For short-term contractors residing overseas, Obamacare may have a direct effect on them financially. Knowing your obligations under this Act may be very important come tax time.
New York, NY (PRWEB) October 31, 2013
With Obamacare set to kick off in January, Americans are scrambling to understand their responsibilities under this new healthcare act and how it will financially impact them. While the provisions for US residents are relatively clear at this point, it is more difficult for US taxpayers living outside the US to understand how they are affected. Greenback Expat Tax Services provides an overview of Obamacare provisions and how it impacts US expats.
US Expats and Residency Requirements
Obamacare will require that every American hold the 'minimum essential coverage' of healthcare as defined by the plan. Those who do not hold this coverage will be assessed a tax penalty on their US tax return. Americans living overseas are generally considered to be compliant with the minimum essential coverage provision and won’t be required to purchase additional coverage or pay a penalty.
However, in order to be exempt from Obamacare compliance, US expats must qualify for residency under either the Physical Presence test or the Bona Fide Residence test. Many expats will qualify under the Physical Presence test, which simply requires you to earn foreign income and be out of the US for 330 days out of a 365 day period. With the Bona Fide Residence test you have to live inside a foreign country for one year and have no plans to return to the US permanently.
Short-Term Contractors
Short-term overseas contractors that don’t meet the Physical Presence or Bona Fide Resident test will not be exempt from Obamacare. These individuals can apply for expatriate health coverage through a US plan if eligible or they will be forced to pay a penalty on their expatriate tax return, which is as follows:
Coverage Under Expatriate Plan
If a US expat is covered under an expatriate plan based in the US, they are compliant with Obamacare—at least for now. The government has granted an exemption to these plans until at least December 31, 2015 as they assess the unique challenges of requiring and providing coverage to Americans living overseas. With this exemption, US-based expatriate health plans are unable to offer the extra benefits that Obamacare brings to health plans, such as free preventive and wellness care, the elimination of pre-existing condition clauses and the ability to add children up to age 26 to your plan.
“For those expats who qualify via the residency tests, Obamacare won’t have an impact unless they return to the US,” says David McKeegan, Co-Founder of Greenback Expat Tax Services. “But for expats living abroad for shorter periods of time, this Act may have a direct effect on them financially. It is important for expats to understand their responsibility under this Act to avoid unpleasant surprises come tax time.”
More About Greenback Expat Tax Services
For more information about how Obamacare affects you or other issues related to US expat taxes, please email Greenback Expat Tax Services at info(at)greenbacktaxservices(dot)com. You can also visit us at http://www.greenbacktaxservices.com.
Greenback Expat Tax Services specializes in the preparation of US expat taxes for Americans living abroad. Greenback offers straightforward pricing, a simple, hassle-free process and CPAs and EAs who have extensive experience in the field of expat tax preparation. For more information, please visit http://www.greenbacktaxservices.com.
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