President Joe Biden is taking his first steps to reverse Trump administration health care policies.
Uninsured Americans who want to buy Affordable Care Act coverage have another three months to do so, thanks to an executive order President Joe Biden signed last month.
The federal Obamacare exchange, healthcare.gov, reopens for a special enrollment period on Monday. Most states that run their own marketplaces are also doing the same or are extending their sign-up season for several more weeks.
Keep scrolling for an explainer on how the pandemic will affect filing your taxes this year
The President is hoping that some of the 15 million uninsured people eligible for Affordable Care Act policies -- 9 million of whom qualify for federal financial assistance -- will participate. Individuals making up to about $51,000 and families of four earning up to about $104,800 are eligible for subsidies.
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Awareness of Obamacare coverage and premium subsidies remains fairly low, even though the exchanges first opened in 2014. Just under two-thirds of uninsured adults said they had heard nothing or only a little about financial assistance for policies, according to an Urban Institute study conducted in September. The Trump administration slashed Obamacare's marketing budget by 90% during its term.
"There are millions of people, literally, in the country who aren't enrolled because they don't even know they are eligible for something," said Joel Ario, managing director of Manatt Health Solutions and former health official in the Obama administration.
More money for outreach, but not enrollment
To address this, the Biden administration is pouring $50 million into outreach and education, though it has not provided many details on its advertising campaign or announced additional funds for enrollment assistance.
The marketing efforts will focus in particular on groups that have had less access to health coverage and greater disparities in health outcomes, including communities of color, according to a news release issued by the Centers for Medicare and Medicaid Services on Friday. It will run advertisements on broadcast and digital platforms, as well as in multiple languages, the agency said last month.
The federal exchange's home page did not have any information about the upcoming special enrollment period as of Sunday afternoon.
Biden has yet to announce his pick to head the agency, which runs the federal exchange, and his choice for Health and Human Services Secretary, Xavier Becerra, has yet to be confirmed by the Senate.
About 9 out of 10 enrollees in healthcare.gov receive subsidies, and three-quarters of consumers are eligible for financial assistance that would lower their premium to $50 or less a month, according to the agency.
Congressional Democrats are currently working on legislation that would make premium subsidies more generous and more available, but it's unclear how long it will take the bill to pass or how quickly federal and state agencies could reprogram the exchanges to reflect the increased assistance.
How many people will enroll?
Still, it's unclear how many people will turn to the exchanges over the next three months.
More Americans have appeared to hold on to job-based coverage than expected, while many of those who have lost their employment and most of their income have turned to Medicaid. Between February and September, Medicaid enrollment jumped by more than 6.6 million people, or 10.3%, according to federal data.
But more people flocked to the federal Affordable Care Act exchange during the most recent open enrollment period, which ran for six weeks in November and December. That's the first time sign ups increased under the Trump administration. The number of new consumers for 2021 slid somewhat, however. Roughly 8.3 million people selected plans in total.
Former President Donald Trump refused to reopen the federal exchange last spring, despite heavy lobbying from elected officials of both parties and the health care industry. But anyone who loses job-based health insurance coverage is eligible to sign up on the exchanges within 60 days of becoming uninsured. Enrollment in the first five months of 2020 jumped to nearly half a million people, up 46% from the same period the year before, the Trump administration said in June.
Eleven states that run their own Obamacare exchanges, along with the District of Columbia, allowed their uninsured residents to obtain coverage outside the usual time frame, in addition to those who lost their work policies or had other qualifying life changes. In total, more than 240,000 people signed up on the state-run exchanges between March and July, with several states reporting much greater interest than in 2019.
States saw many new consumers who had never interacted with the marketplace before, said Julie Bataille, senior vice president at GMMB, a consulting firm.
"That speaks to the need for outreach and enrollment because you are making sure individuals know the marketplace is there, that it is an option," said Bataille, a former Obama administration health official.
In California, the state-run exchange spends heavily on marketing annually, allocating $89 million for fiscal 2020. It spent $9 million during last year's special enrollment period, which attracted 289,000 residents, more than twice the number that signed up during the same time frame a year earlier.
Covered California, which saw a record 1.6 million people selecting 2021 plans for coverage starting January 1, intends to spend $6 million for its upcoming special sign up session, which will run through May 15.
"We've learned over the last eight years that promotions matters," said Peter Lee, the exchange's executive director. "It matters in many ways on the margins, but the margins are what make the most difference."
Those who are sick seek out coverage and enroll, he continued. But the advertising campaigns draw healthier residents who may not be as aware of the coverage or the subsidies -- and these folks can help balance the risk and lower premiums for everyone.
"If you want to get everyone covered, you can't sit on your hands and keep it a secret," Lee said.
Some local enrollment assistance groups plan to do their own ad campaigns, particularly to let residents know they are there to help.
