self-employment

Open Enrollment Question: Do I Have To Take My Employer Healthcare Coverage? (Usually, Yes)

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For many employees, Open Enrollment period for employer insurance comes in the fall, and is a short two or four week period where you have to make important decisions about health care for the coming year. This can be a lot of pressure, and so it turns out that a little preparation can go a long way. If you are a new employee at a job, you may be offered insurance right away, or after a period of 90 or 180 days.

Know your options, because if this were a relationship on Facebook, you might say, "It's Complicated!" What follows is a series of questions that will hopefully help you figure it out.

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If you are going to turn down your employer insurance, you want to make sure you are clear about the alternatives. Although it doesn't matter to Medicaid if you have an offer of employer insurance, it does matter if you were hoping to get subsidies on the Marketplace. Don't turn down your offer of coverage without studying your options!

1. Does your employer coverage meet Minimum Essential Coverage guidelines?

This would mean the the employer coverage covers:

  • Ambulatory patient services(Appointments and procedures in a doctor's office);

  • Emergency services;

  • Hospitalization;

  • Maternity and newborn care;

  • 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.

If the answer is yes, continue. If the answer is no, consider Marketplace and Medicaid eligibility and enrollment.

BEWARE: Some employers offer very inexpensive medical plans that do not cover hospitalization or emergency services. These do not meet Minimum Essential Coverage guidelines.

 

2. Does your employer coverage meet Minimum Value standards? 

Minimum value standard is a standard of minimum coverage that applies to job-based health plans. If your employer’s plan meets this standard and is considered “affordable,” you won’t be eligible for a premium tax credit if you buy a Marketplace insurance plan instead.

A health plan meets the minimum value standard if both of these apply:

  • It’s designed to pay at least 60% of the total cost of medical services for a standard population

  • Its benefits include substantial coverage of physician and inpatient hospital services

If you are unsure, ask your employer to fill out the Employer Coverage Tool.  

If the answer is yes, continue. If the answer is no, consider Marketplace and Medicaid eligibility and enrollment. 

NOTE: If the answer is no to EITHER the minimum essential coverage or minimum value standard, and you are income-eligible, you should be eligible for advance premium tax credits.

 

3. Is your family income low enough for some or all of your family to qualify for Medicaid?

Look here for the income eligibility tables for Medicaid. If you (or some members of your family) are income-eligible for Medicaid, you can apply for Medicaid instead of or in addition to your employer coverage. Because the income cutoffs for children are higher than for adults, often children can be enrolled in Medicaid or MIChild while the parents enroll in employer coverage. You can also have both Medicaid and your employer insurance--Medicaid will pay co-pays and deductibles not covered by your employer coverage, and this can be useful if you have a high-deductible plan. 

 

4. What is the cost of your insurance, relative to your income? 

To figure this out, look at the lowest-cost plan your employer is offering that meets the minimum standards (see #1 and #2 above), and the cost for the health coverage for the employee alone. 

Example 1: The cost is $100/month for the employee alone, and the employee makes $1000/month. $100/$1000=10% of income.

Example 2: The cost is $100/month for the employee alone, and the employee makes $2000/month. $100/$2000=5% of income.

Generally, if the cost is more than 8% of family income but less than 9.69% of family income, you are exempt from having to take the insurance, but you are not eligible to get advance premium tax credits on the Marketplace. [You may, however, be eligible for Medicaid!]

If the cost is more than 9.69% of family income, you don't have to take your employer insurance, but you can buy on the Marketplace and qualify for advance premium tax credits.

 

5. What about the rest of the family?  The Family Glitch

The Affordable Care Act looks primarily at affordability for the employee only. Different people in a family can get covered in different ways. 

If the cost of insurance for the employee is affordable, and the cost for the rest of the family is not affordable, you fall into what is called the "family glitch." The rest of the family is probably not going to be eligible for subsidized plans on the Marketplace. At this point, help from someone familiar with insurance options can be a big help. You may very well be exempted from the mandate to have health insurance, but that doesn’t help with getting health care. On the other hand, other family members may get covered differently. Possibilities may include: 

Thanks to healthinsurance.org for the image.

Thanks to healthinsurance.org for the image.

Don't forget: in many cases, different people in a family are covered in different ways. For example, each parent may be covered by his/her own employer, and the children may be covered by MIChild.

