8

I searched and commented on another question here, and was prompted to ask my own question separately.

As you may be aware, US citizens without health insurance, as of this coming Sunday 31st January, are liable for the individual shared responsibility payment, described here.

I am aware that there are ways around this for expats, listed as such:

The Affordable Care Act will impact US taxpayers for the first time in fiscal year 2014, for which US income tax returns are filed in 2015. Americans living overseas should be aware of the important need to attach a completed Form 8965 (new) to their 1040. Form 8965 allows you to describe your status as an overseas resident, which indicates to the IRS that you benefit from "deemed covered" status by a foreign health plan and do not need to participate in a US plan. If you do not attach Form 8965, you may be subject to the $600 penalty for not having US health coverage.

US citizens living abroad are subject to the individual "shared responsibility" provision under the Affordable Care Act. However, US 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 regardless of whether they enroll in any healthcare coverage.

In addtion, US citizens who are bona fide residents of a foreign country for an entire taxble year are treated as having minimum essential coverage for that year. (In general, these individuals qualify for the foreign earned income exclusion under Section 911.)

Individuals may qualify for this rule even if they cannot use the Section 911 exclusion for all of their foreign earned income because, for example, they are employees of the United States Government. Individulas who qualify for this rule need take no further action to comply with the individual share responasibility provision during the months when they qualify. They will report their status with their federal income tax return on Form 8965.

US citizens who do not meet the foreign physical presence or foreign residency requirements must have essential coverage, or qualify for a coverage exemption, or make an individual shared responsibility payment when they file their federal income tax returns. Note that "minimum essential coverage" includes a group health plan provided by an overseas employer.

My situation:

  • Given that I visited family in the US twice this year (Christmas and briefly during summer), if those visits were in excess of 30 days (I'm not sure, have to check), does that mean I have to pay this fee?

  • I am not a permanent resident in my current country of residence, but I am a legal, tax-paying resident as of 3 months in this country and 5 years in the last and I am legally entitled to remain here in excess of one year (3 to be specific). I have been living outside the US for 5 years; I was on a student visa in the UK for the first 5 years, and I moved to France directly from the UK in October, where I am on a scientist visa for the next three years, which is liable to extension. Three years ago, it is possible that I spent 30 days in the US (the longest was 1.5 months in a summer 3 years ago) because I was doing temp work for a US company (I paid income tax on this). Since then, I've only been home for a maximum of two weeks, although I need to check my plane tickets and verify this.

  • I am earning income in France and will be filing a tax return to this end. Before this October, I earned no income as I was a student.

My Questions:

Do I have to pay this fee or purchase health insurance in the US? I have no reason to do this outside of legal obligation. I am recieving excellent health care in France, and I am legally entitled to bringing my prescription medication home with me for short visits, so I have had no need to see a doctor in America for the past 5 years. If I need to do this, what do I need to do by tomorrow?

If I am eligible for the exemption, how do I prove this? Do I have to do anything in particular before the deadline tomorrow?

As a further complication: I do not have a carte vitale (medical green card) in France yet, but since the process takes several months, I am allowed to see a doctor here, paying out of pocket, and I am reimbursed later. So I don't actually have proof of my health coverage in France yet, as it is dependent on receiving a social security number -- which takes an extremely long time to get, because France. However I have verified that my right to health coverage began on the first day of my contract in France. Is this going to affect my eligibility? I can imagine many US expats on temporary contracts abroad may run into a similar issue.

Is "per year" in reference to fiscal/tax year or calendar year?

If I stay in the US for more than 30 days in a given year (e.g. family emergency) am I obligated to hold US health insurance?

Thanks in advance, and I hope other expats also find this useful.