Change Happens, a navigator group that covers 30 counties in southeast Texas, will run some ads with local newspapers and radio stations in coming weeks, said Jeness Sherrell, program director for adult services. It will supplement the national campaign.
The Houston-based organization used to do more marketing, including placing billboards, before the Trump administration cut its funding by more than half to $586,000. But it did set aside some money for advertising during the most recent open enrollment period for the first time in several years, hoping to reverse a decline in its enrollment numbers.
"We know we needed marketing to get the word out -- even more so for the pandemic," said Stacey Thompson, ACA navigator program coordinator at Change Happens.
An explainer: How the pandemic will affect filing your taxes
An explainer: How the pandemic will affect filing your taxes
Unemployment
Unemployment benefits are taxable income, which may surprise some filers.
Workers are not required to have federal taxes withheld from their benefit payments. While they are given the option to have it withheld, few opt to.
Additionally, unemployment benefits are always subject to federal taxes, but a handful of states do not tax it.
Relief checks
The two rounds of economic impact payments sent to millions of Americas are not taxable income. But people who did not get their payments, or received less than they were due, can get the proper amount by claiming the Recovery Rebate Credit on their 2020 taxes.
As a reminder, the first round of payment was worth up to $1,200 per eligible adult and $500 per dependent; the second was worth up to $600 for each eligible household member. Those who received a larger economic impact payment than they were due will not be penalized.
It's also worth noting that while no one has to pay tax on this income at a federal level, some states are taxing it.
Home office
Working from home became the norm for many in 2020, but few will be able to claim their expenses for their new home office setup. That's because the home-office deduction can only be taken by businesses or the self-employed. Employees can no longer claim any unreimbursed expenses following the last tax overhaul.
To properly claim a home office, it must be used "exclusively and regularly" as the principal place of business, said Lisa Greene-Lewis, a CPA and tax expert at TurboTax. That means the table where your kids do their homework, your family eats dinner and you do your work does not count.
Side note: It won't affect your federal taxes but if you relocated to a different state during the pandemic, you may owe state taxes in more than one location.
Tax credits
Congress put a temporary "lookback" provision in place for this tax season that could help many low and moderate-income households.
The provision allows taxpayers to use either their 2019 or 2020 income when claiming the Earned Income Tax Credit or Child Tax Credit. The eligibility and size of these credits vary based on household size and income. In general, the less earned, the larger the credit.
However, rampant unemployment put some families at risk of missing out or getting a smaller credit as unemployment is not considered "earned income" in the eyes of the IRS. In response, lawmakers are allowing taxpayers to pick which year's income would yield the greatest benefit.
Investing
A number of people jumped into the stock market for the first time in 2020. But tax experts warn these investing newbies may not be fully aware of their tax obligation.
The most important thing to understand is you only pay taxes on investments when you "realize" their gains. So if you bought a stock in 2020 and its value went up — you won't pay taxes on those gains until you sell. And if it sank in value, the same rules of "realizing" apply. It hurts to have a loss but you can use those to offset your gains, up to a limit.
It's also important to understand that gains are taxed differently depending on how long you held on to the investment. If you sell a stock you held for less than a year, they are taxed at the higher short term capital gains rate, versus the lower long term capital gains rate for investments held for more than a year. And if you are a higher income household, you may also face a net investment income tax on capital games and other investment income.
Made a killing at GameStop or another short squeeze? That won't come up until 2021 taxes, which aren't due until next year. But it would be wise start making plans or anticipated payments on those taxes now.
Some types of trading activity can be complicated, so it may be wise to seek professional help in preparing your taxes.
Fraud
Taxpayers may face a new challenge this year due to rampant unemployment fraud.
While millions of people sought legitimate unemployment benefit claims during 2020, scammers seized on the opportunity to commit identity fraud and make fake unemployment claims. California alone paid out $10.4 billion in fraudulent claims, according to a recent audit.
The IRS says taxpayers who receive Forms 1099-G for unemployment benefits they did not receive to contact their state for a corrected form showing they did not receive these benefits. Taxpayers who are unable to obtain a timely, corrected form from states should still file an accurate tax return, reporting only the income they actually received.
Gig work
If you jumped into gig work, like many did during 2020, be ready at tax time.
A big shock may be facing the the self-employment tax rate, which for 2020 is15.3% on the first $137,700 of net income to cover Social Security and Medicare tax. This is not the same as income tax.
One way to help offset this strain is to make sure to claim all your expenses, said Greene-Lewis. This includes supplies, advertising or marketing startup costs, or any equipment or dedicated home office.
If you were driving for a ride sharing service or delivery company, make sure tp claim all the mileage you are eligible for. Consider smaller items too, like supplies for the car or car washing, which are eligible expenses.
Charity
One bright spot for the year is a new, temporary deduction for charitable donations.
Taxpayers can deduct up to $300 for cash donations given to charity even if they don't itemize their deduction. The IRS estimates that about nine in 10 taxpayers now take the standard deduction instead of itemizing.