 

6. What if employer coverage gets offered or dropped in the middle of the year?

Changes in employer coverage in the middle of the year create Special Enrollment Period opportunities. If employer coverage is offered, you should evaluate it. If you have Medicaid and will continue to qualify for Medicaid, you may not want to take it. If you have a Marketplace plan and the employer coverage meets minimum standards, you may need to take the employer coverage because you will no longer be eligible for APTCs. If you take it and have a Marketplace plan, make sure to let the Marketplace know!

If you lose employer coverage during the middle of the year, you may be eligible for Marketplace or Medicaid plans. The Special Enrollment Period on the Marketplace after you lose employer insurance is good for 60 days. Medicaid is open year-round.

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If you have questions, call or walk in to the WHP office.

Washtenaw Health Plan, where We Help People like you!

Monday through Friday from 9am to 4pm

555 Towner, Ypsilanti, MI 48198

 

Resources

Employer Coverage Tool:  Use this tool to gather answers about any employer health coverage that you’re eligible for (even if it’s from another person’s job, like a parent or spouse). You’ll need this information to complete your Marketplace application. Complete one tool for each employer that offers health coverage that you’re eligible for.

Healthcare.gov: Apply here for Marketplace insurance. 

MiBridges: Apply here for Medicaid insurance. 

HealthSherpa:  Use this tool to compare health plans. 

Healthcare.gov Estimator: Compare or preview plans and rates with this estimator. Plans for 2019 should be available during the last week of October.

 

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For These Four Working Households, Medicaid--Without Work Requirements--Matters

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The idea of work requirements for Michiganders on Medicaid is rather abstract. Unfortunately, it would have significant negative consequences. Here are some real stories of people that we have worked with in the past year. (Names have been changed.)

What unites these families is that--even though, in each case, someone in the household is working--under the proposed work requirements for Medicaid, they wouldn't qualify for Medicaid. Here are their stories.

Marsha and Will: Bad Luck and Poor Health Means Medicaid is More Important Than Ever

Marsha and WIll are a married couple in their fifties, and their kids are now all grown. In 2016, they were both working low-wage jobs in the service industry. Their combined income was around $28,000/year. They could afford their rent, and their car, and they qualified for tax credits on the Marketplace. In early 2017, WIll lost his job. He was looking for a job, but now they were living on Marsha's job at Subway, which was averaging about 28 hours/week. Paying for rent was tough, but at least they now qualified for Medicaid. After about six months of being unemployed, Will had a heart attack and was in the hospital for five days. 

Under proposed Medicaid work requirements, Marsha's work was less than 30 hours/week and Will wasn't working at all--they would not have qualified for Medicaid. When Will had his heart attack, what would have happened?

Virginia: Medicaid is Vital to Mental Health

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Virginia is a single woman in her 20s. She has a history of depression and anxiety, and had been helped by Community Mental Health. When she started working 33 hours/week, her income was too high for Medicaid, and as a result she lost her relationship with Community Mental Health. Without medications and support, her anxiety got so bad that she couldn't work at all. Then Virginia became eligible for Medicaid--and Community Mental Health--again. Now, with the support of Medicaid and CMH, she is able to work. Virginia now keeps her work hours at about 25 hours/week, in order to stay eligible for Medicaid and--therefore--CMH. 

With Medicaid work requirements, Virginia might not be able to keep her hours below 30 hours/week. And if her income goes above 30 hours/week, at $11/hour she won't be eligible for Medicaid--or CMH services.

Maria and Jose: Medicaid Keeps The Family Healthy

Maria and Jose have two children, ages 3 and 5. Jose works two jobs so that Maria can stay home with the kids--childcare costs are so high. Jose is offered (and takes!) insurance from his work, but while it would be affordable for him ($100/month), if he were to add the rest of the family it would cost $600/month. So Maria and the kids are on Medicaid, which is a good thing, because Maria and her youngest child have asthma. 

With Medicaid work requirements, Maria wouldn't be eligible for Medicaid unless she were working 30 hours/week. In order to do that, though, they would have to pay for childcare. Without the asthma medication, Maria might end up in the emergency room. 

