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YucaLandia

Sep 26, 2013, 1:49 PM

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ACA Obamacare Rules for Americans Living in Mexico

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We have been getting a raft of questions at Yucalandia about ACA / Obamacare, and a few key issues have popped up:ACA – Obamacare’s Effects on American Expats Living Abroad

You can qualify for having minimum medical insurance by having Medicare (receiving SS retirement benefits), Medicaid, CHIP or other qualifying policies (like some VA coverages). If you do not have qualifying minimum medical insurance, then you may qualify as a bona fide Non Resident of the USA.

ACA and US Citizens who are Non Residents of the USA: Excluded or Not Excluded?
In the simplest case, to qualify for the ACA Foreign exclusion:
~ We must be outside of the the USA for 330 days in a calendar year to qualify.
~ We must qualify under IRS requirements to be a “bona fide resident” of a foreign country.
http://www.irs.gov/pub/irs-pdf/f2555.pdf

Key parts of meeting the IRS requirements for qualifying as a “bona fide resident” of another country, are covered by IRS Form 2555, Question 13:

“13 a. Have you submitted a statement to the authorities of the foreign country where you claim bona fide residence that you are not a resident of that country? See instructions. Yes or No
(13) b. Are you required to pay income tax to the country where you claim bona fide residence? See instructions. Yes or No
If you answered “Yes” to 13a and “No” to 13b, you do not qualify as a bona fide resident. Do not complete the rest of this part.”

As we can see, we must be residents of another country to qualify – which points to Residente Temporal and Residente Permanentes only qualify for the EXEMPTION if they are out of the USA more than 330 days, while VISITORS on 6 month visas – who are not required to pay income taxes in Mexico – owe for ACA insurance coverage or pay the IRS penalty.

for those with TIP cars and Visitors/visitante visas.

If you are a US citizen and a Resident, without a medical coverage plan, then you will have to pay the following “Taxes” on your TY 2014 Federal income tax return (filed by April, 2015):
~2014 TY: Families: $285 per family or 1 percent of total household income, whichever is greater. Individual adults pay $95 each.
~ 2015 TY: Families: $975 per family or 2 percent of income, whichever is greater. Individual adults pay $325 each.
~ 2016 TY: Families––$2,085 or 2.5 percent of income, whichever is greater. Individual adults––$695. These rules directly affect between 5-10 million US citizens living outside of the US, unless you can prove that you are not a US Resident.**

http://www.irs.gov/pub/irs-pdf/f2555.pdf

=====================

Since the IRS instructions on this say we must be residents, does anyone else see how an American in Mexico on Visitor/Visitante tourist visas (without Medicare, Medicaid, or other qualifying health insurance), can be exempt from ACA/Obamacare?

steve
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(This post was edited by YucaLandia on Sep 26, 2013, 2:13 PM)

YucaLandia

Sep 26, 2013, 1:54 PM

Post #2 of 14 (840 views)

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Re: [YucaLandia] ACA Obamacare Rules for Americans Living in Mexico

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Supporting Background Information:

IRS link that describes the 330 day clause:

“12. Are US citizens living abroad subject to the individual shared responsibility provision?
Yes. However, U.S. citizens who live abroad for a calendar year (or at least 330 days within a 12 month period) are treated as having minimum essential coverage for the year (or period). These are individuals who qualify for an exclusion from income under section 911 of the Code. See Publication 54 for further information on the section 911 exclusion. They need take no further action to comply with the individual shared responsibility provision.”
http://www.irs.gov/...onsibility-Provision

If we read further in the IRS official “Publication 54″ that describes who qualifies for the exclusion (through a flow chart) on page 13, which describes:

“Were you physically present in a foreign country or countries for at least 330 full days during ANY period of 12 consecutive months?”

