“Obamacare” for EPIKers

First: obviously we aren’t tax experts. So we’ve definitely referenced all of our sources (it’s always nice to read all this stuff with your own eyes).

Also, if you know/think any of this is incorrect, please leave a comment.

So? Do I need insurance?

It depends on how long you’ve been (or will be) abroad.

According to Healthcare.gov:

“U.S. citizens living in a foreign country are not required to get health insurance coverage under the Affordable Care Act. If you’re uninsured and living abroad, you don’t have to pay the fee that other uninsured U.S. citizens may have to pay.” (source – Healthcare.gov)

HOWEVER!

The IRS says differently.

All U.S. citizens are subject to the individual shared responsibility provision … However, U.S. citizens who live abroad for a calendar year (or at least 330 days within a 12 month period) are treated as having minimum essential coverage for the year (or period). (source – IRS Q&A)

Those who are already abroad

If you live in South Korea for the entirety of 2014: you don’t need insurance

  • You can live and work in South Korea for the whole year, travel to nearby countries and even visit the United States for a little while. As long as you have been out of the US for 330 days, you will not be penalized. In this case, it is assumed that anyone who spends that much time outside of the US has insurance, even if they don’t.
  • You’ll most likely need to claim/prove your Physical Presence or Bona Fide Residency with Foreign Earned Income Tax Form 2555 submitted alongside 1040 or whatever form you usually use. (Although we cannot be 100% sure this is the form the US govt will use to prove that you were insured. This is the form you need to file every year though). 

If you return in March/February: you’ll need coverage

You’ll need to get some kind of coverage. You have until March 31st to enroll with “Obamacare” (source – Healthcare.gov).

If you enroll in a health insurance plan through the Marketplace by March 31, 2014, you won’t have to make the payment for any month before your coverage began.

For example, if you enroll in a Marketplace plan on March 31 your coverage begins on May 1. If you didn’t have coverage earlier in the year, you won’t have to pay a penalty for any of the previous months of 2014 (source)

This is probably your best bet but if you get insurance elsewhere if you like. If you do, you will look like you had a period of 2-3 months “without” insurance while you were in Korea. There is no real way to prove if you had insurance or not while abroad. Fortunately you can go without insurance for 3 months without a penalty. There should be an line on your taxes to keep you exempt from any fees.

If you return in August/September: you’ll need coverage

If you choose the “Obamacare” route: open enrollment will close March 31st but will re-open from November 15, 2014–January 15, 2015 (source)
So you could probably wait for the two-three months, then apply for insurance in November. This would mean you were uninsured until January 1st of 2015.

The problem with this is it will look like you spent the entirety of 2014 without any insurance (at least on paper it will look like this).

At least at this time there isn’t anyway to prove you were insured with a foreign insurance – in fact, the government will not be recognizing foreign insurance with the concern that if anyone came to the United States (even if you aren’t going to) your foreign insurance wouldn’t provide coverage “Therefore, foreign health coverage is not designated as minimum essential coverage in this final rule.” (source).

You will probably have to find a way to prove you were insured or talk to a tax expert.

Ultimately:

If you have a gap in coverage of less than 3 months, or you are out of the US for 330 days … You don’t need to apply for an exemption. This will be handled when you file your taxes. (source)

If you are moving to Korea in 2014:

We’re all a bit more complicated.

So you know: if you have insurance before you leave, and cancel it after you’re insured in Korea OR if you don’t have insurance, and won’t until you become insured in Korea:  you will have no way of proving you are/were insured.

At this time there isn’t anyway to prove you were insured with a foreign insurance – in fact, the government will not be recognizing foreign insurance with the concern that if anyone came to the United States (even if you aren’t going to) your foreign insurance wouldn’t provide coverage “Therefore, foreign health coverage is not designated as minimum essential coverage in this final rule.” (source).

Your only bet is under the 330 day physical presence rule. The February 2014 intake won’t be arriving until mid-late February. We would have to arrive on Feb 4th to meet the 330 day “Physical Presence” rule within a calendar year. Fortunately there is a solution.

Solution: Build your own Physical Presence!

Here are the rules:

“Your 12-month period can begin with any day of the month. It ends the day before the same calendar day, 12 months later” (source)

Example: February 14, 2014 to February 13, 2015

“Your 12-month period must be made up of consecutive months. Any 12-month period
can be used if the 330 days in a foreign country fall within that period.

Just keep the the 330 day rules (below) in mind.

You do not have to begin your 12-month period with your first full day in a foreign country or end it with the day you leave. You can choose the 12-month period that gives you the greatest exclusion.

The only reason you would really want to change this around would be based on paychecks (when and how much). 

330 Day Rules

You will have to be specific in counting your full days. Airtime, time in international waters, and airport transits do NOT count as days in a foreign country. For example: you step on the plane on 15th and arrive on the 16th at 9 am. Your first full day is the 17th.

To be safe and to make it easiest, just count your first full day in a foreign country as the beginning of your 330 day rule unless you really don’t want to.

February Intake Scenario:

So lets pretend the orientation begins the 19th of February, this is your first full day of being in Korea. We can just say that your 12-month period will end on the 18th of February 2015. You can travel anywhere and it will not effect your 330 day rules (unless you spend 35 days or longer in America).

If you do all of this, you’re happy and insured in Korea. Then taxes roll around in April. What do you do? Assuming you’re still in Korea, you don’t have to file until June.

If, on the regular due date of your return, you are out of the country and a U.S. citizen or resident, you are allowed 2 extra months to file your return and pay any amount due without requesting an extension (IRS)

If for some reason you still want or need an extension, you can file an extension form that will make your taxes due in October (but if you request an extension to lengthen your bona fide residency or physical presence you’ll want Form 2350).

When you do file your taxes, you’ll be filing on a specific paper that shows how long you were abroad. This should be enough to prove that you were insured.

The best thing is that the 330 day rule will not only effect your insurance requirements but will change your taxes around some too. We really don’t want to go into this but you can read a bit more about this here.

August Intake Crowd

You all will need to be insured, more than likely throughout the whole year. Talk to a tax or health insurance expert. At this time we don’t know how you prove how you were insured or not (for instance: will it be an additional line or form for taxes, and how open will it be to expats).

Lastly:

EPIKers, meet Publication 54, Publication 54 meet the EPIK crowd. Seriously, this publication is about to be your worst enemy or best friend. This is the go-to for all foreign tax questions.

 

 

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