Jasmine and Mark: Medicaid Allowed Them To Take A Chance And Start A Business

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In 2015 Jasmine and Mark decided to start their own business in Washtenaw County. Investing their life savings, they quit their jobs and started spending long hours on their business. Without income, they and their two kids got Medicaid. In the first year, they did not turn a profit. In their second year, they started making a little bit of money, but were still Medicaid eligible. By year 3, they were over income for Medicaid and went on the Marketplace.

With Medicaid work requirements, in the first two years of their business, their income did not reflect the work they were putting in. How could they prove they were working? Would they qualify for Medicaid?

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Greatest Hits! Our Top 5 Posts of All Time

Here's a look back--our top 5 blog posts of all time are worth a first look, and a second look too!

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1. The most sought-after blog post, getting twice as many hits as any other blog post, was the very first blog post that staff member Tonya South Peterson wrote for us! It has resources for how to get eyeglasses if you have Medicaid. With Medicaid, eyeglasses are a covered benefit!

Need Eyeglasses? Medicaid Has You Covered

What's more, this blog post is also available in Spanish.

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2. The #2 blog post is about how to use Medicaid as secondary insurance. This post has more comments than any other blog post, perhaps because not much has been written for the general public about Medicaid as secondary insurance and it can be a bit complicated. (But not super complicated--it's not too different from having insurance from two employers.)

Good News: Medicaid Can Be Secondary Insurance

Find this blog post in Spanish as well. 

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3. The #3 blog post describes how to find a DHHS caseworker's email and/or phone number. In the coming year, DHHS is planning on moving to a "universal caseworker" system, and most people may not have caseworkers in the traditional sense. But whatever happens, we will keep you posted, and update this post as needed.

How To Find A DHHS Caseworker's Email Address (And Phone Number)

Read this in Spanish.

 

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4. The #4 post was the #1 post in 2016! Trying to figure out which Medicaid health plans to choose can be tricky.  In 2018 there will be some changes, particularly to the dental plan choices of the Medicaid health plans--but we will keep you updated as those changes get closer.

Choosing A Medicaid Health Plan (Updated)

This post is also in Spanish.

 

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5. Last but not least--the #5 blog post is a must read for people who have small businesses or do contract/consulting work. It's better to start early, tracking your income and expenses, than to start late. If the information is basically the same as last year's, you can use your taxes, but if you are just starting a new business, this may be what you need.

Help! How Do I Report Self-Employment Income For Medicaid Or The Marketplace?

Read this in Spanish.

 

Are you curious about what our top posts were in 2016?

There is some overlap. Read the Top Posts of 2016 here.

Want to see all of our Spanish posts? We have a page that holds all of our Spanish posts.

Do you have questions or ideas for other blog posts? Let us know in the comments.

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Top Posts of 2016

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Settling Up: Reconciling Tax Credits

Imagine that you and a friend want to go to the Bruce Springsteen concert. Your friend says, "I'll get the tickets. I think they are selling for between $80 and $120." You say, "How about if I give you $100, and then when you actually find out the cost, we can settle up." Fast forward to the next week, and your friend tells you they cost $120. You pay the additional $20.

 

In a lot of ways, this is just like the Affordable Care Act's Advance Premium Tax Credits. In advance, you make a good faith estimate of the cost--and at the end of the year, you pay more if your income was higher; and less if your income was lower.

Tax household = 25 year old woman (Angela)

Angela's Estimated income = $22,000  

Advance premium tax credit = $117/month or $1404 for the year

Scenario 1

Angela did not work as much as she thought and her W-2 at the end of the year is $17,500.  

Angela's advance premium tax credit should have been $165/month.  She will receive $576 as part of her tax refund.  ($165 - $ 117 = $48, $48 x 12 = $576)

Scenario 2

Angela picks up a second job and makes an extra $3500.  Her W-2s at the end of the year equal $25,500.  Angela's tax credit should have been $74/month.  Now she may not get as much of a tax refund.  

Scenario 3 

Angela loses her job or her hours are cut in half.  Angela is going to make $12,000 for the year.  Angela should report her income change to the Marketplace and apply for Medicaid. 

 

The process of settling up for Advance Premium Tax Credits is called

RECONCILIATION. 

It's important because, if you don't reconcile the tax credits for one year, you can't get tax credits for the next year.

Imagine that you and a friend want to go to the Bruce Springsteen concert. Your friend says, "I'll get the tickets. I think they are selling for between $80 and $120."  You say, "How about if I give you $100, and then when you actually find out the cost, we can settle up."