If you got to this box, and answered “YES” to this question , then you qualify.
http://www.irs.gov/pub/irs-pdf/p54.pdf

Continuing on pages 14 & 15, the IRS also describes how you ~ must be a formal resident of a foreign country and ~ you must be living outside the USA for a period of an entire tax year:

“Statement to foreign authorities.
You are not considered a bona fide resident of a foreign country if you make a statement to the authorities of that country that you are not a resident of that country, and the authorities:
~ Hold that you are not subject to their income tax laws as a resident,
or
~ Have not made a final decision on your status.”
and
“Uninterrupted period including entire tax year. To meet the bona fide residence test, you must reside in a foreign country or countries for an uninterrupted period that includes an entire tax year. An entire tax year is from January 1 through December 31 for taxpayers who file their income tax returns on a calendar year basis. During the period of bona fide residence in a foreign country, you can leave the country for brief or temporary trips back to the United States or elsewhere for vacation or business. To keep your status as a bona fide resident of a foreign country, you must have a clear intention of returning from such trips, without unreasonable delay, to your foreign residence or to a new bona fide residence in another foreign country.”

“Bona fide resident for part of a year.
Once you have established bona fide residence in a foreign country for an uninterrupted period that includes an entire tax year, you are a bona fide resident of that country for the period starting with the date you actually began the residence
and ending with the date you abandon the foreign residence. Your period of bona fide residence can include an entire tax year plus parts of 2 other tax years.”

Is there any way around the $$ consequences in 2014 for Americans living in Mexico on Visitante/Tourist visas, (without Medicare, Medicaid, or other qualifying health insurance), as penalties to the IRS for not having ACA/Obamacare qualified health insurance?

Residente Permanente and Residente Temporal may have unexpected benefits over Visitante/Tourista visas?
steve
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(This post was edited by YucaLandia on Sep 26, 2013, 2:15 PM)

morgaine7

Sep 26, 2013, 5:56 PM

Post #3 of 14 (769 views)

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Re: [YucaLandia] ACA Obamacare Rules for Americans Living in Mexico

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In the simplest case, to qualify for the ACA Foreign exclusion:
~ We must be outside of the the USA for 330 days in a calendar year to qualify.
~ We must qualify under IRS requirements to be a “bona fide resident” of a foreign country.

Having had to deal with these requirements for nearly 30 years to exclude foreign income, I know they are either/or for that purpose (Form 2555) and probably for this one. The requirement for being outside the US for 330 days ("physical presence test" in IRS-speak) is an alternative for those unable to qualify under the "bona fide residence test". Since the the same rules seem to apply for the ACA penalty, there's no reason to assume that an expat living in Mexico on sequential 180-day visitor permits wouldn't qualify for exemption, presuming he/she has proof of being outside the US during the required 330 days of the calendar year.

Kate

YucaLandia

Sep 26, 2013, 6:35 PM

Post #4 of 14 (754 views)

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Re: [morgaine7] ACA Obamacare Rules for Americans Living in Mexico

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Yes, the ACA website says:

" ... U.S. citizens who live abroad for a calendar year (or at least 330 days within a 12 month period) are treated as having minimum essential coverage for the year (or period). These are individuals who qualify for an exclusion from income under section 911 of the Code. ..."

So, ACA has convolved its rules with the IRS, and the IRS describes 2 categories of people who qualify for the exclusion:
~ Those how meet the physical presence test (330 days) ~ or ~
~ Those who meet the "bona fide residence test".

By convolving the rules, things get messy, because to formally meet the "exclusion from income" test, we are legally supposed to have foreign income. ... (see the IRS official flow charts/decision trees)

- This is also where being liable for paying income tax in a foreign country comes in. How does if work if you have no foreign income?

Hopefully, the IRS will re-write their rules on exclusion under section 911 of the IRS code to fit the ACA/Obamacare overseas applicants who have no foreign income, otherwise many Americans in Mexico will have the same mismatch of one Govt. agency (ACA) using another agency's out-of-date (IRS) rules that don't fit the interlocking ACA applicants' needs - just like Mexico's Legislature writing new INM legislation/law without changing the interlocking Aduana TIP car rules or SRE Citizenship laws/rules. ;)
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lhpdiver

Sep 27, 2013, 1:00 PM

Post #5 of 14 (638 views)

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Re: [YucaLandia] ACA Obamacare Rules for Americans Living in Mexico

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1.) Do you think IMSS coverage would qualify as being covered by insurance ?