  • Most individual taxpayers use the calendar year as their fiscal/tax year. Do you not? I don't know what "per year" you are asking about as that question appears to be the only instance of the word "per" in your question. – phoog Jan 30 '16 at 17:32
  • Prior to this past October, I had no reason to pay taxes from overseas, and before this my taxes were a simple matter of plugging in numbers from a form (from a US company) and that's it. My question related to the 330 days "per year" in the US rule, and whether that was "per year from the date taxes are submitted" or "for the year 20xx", or "one year from the exact date you initially moved" or something silly like that. I think I over-complicated the whole thing in my head. – la femme cosmique Jan 30 '16 at 17:48
  • Well most taxpayers use the calendar year as the tax year, and for those people it clearly means 330 days in the calendar year/tax year for which you are filing. If someone was adjusting to a non-calendar tax year, there would have to be a short or long tax year, and I don't know how that would affect the 330-day figure. – phoog Jan 30 '16 at 17:52
  • 1
    I believe the physical presence test isn't based on a calendar year; instead, it's based on the last 12 month period. I left for India on the 22nd of January just so I'd be out of the US for 330 days in a 12 month period. In other words, your 12 month period doesn't have to be from January to December, it can be from March to February, for instance. Even in the text you quote, it's clear. We're looking at a 12 month period, not a specific calendar year. – jmort253 Jan 30 '16 at 19:38
  • 1
    I think it is tax year. irs.gov/Individuals/International-Taxpayers/… "You meet the bona fide residence test if you are a bona fide resident of a foreign country or countries for an uninterrupted period that includes an entire tax year." and "To qualify for bona fide residence, you must reside in a foreign country 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" – la femme cosmique Jan 31 '16 at 9:39
5

In case you can't claim to be a bona fide foreign resident*, it would be good to take a closer look at how situations like yours and the "Shared Responsibility Payment" interact. I expect you would owe very little.

I'm basing the following on information in the instructions for Form 8965, with you as the only person in your tax household.

The first thing to understand is that the penalty is essentially divided into the 12 months of the year (see Worksheet A on p.17), so you will only need to pay for the months in which no coverage exemption applies.

Foreign insurance

Any month in which you have health coverage from your foreign employer, even if only for one day of that month (Timing on p.4), that month is covered and you will not owe the IRS for it:

In general, coverage provided by a foreign employer to its employees and related individuals is minimum essential coverage. … However, coverage that an individual purchases directly from a foreign health insurance issuer or that is provided by the government of a foreign country doesn't qualify as minimum essential coverage unless it's recognized as minimum essential coverage by the Department of Health and Human Services (HHS).

I understand this to mean that you will not need to worry about the Shared Responsibility Payment for future visits to the US, as long as you are still residing overseas and given health insurance through your employer. I could be wrong about this; if so, you still would probably not owe anything from a short trip because of the "short coverage gap" exemption (p.9–11).

Physical presence test

The 12 months for the physical presence test are counted from any day of any month of a year, and end on the day before the next year (i.e. July 10th, 2014 to July 9th, 2015). You can choose whichever day helps you the best, if you have at least 330 full days in foreign countries during that period. (See Publication 54.) According to the Form 8965 instructions (Citizens living abroad and certain noncitizens (code “C”) on p.11),

You can claim the coverage exemption for any month during your tax year that is included in the 12­-month period.

I understand this to mean that each whole calendar month being exempted needs to be included as part of the 12-month period.


Here's an example, inspired by the information in your question (but not a definite answer for you, because I'm making these dates up). If you were

  • present in a foreign country for 330 full days from Aug. 13, 2014 to Aug. 12, 2015
  • covered by your employer starting on Oct. 24, 2015 through the present date
  • not a bona fide resident of a foreign country*

Then:

  • the months of January through July are covered by the physical presence test
  • for the months of October through December, you have minimum essential coverage
  • you pay only for the months of August and September, 1/6 of the amount.

*Your situation might or might not count for bona fide residency; I don't know. On the one hand, your intents and purposes are an important part of determining this, but they're missing (or at least not clear to me) from your question. On the other hand, the IRS will also have to decide if they will accept you declaring yourself a bona fide foreign resident. The IRS can't read your mind, either, and unless they suspect something won't ask for much or any documentation. So I couldn't even guess.