Fast forward to the next week, and your friend tells you the tickets cost $120. What if you didn't ever pay your friend the extra $20? Your friend probably wouldn't want to advance money for tickets to the next concert.

So, too, with the Affordable Care Act. If you got tax credits in 2014 or 2015, and you didn't reconcile those tax credits when you did your 2014 or 2015 taxes, you will not get tax credits for 2017.

When you receive Advance Premium Tax Credits from the Marketplace, you are agreeing to file taxes for that year and file jointly if you are married at any time during the year. 

Refund Or Payment?

If you earned less than you estimated when you applied on the Marketplace (or if you had more dependents than you expected you would), you will probably be eligible for additional tax credits. This would be added to any tax refund you might get.

If you made more than you estimated when you applied on the Marketplace (or if you had fewer dependents than you thought you would), you probably got too many tax credits, and will owe back money on your taxes.

How Do I Reconcile APTCs?

To reconcile your taxes, you need to have the correct forms and all your income information for the year.  If you were married at any time during the year, you must file jointly with your spouse.  

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The forms you need are 1095-A, IRS form 8962 and a tax preparer.  It is possible to reconcile yourself, you can read the IRS guidance here.  (Also, there is free help from the VITA program in Washtenaw County.) 

What If I Didn't Reconcile Tax Credits For 2014 Or 2015? Can I Catch Up?

You can amend your taxes and submit them to the IRS. Once you have submitted your amended taxes to the IRS, you can go back into your Marketplace application for 2017 and report a life change. This time, you will be able to answer YES to the question, "Have you reconciled tax credits for 2014 or 2015?" You will receive APTCs for the current year and be able to sign up for health care through the Marketplace.

More Resources

Filing Taxes and Marketplace Health Insurance - Form 8962

1095-A, 1095-B and 1095-C: What are they and what do I do with them?

Tips on How to Amend Your Tax Return from the IRS

IRS.gov

 

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Deductions: "Modifying" Your Adjusted Gross Income Can Save You Money

The Gift Of "MAGI": What Is That?

Adjusted Gross Income is your annual income, as defined by the IRS. If you file taxes using the 1040, you will find it on Line 37. [It is line 4 on the 1040EZ and line 21 on a 1040A.]

For purposes of applying for health care--both Marketplace and Medicaid--and for assessing whether or not health coverage is affordable--the federal government uses "Modified" Adjusted Gross Income, fondly referred to by those of us in "the biz" as MAGI.

*Do you know the story of The Gift of the MAGI?   Pronunciation /ˈmeɪˌdʒaɪ/.

What Gets Modified In Order To Get To A Modified Adjusted Gross Income? Add Backs AND Deductions 

Income includes everything on the list below. More common items are in bold.

  • Wages, Salaries, tips, etc.
  • Taxable interest
  • Taxable amount of pension, annuity, or IRA distributions and social Security benefits
  • Business income, farm income capital gain, other gains (or loss)
  • Unemployment compensation
  • Ordinary dividends
  • Alimony received
  • Rental real estate, royalties, partnerships, S corporations, trusts, etc.
  • Taxable refunds, credits, or offsets of state and local income taxes
  • Other income

This list is from the UC Berkeley Labor Center MAGI handout.

Add Backs

There are a few things you need to "add back" as income--the most common of those is non-taxable social security benefits. Other possible add backs include tax-exempt interest and foreign earned income for Americans living abroad.

Deductions

If you do a Marketplace or Medicaid application, after you are asked about your income, you are asked if you have any deductions such as alimony or student loan interest. The actual list of potential deductions is quite a bit longer, and might make a difference for you. 

Here is the list. More common items are in bold.

  • Educator expenses
  • Certain business expenses of reservists, performing artists, and fee-basis government officials.
  • Health savings account deduction
  • Moving expenses
  • Deductible part of self-employment tax
  • Self-employed SEP, SIMPLE, and qualified plans
  • Self-employed health insurance deduction
  • Penalty on early withdrawal of savings
  • Alimony paid
  • IRA deduction
  • Student loan interest deduction
  • Tuition and fees
  • Domestic production activities deduction

What This Means

On the Marketplace, cost-sharing goes up to 250% of the poverty level (or $60,750 for a family of 4) and tax credit subsidies go up to 400% of the poverty level (or $97,200 for a family of 4). In some cases, putting money in an IRA, paying tuition, or setting up a health savings account can make your MODIFIED Adjusted Gross Income lower, and you could qualify for more benefits. [Note: Not all Marketplace plans allow the use of health savings accounts, but some of them do.]