2.) Assuming you are in Mexico at least 330 days/year, if you are supposed to have a US policy, and you no longer have a US address, what state are you supposed to contact for coverage ?

“13 a. Have you submitted a statement to the authorities of the foreign country where you claim bona fide residence that you are not a resident of that country? See instructions. Yes or No
(13) b. Are you required to pay income tax to the country where you claim bona fide residence? See instructions. Yes or No
If you answered “Yes” to 13a and “No” to 13b, you do not qualify as a bona fide resident. Do not complete the rest of this part.”

3.) They use the word AND not OR. so if 13a is NO that ends the test. Right ?

(This post was edited by lhpdiver on Sep 27, 2013, 1:59 PM)

John Shrall

Sep 27, 2013, 2:14 PM

Post #6 of 14 (608 views)

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Re: [YucaLandia] ACA Obamacare Rules for Americans Living in Mexico

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Publication 54 containing instructions for IRS form 2555, at least for 2012, describes how one qualifies for a foreign income exclusion. It's designed for those US citizens earning income while living in a foreign country. If you meet the requirements, all or a portion of that income is excluded from US taxation.

Nothing in the 2012 instructions talk about ACA although a lot of the same terminology has been bandied about.

Until there is a 2013 or perhaps 2014 IRS publication that talks about exclusions in the context of ACA, isn't this speculation a but premature?

YucaLandia

Sep 27, 2013, 3:17 PM

Post #7 of 14 (598 views)

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Re: [lhpdiver] ACA Obamacare Rules for Americans Living in Mexico

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I am trying to come up to speed on these things, which is why I started this thread - for people to discuss what the practical requirements are for ACA / Obamacare and us residents of Mexico.

I have made 2 separate official inquiries with the US official agency in charge of registering us US citizens. - After sitting on hold for 45 minutes as they "researched" the issues, they both/each say they don't know. They just quote the simplified ACA website description:

"U.S. citizens living outside the U.S.
U.S. citizens living in a foreign country are not required to get health insurance coverage under the Affordable Care Act. If you're uninsured and living abroad, you don't have to pay the fee that other uninsured U.S. citizens may have to pay.

Generally, health insurance coverage in the Marketplace covers health care provided by doctors, hospitals, and medical services within the United States. If you're living abroad, it's important to know this before you consider buying Marketplace insurance.

Questions? Call 1-800-318-2596, 24 hours a day, 7 days a week. (TTY: 1-855-889-4325)"

https://www.healthcare.gov/...-in-the-marketplace/

The staff at the official help number do not currently know the answers, and they say the questions about US citizens living abroad and those who have foreign health care coverage, have been forwarded to their special advanced issues division for an answer within 2 business days (next Tuesday).

The key is just what does it mean to officially "live outside the USA". This is where the ACA says that it defaults to IRS rules.
https://www.healthcare.gov/exemptions/ describes exemptions from the "fee" for not having health coverage:

"How do I get an exemption from the fee for not having health coverage?
The individual shared responsibility payment
If you can afford health insurance but choose not to buy it, you must pay a fee known as the individual shared responsibility payment. "

According to the IRS Q & A Website for ACA requirements on the "individual shared responsibility payment", they say:

1. If you are outside the USA for 330 days (or more), then you have no responsibilities under the ACA:

"12. Are US citizens living abroad subject to the (ACA's) individual shared responsibility provision?

Yes. However, U.S. citizens who live abroad for a calendar year (or at least 330 days within a 12 month period) are treated as having minimum essential coverage for the year (or period). These are individuals who qualify for an exclusion from income under section 911 of the Code. See Publication 54 for further information on the section 911 exclusion. They need take no further action to comply with the individual shared responsibility provision.

