemed compliant rather than exempt from the requirement. To me that says that you just indicate that you have insurance. The IRS should be able to put that together with your foreign address on your forms and figure out the rest.

I have yet to see the draft forms to see precisely what you have to fill out on the 1040 this year, but everything I've read (from the consulate and IRS websites) indicates that overseas residents are simply deemed to have the proper insurance.
Cheers,
Bev


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## theOAP

In September, the IRS released a draft of Form 8965 and it's instructions. This was to be filed by expats to claim an exemption. Since then, an informational page has appeared on the IRS site for claiming exemptions, but expats are not mentioned.

The only suggestion is to hold tight until IRS figures out how they are going to handle this issue. Could it be more red ink at the top of 1040 stating you're exempt? Who knows.


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## Bevdeforges

Form 8965 doesn't apply to US expats. This is the current statement on the US State Department website Federal Benefits and Obligations (emphasis is mine):



> U.S. citizens living abroad are generally subject to the same individual shared responsibility provision as U.S. citizens living in the United States. Starting in 2014, the individual shared responsibility provision calls for each individual to have minimum essential coverage (MEC) for each month, qualify for an exemption, or make a payment when filing his or her federal income tax return. *However, U.S. citizens or residents living abroad for at least 330 days within a 12 month period are treated as having MEC during those 12 months and thus will not owe a shared responsibility payment for any of those 12 months. Also, U.S. citizens who qualify as a bona fide resident of a foreign country for an entire taxable year are treated as having MEC for that year.*


Expats do not need to file for an exemption. They are treated as having MEC whether or not they have any coverage at all. Until I see the draft 1040 forms for 2014, I can't say anything about how you claim this - but I suspect you'll be able to simply fill in "US expat" or indicate that you fulfill the physical presence or bona fide residence test somehow and as far as they are concerned, you're in compliance.

For the time being, on TaxAct or any other tax software program, I'd just fill in whatever you need to to indicate that you have the necessary insurance.
Cheers,
Bev


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## theOAP

Yes Bev, we're dancing around the same conclusion.

On 24 September, 2014, the IRS released this draft for 8965. It had instructions for expats.
http://www.irs.gov/pub/irs-dft/i8965--dft.pdf

As I said previously, in October 2014, the IRS website suddenly gave new conditions for those with exemptions *which did not include expats.*

Your reference is to a DoS statement. Here is the latest statement from the IRS (5 November 2014) which says the same, "do nothing":
Questions and Answers on the Individual Shared Responsibility Provision

And here's an original draft for Form 1040 for 2014 (28 August 2014). The question is on line 61:
http://www.irs.gov/pub/irs-dft/f1040--dft.pdf

Publication 54, when released, will likely hold the answer as to how to "do nothing officially" which will probably be do nothing. For TaxAct, etc., this _may_ mean simply checking the box on line 61 of 1040, unless of course the 1040 changes in its final form.


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## Bevdeforges

You have to remember that I'm an accountant by trade, so for me there is a BIG difference between saying that expats have an "exemption" from the rules, and saying that expats are "deemed in compliance." 

Thanks for the reference to the draft 1040. I hadn't managed to turn that one up in my (admittedly brief) search - but I believe you're right in that most expats will simply have to check the box saying they have "whole year cover" and be done with it. (Though the thought does leap to mind here how they would detect someone who just checked the box, without having any medical coverage at all back in the States. However, that is not my problem.... <g>)
Cheers,
Bev


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## chrisddickey

*Here are the form numbers*

Thank you Bev and theOAP for your help. 

With your help, I think I have tracked down the forms and step by step.
Let me just summarize it here for the benefit of people who will be doing this later. Please note that I am looking at the DRAFT forms, not the final forms. 

As mentioned, Form 1040 line 61 is the Health Care Individual Responsibility line. 
It has a checkbox where you can say that you have full year Minimum Essential Coverage, plus a space were you can enter the Penalty calculated on form 8965. 

It looks like from the quotes quoted above, it would be acceptable to simply check the checkbox that says you have the Minimum Essential Coverage and ignore the whole issue. I think that this is acceptable, but if you are using a US address, might be a red flag if IRS data mining can't match you to a health care plan. I don't know if they are doing that or might do that in the future, it just seems like something that you might have to explain someday - but which should be acceptable.

However it looks like if you wanted to be a bit more explicit, you could also leave that checkbox blank and also file form 8965 and under part III claim a whole year exemption for exemption reason code 'C' - Citizens living abroad and certain noncitizens. Note that at this time certain tax preparation software (specifically Taxact preview edition) does not support entering exemption code C, though it seems to support most of the other exemption codes. It also supports claiming an exemption but leaving the reason blank - which is another possibility. 

Thanks for your help on this topic and I hope this thread helps others in a few months.


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## FFMralph

Exemptions from the fee for not having health coverage.

https://www.healthcare.gov/fees-exemptions/exemptions-from-the-fee/


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## Bevdeforges

FFMralph said:


> Exemptions from the fee for not having health coverage.
> 
> https://www.healthcare.gov/fees-exemptions/exemptions-from-the-fee/


Right, but we expats don't get an exemption. We're deemed in compliance: see the link and the quote in message #4 of this thread. We get to just check the box and get on with our lives. Certainly the case if you are taking the FEIE.
Cheers,
Bev


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