Of course, we're not tax experts--so you might want to check with yours!

Resources:

UC Berkeley Labor Center MAGI handout

Advocate's Guide to MAGI from the National Health Law Program. 

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¡Necesito Ayuda! Trabajo por mi propia cuenta, ¿cómo reporto ingresos para Medicaid o el Mercado de Salud?

¿Sabía que en el año 2014, 10% de personas empleadas en Estados Unidos trabajan por su propia cuenta?  Si usted trabaja por su propia cuenta, es mucho más probable que usted va a necesitar un seguro de salud a través del mercado o Medicaid.

 

Si usted tiene su propio negocio, o si trabaja como contratista para otra persona (usted recibe el documento 1099 al fin del año), reportar su ingreso es un poco (¡pero solamente un poco!) más complicado que si tuviera un sueldo fijo. Y debido a que es un poco más complicado, algunas personas evitan solicitar cobertura médica. Dado que la cobertura de salud es esencial (¡y por mandato!), aquí hay algunas sugerencias de cómo puede reportar sus ingresos.

Lo que queremos decir con la palabra INGRESOS

Cuando trabajamos con una persona que recibe un sueldo fijo, les decimos que tenemos que mirar el ingreso "bruto”. El ingreso bruto es el ingreso antes de sacar impuestos.

Digamos que usted trabaja a tiempo completo (40 horas a la semana) a $10/hora.

Su ingreso bruto cada semana es 40 horas x $ 10 / hora, o $ 400 por semana. Hay más de 4 semanas en un mes (¡no en febrero!), así que su ingreso bruto mensual en realidad es:

$ 400 (por semana) x 4.3 (semanas en el mes) = $ 1720 / mes

Este monto podría ser muy diferente de su ingreso "neto." El ingreso neto es el dinero que recibe después de impuestos. Así que puede estar "ganando" $ 1720 / mes, pero usted dice, "¡Pero sólo llevo a casa $1300!" Si es verdad, pero ese es su ingreso "neto."

Cuando trabaja por su propia cuenta, es un poco diferente. Usted es responsable de pagar sus propios impuestos, el pago de sus suministros de oficina, gastos de kilometraje, etc. Así que si usted es un carpintero, es posible que tenga gastos de materiales (madera, clavos), el equipo, el kilometraje para llegar al trabajo, incluso el pago de un empleado o ayudante. Así que si usted está manejando su propio negocio, todos los gastos correspondientes al funcionamiento de su negocio se quitan de su ingreso.  En este caso el gobierno mira el ingreso "bruto" de su negocio como sus ingresos menos sus gastos.

¡El truco es que usted tiene que mantener un registro de sus gastos!

 

1. CONTABILIDAD MES POR MES

La idea detrás de esto es simple, y facilita el proceso de reportar ingresos anualmente. Usando un libro de contabilidad, una hoja de cálculo, o una aplicación en su teléfono, mantiene control sobre todos sus ingresos.  

Por ejemplo, si usted tiene un negocio de limpieza, puede hacer una lista de sus ingresos cada mes de la siguiente forma:

Ingreso de Enero / Gastos del negocio de limpieza

Ingreso de Enero / Gastos del negocio de limpieza

INGRESO TOTAL:  $1800

GASTOS DE NEGOCIOS $ 260.25

JUNTANDO EL INGRESO BRUTO / INGRESO DEL NEGOCIO= $ 1.540

INGRESO MENSUAL= $1,540

ESTIMACION DE SU INGRESO ANUAL (si trabaja todo el año) SERIA $1,540 X 12 = $ 18,480

 

2.  REPORTANDO ANUALMENTE (IMPUESTOS)

Si reporta mes a mes, al final del año puede sumar todos los meses y tendrá su informe anual, listo para usar cuando declare sus impuestos anuales.