http://www.irs.gov/...onsibility-Provision
or

2. If you owe no US taxes, then you have no responsibilities under ACA / Obamacare:

"6. What are the statutory exemptions from the requirement to obtain minimum essential coverage?
Religious conscience. You are a member of a religious sect that is recognized as conscientiously opposed to accepting any insurance benefits. The Social Security Administration administers the process for recognizing these sects according to the criteria in the law.
Health care sharing ministry. You are a member of a recognized health care sharing ministry.
Indian tribes. You are a member of a federally recognized Indian tribe.
No filing requirement. Your income is below the minimum threshold for filing a tax return. The requirement to file a federal tax return depends on your filing status, age and types and amounts of income. To find out if you are required to file a federal tax return, use the IRS Interactive Tax Assistant (ITA)."

or

3. If you are a bona fide resident of a foreign country, (under IRS definitions/rules) then you have no responsibilities under ACA / Obamacare.

So, if you either are outside the USA for 330 days per year, ~ or you have Medicare or other qualifying coverage, ~ or if you are not required to file a US tax return for that year, ~ or if you are a bona fide resident of a foreign country - then nothing owed.

I realize that this only partly answers your questions, but I am waiting to hear from the experts at the US govt. ACA helpline on what happens for ~ US citizens who owe taxes, ~ visit the USA for more than 35 days a year, and/or ~ who have foreign health coverage...

Enjoy the weekend,
steve
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(This post was edited by YucaLandia on Sep 27, 2013, 5:53 PM)

John Shrall

Sep 27, 2013, 8:14 PM

Post #8 of 14 (540 views)

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Re: [YucaLandia] ACA Obamacare Rules for Americans Living in Mexico

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In Reply To

1. If you are outside the USA for 330 days (or more), then you have no responsibilities under the ACA:

"12. Are US citizens living abroad subject to the (ACA's) individual shared responsibility provision?

Yes. However, U.S. citizens who live abroad for a calendar year (or at least 330 days within a 12 month period) are treated as having minimum essential coverage for the year (or period). These are individuals who qualify for an exclusion from income under section 911 of the Code.

Time will tell but it still makes no sense to cite a 330 day residency requirement that acts as the means to exclude income from taxes for people earning money while living outside the US. The only thing that counts against time away from the US is when you travel back to earn income while on US soil. If you don't earn any income while in the US it doesn't count against your residency days, at least according to pub 54.

What is the definition of the 330 day rule if no earned income is involved?

morgaine7

Sep 27, 2013, 9:36 PM

Post #9 of 14 (526 views)

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Re: [John Shrall] ACA Obamacare Rules for Americans Living in Mexico

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The only thing that counts against time away from the US is when you travel back to earn income while on US soil. If you don't earn any income while in the US it doesn't count against your residency days, at least according to pub 54.

John, no, Publication 54 says, "You do not meet the physical presence test if illness, family problems, a vacation, or your employer's orders cause you to be present [meaning in context outside the US] for less than the required amount of time."
http://www.irs.gov/...012_publink100047432
In other words, you must spend a full 330 days abroad. If you spend more than the allowed time in the US, you don't qualify under the physical presence test.

Money earned while in the US has no effect on physical presence days or bona fide residency in a foreign country, but since it is not "foreign earned income", it can't be excluded on Form 2555.

As I understand what's available regarding the Affordable Care Act, the physical presence and bona fide residence tests are being used only to define "living in a foreign country". Irrespective of earned income, anyone who could qualify using one of those tests won't be penalized for not having US insurance coverage.

Kate

donemry

Sep 28, 2013, 9:08 AM

Post #10 of 14 (478 views)

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Re: [YucaLandia] ACA Obamacare Rules for Americans Living in Mexico

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As I understand the ACA, the test of insured/uninsured will be administered by the IRS as part of filing tax returns. If one does not have to file, then there is no test.

