ACA Question: I can't be the only one.....

[sheldon cornped]

We underestimated our income for this year for purposes of ACA. We have been subsidized $1,000 per month when we will NOT be eligible for any subsidy this year. We will owe back $12k by year end. Questions:

Can I pay back the $12,000 before the end of the year to catch it up?
Will the $12k still be deductible on our 2017 taxes?
Will I have to wait until tax filing time next year?

I have spoken with my insurance carrier who says I have to talk to the ACA marketplace people. The ACA marketplace people told me to make a life change entry on my application with no additional instructions on how to pay back. I entered the change. The IRS told me they didn't know and tried to transfer me to another department. The IRS person told me after exhausting all her resources said "I don't know why they passed that healthcare act, it's so confusing"

Have any of you dealt with this issue? I'll keep trying until I get an answer. I just don't want to wait until year end and get slapped with a penalty when I file my tax return next year. Plus I want to claim a deduction on my Medical expenses for the premiums. Help!!!

 

[Texas Proud]

I have not dealt with this... so what I say can be wrong....


When you find out your situation has changed you are supposed to go to the ACA site and let them know... I did not do this a few years back when I got insurance from a job I was doing.... caused me some pain to get them to backdate the change so the insurance company did not try and collect from me...


From what I read, you settle up at tax filing time... IOW, you do not have to pay back the excess credits until you file...

 

[RunningBum]

My guess, just a guess, is that it would be like underwithholding your tax payments by this amount. Like if you had income or a capital gain each month resulting in $1K in taxes that would be due each month. I'd probably make a full estimated tax payment now rather than later to limit the interest+penalty due, though IIRC the interest rate isn't terrible. You'll probably have to fill out form 2210 for underpayment.

 

[pb4uski]

Work through the forms by doing a 'pretend" tax return, but I think the easy solution to your issue is to just include the $12,000 in your 4Q 2017 estimated payment.

I don't think that the $12k will be deductible (or that you can increase your health insurance cost on Schedule A by the $12,000 in addition to what you actually paid in premiums.

While you might pay the $12,000 back now as part of your estimated payments, you will reconcile and square up everything when you finalize your 2017 tax return in early 2018.

See Form 8962 and Instructions.

 

[Texas Proud]

Just looked and there is no penalty for having to pay this back....

Line 61, which is the amount owed back, is not included in the 2210...

No need to prepay the amount... you will not have to pay any penalty or interest on that amount...

 

[RunningBum]

If you have a way to make it part of withholding as opposed to estimated payments, those are assumed to have been made throughout the year so you wouldn't have any penalty or interest. There's also the safe harbor exception that would save you.

 

[pb4uski]

Just looked and there is no penalty for having to pay this back....

Line 61, which is the amount owed back, is not included in the 2210...

No need to prepay the amount... you will not have to pay any penalty or interest on that amount...

So the OP can just make a $12k estimated payment if they wish to and it is taken care of?

 

[RunningBum]

Just looked and there is no penalty for having to pay this back....

Line 61, which is the amount owed back, is not included in the 2210...

No need to prepay the amount... you will not have to pay any penalty or interest on that amount...

Line 61 looks like the penalty if you don't have any health insurance. Line 46 looks like the excess subsidy you got. At a quick look, since line 1 of 2210 is from line 56 of 1040, which comes after line 46, I'd say that line 46 IS included in 2210.

 

[scrabbler1]

Work through the forms by doing a 'pretend" tax return, but I think the easy solution to your issue is to just include the $12,000 in your 4Q 2017 estimated payment.

I don't think that the $12k will be deductible (or that you can increase your health insurance cost on Schedule A by the $12,000 in addition to what you actually paid in premiums.

While you might pay the $12,000 back now as part of your estimated payments, you will reconcile and square up everything when you finalize your 2017 tax return in early 2018.

See Form 8962 and Instructions.