A note about documentation/proof

I see nothing asking for documentation or proof of what you claim on Form 8965. This is fairly normal, and reminds me of other IRS forms I've had to file in the past. It's not a question of being able to provide documentary proof right now. Instead, make sure that you're being truthful in what you claim (or fail to claim) on your tax return. Collect and save documentation when you can, in case you're asked about it in the future. When in doubt, consult a real accountant, of course!

  • 1
    The IRS doesn't exactly have the final say; an IRS determination that a taxpayer is not a bona fide foreign resident can be challenged in court. – phoog Jan 31 '16 at 17:43
  • @phoog whoops, right. That was bad wording on my part. I meant to say, unless it goes to court, they get to decide what they want to accept. – Dan Getz Jan 31 '16 at 17:44
  • Two things. 1) Thanks for this great and comprehensive answer. I really appreciate the time you put into this. 2) Re: my intent. I didn't want to mention it because it's iffy. Personally, I have no intention to come back to the US unless I've exhausted every legal means of staying in other countries and furthering my career. I've felt like this since going to the UK 6 years ago, but in the UK you are required to consider yourself a "student in the country" rather than living there. I was given a firm talking-to at the UK border for saying I "lived" there whilst I was a student there for – la femme cosmique Feb 3 '16 at 18:47
  • 5 years. Apparently if you say you "live" in the UK it's a huge red flag and the border guy reiterated that "you're only studying here, you don't live here". Since then I've been trying to avoid expressly saying "I intend to stay out of the US" in case it implied that I was intending to overstay (I'm not). But yes, I absolutely consider myself an expat, and resident outside of the US, and I've felt that way for more than half a decade. So I've not made any statements contrary since moving to France. I probably am a BFR, but I suppose that's up to the IRS! – la femme cosmique Feb 3 '16 at 18:50
  • And I've checked, and even if I'm not a BFR, I would easily pass the physical presence test this year. It would be nice to know I'm BFR so that I don't have to make extra effort to stay out of the US for > 330 days if anything ever happens, though. And re: accountant - yup, probably going to do that since filing taxes for the first time from overseas. Thanks! – la femme cosmique Feb 3 '16 at 18:53
5

You are a bona fide foreign resident. (The fact that you are not a permanent resident is irrelevant.) Therefore the physical presence test does not apply to you.

The fact that you were a student (or otherwise without earned income) is irrelevant.

The fact that you moved from one foreign country to another is also irrelevant.

You do not need to pay the penalty.

Tomorrow's deadline is the deadline for obtaining coverage, if you need it. You do not, therefore you should not worry about it. The deadline for informing the IRS of your foreign resident status is the tax filing deadline; you just need to include form 8965 with your tax return.

UPDATE:

In the comments, there is some controversy as to whether you qualify as a bona fide resident. I made that statement because it appears that you have no intention to return to the United States.

Whether you in fact qualify as a bona fide foreign resident is most likely a topic for discussion between you and a tax advisor who has experience with people in academic and/or research fields. The most likely reason for a denial of your bona fide status would be if your position in France has a fixed term, meaning that your stay there is not "indefinite"; you have indicated, however, that your visa is eligible for extension.

In addition, if your "purpose" in leaving the United States was to pursue an academic career in Europe, then having a fixed-term appointment might not disqualify your residence in France.

Regardless, it appears that you qualify for the foreign presence test; a stay in the US of 45 days, three years ago, would not disqualify you under that test for tax returns filed for last year or this year.

  • Comments are not for extended discussion; this conversation has been moved to chat. – SztupY Feb 1 '16 at 16:41

Your Answer

By clicking “Post Your Answer”, you agree to our terms of service, privacy policy and cookie policy

Not the answer you're looking for? Browse other questions tagged or ask your own question.