YucaLandia

Sep 28, 2013, 10:03 AM

Post #11 of 14 (465 views)

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Re: [donemry] ACA Obamacare Rules for Americans Living in Mexico

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Yes, that fits item 4 above: "No filing requirement. Your income is below the minimum threshold for filing a tax return."
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YucaLandia

Oct 2, 2013, 5:55 AM

Post #12 of 14 (273 views)

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Re: [YucaLandia] ACA Obamacare Rules for Americans Living in Mexico

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Filling in some additional details on how the sighn-up for ACA / Obamacare works:
If you sign up on an exchange between October 1 and December 15 **, 2013, coverage will be effective January 1, 2014. ~ If you sign up between December 15 and January 15, 2014, coverage will be effective February 1, 2014. ~ If you sign up between February 16 and March 15, coverage will be effective April 1, 2014. ~ If they sign up between March 16 to March 31, coverage will be effective May 1, 2014. ~ For 2014, the Open Enrollment will be October 1 to December 15, 2014 for an effective date of January 1, 2015.

From researching the details of ACA official information, I would also note that one clause in the ACA act states that if you have qualifying health insurance coverage for just 1 day of a calendar month, then that counts as coverage for the rest of the calendar month.

Happy Trails,
steve

**The US govt websites for signing up for ACA were overwhelmed yesterday with applications from people wanting insurance. For people who want insurance coverage, the first reduced-price coverage (that covers pre-existing conditions and has lower costs than private insurance), actually does not start until Jan 1, 2014. If you want that coverage, then you can apply as late as Dec. 15, 2013, and still qualify.
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(This post was edited by YucaLandia on Oct 2, 2013, 6:41 AM)

YucaLandia

Oct 2, 2013, 1:55 PM

Post #13 of 14 (187 views)

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Re: [YucaLandia] ACA Obamacare Rules for Americans Living in Mexico

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Here's an additional work around to get an exemption from ACA / Obamacare for expats living abroad who travel back to the USA:

https://www.healthcare.gov/exemptions/

Exemptions from the payment
Under certain circumstances, you won’t have to make the individual responsibility payment. This is called an “exemption.”
You qualify for an exemption if:

You’re uninsured for less than 3 months of the year

This means that you can go back to the USA for up to 3 months without getting health insurance.

======================
What if I go back to the USA for more than 3 months?
You must either be exempt due to insufficient annual income (under IRS exemption to filing rules), or you must get qualifying health care insurance coverage.

Many travel insurance policies qualify. See the list of essential benefits** (listed below) that must be covered by qualifying insurance.

======================
What if you live outside the USA and have health care coverage in the foreign country where you live?
~ If you do not return to the USA for more than 35 days per year, then you are exempt.
~ If you return to the USA for more than 35 days per year, but you have qualifying medical insurance coverage in your home country, then you are exempt from ACA/Obamacare.
======================

What are the essential benefits that a qualifying foreign health care insurance program or travel health care insurance policy must cover?

**Essential health benefits must include items and services within at least the following 10 categories:

~ Ambulatory patient services (doctor's office visits);

~ Emergency services (ER visits);

~ Hospitalization;

~ Maternity and newborn care (this is waived for men, and likely for clearly post menopausal women);

~ Mental health and substance use disorder services, including behavioral health treatment;

~ Prescription drugs;

~ Rehabilitative and habilitative services and devices;

~ Laboratory services;

~ Preventive and wellness services and chronic disease management; and

~ Pediatric services, including oral and vision care.
https://www.healthcare.gov/...ial-health-benefits/

This
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(This post was edited by YucaLandia on Oct 2, 2013, 1:57 PM)

YucaLandia

Oct 2, 2013, 2:25 PM

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Re: [YucaLandia] ACA Obamacare Rules for Americans Living in Mexico

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I live abroad, but I want to participate in ACA / Obamacare:
According to an advanced expert on the Marketplace helpline, you must be a Resident of the state where you apply for healthcare coverage with a state exchange. There are some multi-state coverage plans (with reciprocity agreements) like the Kansas, Missouri, and Oklahoma group, but you still must be a resident of one of those states.

When you arrive in your US state of residency, there are special rules allowing people to sign up for insurance protection under the exchanges, even outside the open enrollment periods.

* * * *
Readers who want more detailed information on Americans traveling or living abroad and the Affordable Care Act (ACA) / Obamacare can go here: ACA – Obamacare’s Effects on American Expats Living Abroad

Happy Trails,
steve
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(This post was edited by YucaLandia on Oct 2, 2013, 2:36 PM)