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Changing MAGI for ACA?
Old 05-10-2018, 05:13 PM   #1
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Changing MAGI for ACA?

Hi all! I'm sorry to start yet another ACA thread but I couldn't find an answer in the others.

I would appreciate first hand experience, as well as your opinions.

I'm thinking about taking a little money out of the market. I would like to lock in some gains.

Would it be better to go online & adjust my income estimate for the year, or just let it slide & pay up at tax time?

I am really wondering if one way is more likely to create problems for us.

This year we went over on our income estimate by about 12%. We had no problems with that. We just payed back the extra at tax time.

What we are looking at selling would raise our MAGI by about 50%. Would this be enough to raise issues with the powers that be? I would like to keep things simple, if possible.

Thanks,
Murf
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Old 05-10-2018, 06:01 PM   #2
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There is no penalty for reconciling at tax time. And there's no reward for earlier being proactive and reporting an upward change. There is though a unfavorable consequence of reporting the change. After all, who knows you could have opportunities to recognize losses later to offset those gains.
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Old 05-10-2018, 06:05 PM   #3
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Thanks, I never thought of that.

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Old 05-10-2018, 06:13 PM   #4
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You are just making you best guess on income that is the way I look at it.
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Old 05-10-2018, 07:29 PM   #5
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You are just making you best guess on income that is the way I look at it.
Me too, but I wondered how "they" look at it.

Thanks
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Old 05-10-2018, 07:46 PM   #6
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I went online to change my income estimate last year and it was a royal pain in the a$$. The California site wanted all kinds of certifications and other completely unrelated information. I spent several hours and was not able do it online. I ended up calling the number listed and was told it was easier to just cancel my subsidy completely which turned out to be a better idea since I'm charging the premium to the 2% Fidelity Visa and so now I get an extra $200/yr back from Visa.
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Old 05-10-2018, 08:20 PM   #7
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One other annoying thing about changing it midyear is that you would have to fill in the month-by-month section of Form 8962, rather than the single annual summary line at the top (line 11 IIRC).

Personally I'd leave it. At least in my state, I don't think "they" care in the slightest if your estimate is high or low by any degree.
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Old 05-11-2018, 06:29 AM   #8
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I left it even when I realized that I was going to go over the subsidy limit, and resolved at tax time. If you pay a large chunk at the end you could hit an underpayment penalty as they like to see quarterly taxes paid either evenly or at the rate you earn the income and incur the expenses, so make up for it in your next estimated payment.
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Old 05-11-2018, 10:49 AM   #9
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Thanks to all for the input. It's very helpful.

RunningBum, We haven't done quarterly payments. Our MAGI has been very low. We are probably not FI but we are RE.

Our 2017 MAGI was @ 20K. This is what I estimated for 2018. If we overshot that by 10-15K, would that be an issue in your opinion?

I realize the actual numbers are small but I was thinking that large of a percentage might raise an issue.

If I can just let it go and pay the extra at tax time, that would be the simplest.

Thanks again to all for the help!
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Old 05-11-2018, 10:59 AM   #10
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I left it even when I realized that I was going to go over the subsidy limit, and resolved at tax time. If you pay a large chunk at the end you could hit an underpayment penalty as they like to see quarterly taxes paid either evenly or at the rate you earn the income and incur the expenses, so make up for it in your next estimated payment.
Depends on what taxes were last year, they just need to pay 100% of last year's tax, which could be $0. Or if long term gains they still may not owe any tax this year depending on their total income.

IRS guidelines:
Quote:
Generally, most taxpayers will avoid this penalty if they either owe less than $1,000 in tax after subtracting their withholding and refundable credits, or if they paid withholding and estimated tax of at least 90% of the tax for the current year or 100% of the tax shown on the return for the prior year, whichever is smaller.
Topic Number 306 - Penalty for Underpayment of Estimated Tax
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Old 05-11-2018, 12:17 PM   #11
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I believe you sign up you agree to update income data when you are aware of a change.
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Old 05-11-2018, 01:24 PM   #12
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I believe you sign up you agree to update income data when you are aware of a change.
And if I was OP, I'd do that.... however I'd also consider that there is a strong likelihood of having offsetting losses to take, so at this time I have no awareness of any change. I may be aware very late in December when market has performed better than I expected and I no longer have losses that I anticipated.
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Old 05-11-2018, 04:56 PM   #13
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I believe you sign up you agree to update income data when you are aware of a change.
Thanks, I didn't realize that.

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Old 05-13-2018, 08:23 AM   #14
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I believe you sign up you agree to update income data when you are aware of a change.
True, but there is no penalty that I've seen reported for not doing so. And a LOT of downside (possible loss of CSRs, more complicated tax filing) for jacking an income estimate mid-year.

Therefore, easy answer is to always reconcile at year's end.
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Old 05-16-2018, 07:25 AM   #15
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I went online to change my income estimate last year and it was a royal pain in the a$$.
Yeah, we were asked to re-asses our situation 2 years ago during the summer. Took about 4 hours and about 50 pages of docs. Would certainly never volunteer for that pain if I could avoid it. I would almost be willing to pay the penalty, if that happened.
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