Why shouldn't he be able to include the $12,000 as deductible medical expenses? Let's say his premiums due were $15,000 and the $12,000 subsidy reduced it to $3,000 paid. When he finds out he wasn't entitled to receive the $12,000 subsidy, he is paying it back to the source of the subsidy, the US Government. In effect, he is paying an additional $12,000 more in HI premiums. He may not be able to take this additional $12,000 deduction until he files his 2018 return in early 2019, though, because he won't be completing his Form 8962 to square up his 2017 taxes until early 2018.

I had a similar situation on a much smaller scale last year. My subsidy in 2016 was a little too high so I had to repay some of it on my 2016 return. That overpayment I included on my 2016 return I filed earlier this year and will include as additional medical expense on my 2017 return (if I itemize). Similarly, when my subsidy was too low (or I didn't take one at all), any subsidy I claimed on Form 8962 I included as an offset (negative) to my medical expenses in the following year.

 

[pb4uski]

Why shouldn't he be able to include the $12,000 as deductible medical expenses? ...

I stand corrected.... the amount due with the return can be included on Schedule A.

Premium Tax Credit
You can't include in medical expenses the amount of
health insurance premiums paid by or through the premium
tax credit. You also can't include in medical expenses
any amount of advance payments of the premium tax
credit made that you did not have to pay back. However,
any amount of advance payments of the premium tax
credit that you did have to pay back can be included in
medical expenses.

Example 1. Amy is under age 65 and unmarried. The
cost of her health insurance premiums in 2016 is $8,700.
Advance payments of the premium tax credit of $4,200
are made to the insurance company and Amy pays premiums
of $4,500. On her 2016 tax return, Amy is allowed a
premium tax credit of $3,600 and must repay $600 excess
advance credit payments (which is less than the repayment
limitation). Amy is treated as paying $5,100 ($8,700
less the allowed premium tax credit of $3,600) for health
insurance premiums in 2016. Because $5,100 is more
than 10% of Amy's AGI, when she fills out her Schedule A,
she enters $5,100 on line 1.

Example 2. The facts are the same as in Example 1,
except Amy is allowed a premium tax credit of $4,900 on
her tax return and receives a net premium tax credit of
$700. Amy is treated as paying $3,800 ($8,700 less the allowed
premium tax credit of $4,900) for health insurance
premiums in 2016. Because $3,800 is more than 10% of
Amy's AGI, when she fills out her Schedule A, she enters
$3,800 on line 1.

 

[SecondCor521]

I'm putting this in at the top since it's important:

The amount you need to repay may be limited based on your income. In your case, since you said you don't qualify for subsidies, that means your Obamacare AGI is probably above 400% FPL. This in turn means that you'll have to repay all of the APTC.

For those under 400% FPL, the most you'll have to repay is $2550.

Given that you're talking about repaying almost $10,000 more than that, I'd try really hard to get under 400% of FPL if you have any shot at it. Recognize capital losses, start a money-losing business, contribute to retirement accounts if you can, fund a health care account if you can, etc.

We underestimated our income for this year for purposes of ACA. We have been subsidized $1,000 per month when we will NOT be eligible for any subsidy this year. We will owe back $12k by year end. Questions:

[1.] Can I pay back the $12,000 before the end of the year to catch it up?
[2.] Will the $12k still be deductible on our 2017 taxes?
[3.] Will I have to wait until tax filing time next year?

I have spoken with my insurance carrier who says I have to talk to the ACA marketplace people. [4.] The ACA marketplace people told me to make a life change entry on my application with no additional instructions on how to pay back. I entered the change. The IRS told me they didn't know and tried to transfer me to another department. The IRS person told me after exhausting all her resources said "I don't know why they passed that healthcare act, it's so confusing"

Have any of you dealt with this issue? I'll keep trying until I get an answer. I just don't want to wait until year end and get slapped with a penalty when I file my tax return next year. Plus I want to claim a deduction on my Medical expenses for the premiums. Help!!!

1. Yes, either by changing your withholding or by making estimated tax payments, as others have noted.
2. Yes. See pb4uski's post above this one.
3. Well, see question 1, but you'll settle everything up when you file your taxes in the spring.