Si no cree que su ingreso cambia mucho ano tras ano (está haciendo el mismo tipo de trabajo, y se espera hacer la misma cantidad de dinero), puede utilizar sus impuestos como prueba de sus ingresos, y será aceptado como prueba de ingresos en el mercado de seguros médicos y Medicaid. Todo lo que necesita es la primera página de su declaración de impuestos, lo que demuestra su ingreso bruto ajustado.

SU 2015 AGI = $ 18,750

ESTIMACION de 2016 INGRESO ANUAL = $ 18,750

ESTIMACION de ingresos mensuales del 2016 es $ 18.750 / 12 = $ 1,562.50

(Si su ingreso es irregular porque trabaja ciertos meses y otros meses no, su ingreso anual puede demonstrar su trabajo mejor que el ingreso mensual).

NOTA: Si piensa que su ingreso va a cambiar mucho - por ejemplo, debido a que su negocio está prosperando o porque ha perdido varios clientes - entonces le conviene usar su estado de cuenta mensual como prueba de ingresos. Mientras que su ingreso aumente, puede esperar pagar más por su seguro médico. (Sin embargo, consulte con un contador para ver en qué condiciones puede deducir la totalidad o una parte).

Pasar de un trabajo corporativo de muchos anos a iniciar mi propio negocio y ser soltero, y tener una manera fácil de obtener un seguro de salud que puedo solventar ha sido increíblemente útil. Y como mi negocio crece y se vuelve más próspero, estoy pagando más por el seguro. Tiene perfecto sentido para mí. Además, algo así como Obamacare hubiera ayudado a mi madre (hace 25 años) cuando ella perdió su seguro después de que mi padre falleció, su cobertura COBRA terminó, y ella tenía cáncer.
— Terapeuta Autónomo

Recursos para los que trabajan por su propia cuenta.

No se ponga en un riesgo por no tener seguro médico, y tenga que pagar la multa por la razón de que se siente intimidado por mantener contabilidad de sus ingresos y gastos.

Aquí están algunos recursos útiles!

USA.GOV: Iniciar su propio negocio

IRS.GOV: Declarar y Pagar impuestos de su negocio

Administración de Pequeños Negocios

TheSelfEmployed.com

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Help! How Do I Report Self-Employment Income for Medicaid or the Marketplace?

En espanol - ¡Necesito Ayuda! ¿Trabajo por mi propia cuenta, cómo reporto ingresos para Medicaid o el Mercado de Salud?

Did you know that in 2014, 10% of all workers were self-employed? And IF you are self-employed, it is much more likely that you will need health insurance through the Marketplace or Medicaid.

If you have your own business, or you work as a contractor for somebody else (you get a 1099 at the end of the year), then reporting your income is a bit (but only a bit!) more complicated than if you get a regular paycheck. And because it is a bit more complicated, it keeps some people from applying for health coverage at all. Since health coverage is essential (and mandated!), here are some suggestions for how you can report your income.

What We Mean By Income

When we work with someone who gets a regular paycheck, we tell them that we have to look at "gross" income. Gross income is your income before you take out taxes.

Let's say you work full-time at $10/hour.

Your gross income every week is going to be 40 hours x $10/hour, or $400 per week. There are more than 4 weeks in a month (except February!), so your monthly gross income is actually:

$400 (per week)  x 4.3 (weeks in the month) = $1720/month

This could be quite different from your "NET" income, which is after taxes are taken out. So you might be "making" $1720/month, but you say, "But I only bring home $1300!" True, but that is your "net" income.

When you are self-employed, it's quite a bit different. You are responsible for paying your own taxes, paying for your office supplies, mileage expenses, etc. So if you are a carpenter, you might have expenses for materials (wood, nails), equipment, mileage to get to a job, possibly even paying a helper. Since you are running your own small business, all of this gets taken out as the cost of running your own business. In this case, the government thinks of your business's "gross" income as your income minus your expenses.

The trick is, you have to keep track of that!

1. Month by Month Accounting

The idea behind this is simple, and it actually makes annual reporting easier. Using a hand ledger, a spreadsheet, or an app on your phone, you keep track of all of your income. 

So, for example, if you run a cleaning business, you might list your income every month like this:

January Income/Expense Statement for a cleaning business

January Income/Expense Statement for a cleaning business

Total Income $1,800

Minus Expenses $260.25

equals Gross/Business income $1,540

Monthly income = $1,540

Estimated Annual income (if you work all year) will be       $1,540 x 12 = $18,480

2. Annual Reporting (Taxes)

If you do month by month reporting, then at the end of the year you can add up all of your months and you'll have your annual report, ready to use for filing your taxes.

