Tax Law (Questions About Taxes)/Obamacare Tax

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QUESTION: John, Ireally need help. Please! Thank you so very much in advance. I originally thought my daughter, who is TEMPORARILY teaching in China would be exempt from the Obamacare tax for 2014 because she lived overseas for over 330 days during a period of 12 consecutive months, and therefore qualified for an Obamacare tax exemption by passing the IRS's physical presence test. But if I'm correct on my new analysis, the physical presence test is more than at least 330 days/365, and to avoid the tax you need to qualify EXACTLY as you would to claim foreign income exclusion - which she doesn't. Lately I've learned that although according to 26 U.S. Code 911/Internal Revenue Code 911(d)(1)(B) my daughter DOES have a tax home outside the U.S., she still does NOT have minimum essential coverage to avoid the Obamacare tax for her over 330 days/365, because IRS publication 54 says you CAN'T have a tax home outside the U.S. if your abode (which the IRS says is considered a domestic issue, not vocational) is in the U.S. I believe my daughter's abode IS in the U.S. for my daughter's just TEMPORARILY teaching in China, has NO plans to stay in China after teaching, has her domestic ties in the U.S.(family, banking, etc.), is a resident of California and in her “heart of hearts” is domestically linked to the U.S. I believe now because of the aforementioned reference to abode in conjunction to tax home, my daughter DOES NOT qualify for an Obamacare exemption and needs to pay the tax. Please advise.

ANSWER: Shone,

Thanks for your question.

If she was physically present in a foreign country for 330 days during the year, she is not required to have health insurance. The difference in this and the requirement for the foreign earned income exclusion is that the health insurance requirement is based on a calendar year. So, if she were physically present is a foreign country for 330 or more days in 2014, she would not be required to have health insurance coverage.

Hope this helps.

John Stancil, CPA


---------- FOLLOW-UP ----------

QUESTION: John,
 Thank you so very much for your immediate reply to my post.
 Please, though, re-read my post, I REALLY don't mean to be argumentative, but I think you're incorrect with your response. I believe the exemption qualification is more comprehensive than merely being out of the country for 330/365 days. I don't believe I can be any more clear on this matter than my original post. I don't think my daughter qualifies for the Obamacare exemption per my code and Pub.54 references.
 What about my references, 26 U.S. Code 911/Internal Revenue Code 911(d)(1)(B) and Pub. 54? My daughter DOES have a tax home outside the U.S., but I believe she still does NOT have minimum essential coverage to avoid the Obamacare tax for her over 330 days/365, because IRS publication 54 says you CAN'T have a tax home outside the U.S. if your abode (which the IRS says is considered a domestic issue, not vocational) is in the U.S. The codes clearly state in order to qualify for an exemption to Obamacare you need a tax home outside the U.S. and Pub. 54 says you can't have this tax home outside the U.S. if your abode is in the U.S.
Thank you once again.

ANSWER: You are reading things into the ACA that are not there.

Straight from the IRS websitge: "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. 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 minimum essential coverage for that year. In general, these are individuals who qualify for a foreign earned income exclusion under section 911 of the Internal Revenue Code. Individuals may qualify for this rule even if they cannot use the exclusion for all of their foreign earned income."

Hope this helps.

John Stancil, CPA

---------- FOLLOW-UP ----------

QUESTION: John,
One more time please on this matter and I'll leave you alone. I trust you won't be too irritated with this response! This issue is really bugging me. I'm still confused, though!! As per your comment in your second response to me, I don't think I'm making this particular healthcare exemption more complicated than it is. Please check out my references here. When the U.S. Treasury Dept. drafted their final law on this matter (as located in the Federal Register, Vol. 78, No.169, August 30,2015, rules and regulations) for citizens residing outside the U.S. to be considered to have minimum essential coverage for a month, they cited a month has to occur "during any period described in section 911(d)(1)(B)" To me, this means ALL of 911 needs to be cited in order to qualify for the exemption. You only cite 911(B), the 330 days, etc. I believe you need to take 911(1) "Qualified individual" which "means an individual whose TAX HOME is in a foreign country and who is" to legally evaluate if a person is exempt from the healthcare penalty because 911(1) is linked to 911(B) with the word AND. You have cited 911(B), physical presence, as the only citation of 911 to be the sole determining factor to claim the healthcare exemption. Please tell me why you ONLY need to cite 911(B) and NOT also 911(1) to qualify for the exemption. What am I missing? Is this Treasury Dept reference I gave at the beginning of this response outdated, irrelevant or what, and why? If you could please call to augment your response here in the spirit of a FREE consultation, I'd truly appreciate this. John .

Answer
Citation of one section of the tax code does not automatically othersections. To qualify for the exemption, you must be physically present in a foriegn country for 330 days in the calendar year. Period.

I am not available for a free consultation. At this time, I am having trouble keeping up with paid business. My standard rate is $200 per hour, with a one-hour minimum.

John Stancil, CPA

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John Stancil, CPA

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I can answer questions on personal income taxes, partnerships, and some corporate income taxes. I can deal with some state tax questions. Limited gift and estate tax questions. I am also familiar with ministerial and church tax reporting issues. I am Professor Emeritus at Florida Southern College. Sales taxes and property taxes are state and local issues so I am not likely be be able to give you an in depth answer on those types of taxes. I have maintained a CPA practice, specializing in tax, for over 35 years. I am a member of the National Association of Tax Professionals, The Florida Insititute of CPA's, The NCPE Fellowship. In addition I am a Certified Mentor for SCORE. Visit my website at www.mybaldcpa.com. I also offer seminars and consultations to churches and clergy on their tax issues at www.churchtaxsolutions.com Also visit my blog, www.thetaxdocspot.com. I am listed on Tax Connections at https://www.taxconnections.com/profile/John-Stancil/12258973 Prepare and file your own taxes at www.1040stancilcpa.com

Experience

I hold a doctorate in Accounting, and am a CPA. My certifications of CIA, CFM, and CMA are inactive. I passed all certification examinations on the first attempt, and received honorable mention for my scores on the CIA exam. I have operated a CPA firm for over 37 years and have taught accounting and tax at the college level for over 35 years.

Organizations
FICPA, NATP, NCPE Fellowship, Lakeland Business Leaders

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The CPA Journal, Florida CPA Today, Green Consumer, Green Business, Global Sustainability as a Business Imperative, Palmetto Review, NATP TaxPro Quarterly, Mustang Journal of Finance and Accounting.

Education/Credentials
DBA University of Memphis MBA University of Georgia BS in Accounting Mars Hill University

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