4. When you submit a life change form, they will recalculate your subsidy and in your case reduce it for the rest of the year. Since it's already October, this isn't going to help much.

 

[sheldon cornped]

Thanks so much everybody. These suggestions give me something to go on. I knew I could count on the astute posters of ER!

 

[Texas Proud]

Line 61 looks like the penalty if you don't have any health insurance. Line 46 looks like the excess subsidy you got. At a quick look, since line 1 of 2210 is from line 56 of 1040, which comes after line 46, I'd say that line 46 IS included in 2210.

OK... looks like I missed that line!!!!


Ignore my previous post....

 

[Texas Proud]

I'm putting this in at the top since it's important:

The amount you need to repay may be limited based on your income. In your case, since you said you don't qualify for subsidies, that means your Obamacare AGI is probably above 400% FPL. This in turn means that you'll have to repay all of the APTC.

For those under 400% FPL, the most you'll have to repay is $2550.

Can you tell me where this is said

This can change my tax planning!!! That means I would have a max tax bill of $2550 and can take income close to the 400% FPL..... I was assuming I would have to pay the full amount along the way...

 

[MBSC]

I'm putting this in at the top since it's important:

The amount you need to repay may be limited based on your income. In your case, since you said you don't qualify for subsidies, that means your Obamacare AGI is probably above 400% FPL. This in turn means that you'll have to repay all of the APTC.

For those under 400% FPL, the most you'll have to repay is $2550.

Can you tell me where this is said

This can change my tax planning!!! That means I would have a max tax bill of $2550 and can take income close to the 400% FPL..... I was assuming I would have to pay the full amount along the way...

Instructions for IRS Form 8962, Line 28, Table 5 (Repayment Limitation).

https://www.irs.gov/pub/irs-pdf/i8962.pdf

 

[brucethebroker]

Can't make IRA or HSA contributions to reduce your MAGI enough? How much income do you need to lop off?

 

[Texas Proud]

Instructions for IRS Form 8962, Line 28, Table 5 (Repayment Limitation).

https://www.irs.gov/pub/irs-pdf/i8962.pdf

WOW... thank.... that will change my thinking for this year... and since it looks like the reduced payments/deductibles are going to go away next year I do not have to keep it low for that either...

 

[wmc1000]

TexasProud the reduced payments aren't likely to go away - - even if the government does away with cost sharing reimbursement to insurance companies they will still be available for 2018.

IMHO the insurance companies have already priced in the lack of reimbursements for next year. This is why the states approved such high premium increases for those plans on the exchanges.

When large numbers of insureds who don't qualify for subsidies go elsewhere or opt out of coverage the insurance companies still in for 2018 will look for very high increases for 2019 or will pull out like many did for the upcoming year.

 

[Texas Proud]

TexasProud the reduced payments aren't likely to go away - - even if the government does away with cost sharing reimbursement to insurance companies they will still be available for 2018.

IMHO the insurance companies have already priced in the lack of reimbursements for next year. This is why the states approved such high premium increases for those plans on the exchanges.

When large numbers of insureds who don't qualify for subsidies go elsewhere or opt out of coverage the insurance companies still in for 2018 will look for very high increases for 2019 or will pull out like many did for the upcoming year.

We will see.... I cannot see them keeping the copay at $10 when it was at $50 for BCBS and I only got two before I had to pay 100%....

If it stays the same, I will keep income low for this year so I can get whatever is available next... but I still want to get as much credit I can and not have to pay it back...

 

[ncbill]

Most companies priced in the potential loss of CSRs in their 2018 premiums.

They still have to provide them in 2018 if they don't withdraw from the marketplace.

 

[Fermion]

Because of a huge move in a biotech stock, we also generated way more income this year than I had planned, but I do not think it will be quite as bad as the OP. We were targeting $23,000 MAGI as a married couple and I was going to have to do a IRA conversion to reach that but now we already have realized $33,000 in gains. I ran the numbers and it is not too bad, perhaps paying back about $800 of subsidy. The year isn't over yet though, maybe I can lose some money and get back to $23,000!