PPACA Premium Tax Credit and American Rescue Plan Act

[sengsational]

As I was preparing my federal income tax, I came across this in the H&R Block tax prep software:

We've done the math, and you received too much of an advance premium tax credit when you signed up for marketplace insurance. Usually, this means you have to pay back some or all of the extra. However, thanks to the American Rescue Plan Act, you don't have to pay any of it back this year. (And this form wont' be included with your 2020 return.)

To make sure you receive the correct advance premium credit in the future, update your info with the marketplace throughout the year - whenever you have a change in in come or family situation.

Depending on how much I Roth convert, even below 400% FPL, the Schedule 2, Part I, Line 2 "Excess advance premium tax credit repayment, Attach form 8962" is populated and that amount is carried forward to 1040 line 17, and added to the tax I owe. So it seems like they're saying one thing, and doing another.

I wonder if this is a bug in the software or what.

 

[RunningBum]

They haven't yet removed the special 2020 "no claw back" provision, or forgot about removing it.

 

[bobandsherry]

It mentions 2020, this would be 2021 tax return. Gonna guess it's just language from last year when you didn't have to repay and the package isn't ready for prime time 2021 use.

 

[Gumby]

The earliest versions of H&R Block sometimes have nits like this in them. I have called them twice to report an issue and both were corrected in the early January update. They may have been corrected without my call, but I try to help others if I can.

 

[SecondCor521]

In 2020, because of the ARP Act, you didn't have to repay the excess subsidy. That was a one year retroactive thing.

In 2021, unless the law is changed in the next few months, you'll have to repay the excess subsidy amount.

The ARP Act also changed the applicable percentage amounts used on Form 8962, as well as removing the 400% FPL cliff. Those two changes do apply in 2021.

So for a 2021 pro forma return, the software is closer to correct, and the language quoted in the OP is probably out of date.

 

[sengsational]

Thanks, all. I didn't see the cliff as I incremented the Roth conversion, so I think they've got that worked out.

I was incorrectly thinking the no clawback rule was in for 2021. As conversions increase, it goes up to $800 and stops increasing.

 

[sengsational]

I ran the marginal and average tax rates as the conversion amount increased. Anything above 400% FPL used to be out of bounds. Now, not so much.

This is more of a "Roth Conversion" topic, but not worth a separate thread. I don't mind the redirection...the original question is resolved.

Now I need to figure out the IRMAA break-points for 2 years from now...something I've never worried about before.

 

[Gumby]

I ran the marginal and average tax rates as the conversion amount increased. Anything above 400% FPL used to be out of bounds. Now, not so much.

This is more of a "Roth Conversion" topic, but not worth a separate thread. I don't mind the redirection...the original question is resolved.

Now I need to figure out the IRMAA break-points for 2 years from now...something I've never worried about before.

They will almost certainly be higher than they are for 2022 (i.e. 2020 income), so if you go with the 2022 numbers you'll have a margin of safety.

 

[RetiredAndLovingIt]

I have not ran my estimate yet but this is what I found

Potential ACA Subsidy Repayment Caps for Fiscal Year 2021:

Maximum Clawback Repayment in 2022:

MAGI (Taxable) Income % of Federal Poverty Level Single Tax Filer All Other Filers
Less Than 200% $325 $650
200-299% $800 $1,6000
300-399% $1,350 $2,700
400%+ Entire Subsidy Entire Subsidy

https://healthcareinsider.com/subsidy-repayment-caps-170664

I copied and pasted and fixed all the columns but they are all messed up when posted. You can find the same info at the link

 

[sengsational]

They will almost certainly be higher than they are for 2022 (i.e. 2020 income), so if you go with the 2022 numbers you'll have a margin of safety.

Yes, I'm slowly figuring this stuff out. I found a "finance buff" page that makes a conservative guess on 2023 coverage based on 2021 income: Single 94K and MFJ 188K.

https://thefinancebuff.com/medicare-irmaa-income-brackets.html

 

[sengsational]

... 400%+ Entire Subsidy Entire Subsidy...

Yes, HR Block put in ten million dollars on line 28 when I went over 400% FPL

 

[RetiredAndLovingIt]

I'm using the "What If" calculator in Turbo Tax to figure out the clawback if I make a larger Roth Conversion than I originally estimated.
What if is estimating I owe $300 using the original 18K income number that I was approved for which does not seem right. I'm assuming it has not been updated to allow for the ARP changes or I'm just entering bad data.
Last year I was spot on when I created my dummy form 1095-A but I'm having trouble this year filling in the numbers since everything changed halfway through the year and I'm so confused. Has anyone figured out how to do this for 2021 yet that can give me some pointers?