If you don't expect your income to change much year to year (you are doing the same type of work, and you expect to make about the same amount of money), you can use your taxes as proof of your income, and will be accepted as proof of income with both the Marketplace and Medicaid. All you need is the front page of your taxes, which shows your adjusted gross income (AGI).

your 2015 AGI = $18,750

Estimated 2016 Annual income = $18,750

Estimated 2016 monthly income is $18,750/12 = $1,562.50

(If your income is irregular, because you work a lot in some months and not at all in others, your annual income may represent your work better than monthly income.)

NOTE: If you DO think your income will change a lot--for instance, because your business is booming or because you have lost several clients--then you are better off using your monthly statement as proof of income. As your income goes up, you can expect to pay more for your health care. (But check with an accountant to see under what conditions you can deduct all or part of it.)

Going from a corporate job for many years to starting my own business, and being single, having an easy way to get health insurance that I can afford, has been incredibly helpful. And as my business grows and becomes more profitable, I’m paying more for insurance. Makes perfect sense to me. Additionally, something like Obamacare would have helped my mother out so significantly (25 years ago) when she lost her insurance after my father died, his COBRA ended, and she had cancer.
— Self-employed therapist

Resources for the Self-Employed

Don't get stuck, and have no insurance, and have to pay the health care penalty, just because you were intimidated by keeping records of your income and expenses.

Here are some helpful resources!

USA.GOV: Starting Your Own Business

IRS.GOV: Filing and Paying Business Taxes

Small Business Administration

TheSelfEmployed.com

 

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Self-Employed? The Marketplace and Medicaid are Open for You!

carpenter

Let's say that you have a small carpentry business, or you run a day care. Most of the time it's just you, occasionally you pay a helper. Your business is really too small to get a health insurance plan through the business. 

But...

Depending on your income, it is very likely that you can choose an affordable plan on the Marketplace. If your income is on the low side, you may even qualify for Medicaid. Medicaid income guideline information.

When we talk about INCOME for people who are SELF-EMPLOYED, we are really talking about NET PROFIT. 

incomeminusexpenseequalsnetincome

So--let's say that you get paid $10,000/month for a contract, but your expenses are $5,000/month. Your NET PROFIT is $5,000/month. If that is steady year-round, then you would have an annual income of $60,000. But for many people who are self-employed, contracts have their highs and lows. It could be that you make a net profit of $5,000/month five months out of the year. The rest of the time, you barely break even. That would give you an annual income of $25,000.

AGILine37onTaxform

For most self-employed people, your adjusted gross income (found on line 37 of the front page of your 1040 taxes) can be used to qualify for either the Marketplace or Medicaid. You can use last year's information to prove your income, unless you have some reason to think that your income this year will be significantly different from last year.

Maybe you won (or lost) a big contract. In that case, your income/expense statement from the last few months will be your best guide. [Note: Your income/expense statement does not have to be anything fancy! An Excel spreadsheet, or even a handwritten accounting, will work. And of course, if you prefer, there are smartphone apps that will help you.]

Last, but not least--if one person in a household has an offer of employer insurance, that can also affect eligibility. Read more about employer offered insurance.

whyhealthinsurance

In fact, the biggest obstacles for self-employed people getting insurance through Medicaid or the Marketplace are often these two things:

1. They didn't know they could qualify.

fileyourtaxes

2. They haven't done last year's taxes. Doing last year's taxes isn't a requirement for getting health coverage, but it does make things a lot easier. However--if you do get a Marketplace plan, you will need to do your taxes for the following year to reconcile your Advanced Premium Tax Credits. 

If you think you will qualify for the Marketplace (healthcare.gov), you must sign up during Open Enrollment, November 1, 2015 to January 31, 2016.  Medicaid enrollment is always open, you can apply anytime at https://www.mibridges.michigan.gov/.  If you are not sure, please call a nonprofit agency to help you.  Find one close to you and make an appointment

NOTE: Is your business a bit bigger? Check out the SHOP Marketplace to see if you can offer insurance to everyone who works for you!

--R. Kraut

 

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