 

[SecondCor521]

I'm using the "What If" calculator in Turbo Tax to figure out the clawback if I make a larger Roth Conversion than I originally estimated.
What if is estimating I owe $300 using the original 18K income number that I was approved for which does not seem right. I'm assuming it has not been updated to allow for the ARP changes or I'm just entering bad data.
Last year I was spot on when I created my dummy form 1095-A but I'm having trouble this year filling in the numbers since everything changed halfway through the year and I'm so confused. Has anyone figured out how to do this for 2021 yet that can give me some pointers?

Are you using a 2020 version of TT? If so, I think it's highly doubtful they would update it for the ARP changes. If you want to use TT I'd try to get my hands on a 2021 version of the program, which at least has a chance of being updated for ARP. Although it could easily be buggy in other areas, especially the CTC which has a lot of changes this year as well.

You can try doing the math yourself.

For the 1095-A data: The SLCSP can be found by going to your exchange, filtering on Silver plans, and sorting by price ascending and then taking the second cheapest one (usually). You should be able to find out what premium you paid either from your bank register or your health insurance company. Then you need your premium tax credit, which probably changed in the middle of the year, but hopefully you saved your paperwork on that.

For the Form 8962 calculations, you mostly just need to figure out your AGI relative to FPL so you can calculate your applicable figure. I think the 2021 instructions for Form 8962 are out at least in draft form, so in theory you can figure that out.

It's intimidating though - quite easy to make a mistake somewhere. I've got mine done but even with all the data and an up to date tax software package I'm not at all confident that I'm even close.

I guess my suggestions:

1. Collect all the data.
2. Try to use a 2021 tax prep software program.
3. Compare against your 2020 return and common sense.
4. Triple check everything.

 

[RetiredAndLovingIt]

Whoops it turns out I already posted the payback limits according to FPL so as long as I stay under 200% of FPL it's $325.
As to the $300 what if says I owe on my original estimate, it's probably not been updated yet for the ARP changes.
https://www.coveredca.com/learning-center/tax-forms-and-filing/financial-help-repayment-limits/

 

[Born2Fish]

OK this has blind-sided me.

My 2021 MAGI is $74k. Married with no dependents.

Healthcare.gov stated that I would get a 2021 Premium Tax Credit of $1848/month based on the $74k MAGI.

 

[Born2Fish]

In 2020, because of the ARP Act, you didn't have to repay the excess subsidy. That was a one year retroactive thing.

In 2021, unless the law is changed in the next few months, you'll have to repay the excess subsidy amount.

The ARP Act also changed the applicable percentage amounts used on Form 8962, as well as removing the 400% FPL cliff. Those two changes do apply in 2021.

So for a 2021 pro forma return, the software is closer to correct, and the language quoted in the OP is probably out of date.

OK I just read SecondCor's response.

Just to be sure, the 400% FPL cliff is NOT in effect (is this Effect or Affect?) for my 2021 return - right?

 

[PaunchyPirate]

OK this has blind-sided me.

My 2021 MAGI is $74k. Married with no dependents.

Healthcare.gov stated that I would get a 2021 Premium Tax Credit of $1848/month based on the $74k MAGI.

That sounds about right. You shouldn't have to pay more than 8.5% of your MAGI to get the second lowest cost silver plan. That's how the subsidy amount is determined. Then spend that subsidy on any plan you want (bronze, silver, gold).

 

[SecondCor521]

OK I just read SecondCor's response.

Just to be sure, the 400% FPL cliff is NOT in effect (is this Effect or Affect?) for my 2021 return - right?

Correct. You can double check if you like by reading all of the gory details in the American Rescue Plan Act, which was enacted into law back in March, or any of a zillion popular blog articles about it.

 

[RunningBum]

Or buy a tax prep program and test it out that way.

 

[Born2Fish]

Correct. You can double check if you like by reading all of the gory details in the American Rescue Plan Act, which was enacted into law back in March, or any of a zillion popular blog articles about it.

Or buy a tax prep program and test it out that way.

Ugh, not sure I want to read the entire act. Sounds like a cure for insomnia.

I'll buy Turbo Tax at some point in the near future.

Your endorsements are enough for me to not worry about it.

 

[xlf11]

TT2020 WhatIf seems to be right on 2021 tax calculation (estimate) after updated with ARP Act. But TT2021 may not be ready yet as of today because of many unavailable forms.