Proving Estimated Income for ACA Subsidy

[scrabbler1]

It's worth remembering that the system isn't designed for people like us. We have much different sources of income than the typical ACA plan/subsidy recipient, and those who receive our explanations are much more used to reasons like "I got a better job" or "I lost my job" than reasons like "I won't do Roth conversions or sell as much stock or whatnot next year".

I've already discovered that with respect to the phone reps. When I told them about how my investment income was going to drop in 2020, they simply parroted what it in the marketplace's website, stuff which doesn't make much sense to me and didn't show any imagination by the reps. For example, they and the website said I needed a letter from the investment company on their letterhead stating I had sold my shares. A letter? I asked if a transaction confirmation was the same thing and they had no clue. I uploaded mine anyway.

I already got some automated reply today telling me I needed to send them proof of income. I had uploaded the documents yesterday, so I doubt anyone actually looked at them yet. I'll give them a few weekdays to review them before I call the phone rep flunkies again.

At least with an appeal I know I'll talk to a person more knowledgeable and who can make a decision.

 

[Dtail]

For 2017, they wanted income proof from me, but not since then.
I am guessing it is due to pretty much hitting the estimate, but also my TIRA distribution represents the income and not dividend flows, CD interest, etc,

 

[Looking4Ward]

If your FPL is 250% or less and you are in a Silver plan it makes sense to make an estimate since you would get cost sharing reductions. If you wait until the end of the year and tax time you would miss out on them.

Excellent point. I consistently claim my income to be at such a level that I qualify for Silver plans with $0 deductibles and low out of pocket max.

The first year I did that (2018), my MAGI was 28% more than my estimate (but still under the cliff). Instead of having to pay a penalty, I actually received a $450 refund (I paid no taxes) because I had added my minor son halfway thru the year which would have raised the monthly subsidy.

The next year (2019), I again estimated my MAGI at the same amount as 2018. And I also went over by about the same amount (28%). BUT - the penalty amount was only $650 which was cancelled out by the child tax credit with a net due of $0. In effect, my MAGI could have been right up to a dollar less than the cliff and I wouldn't have had to pay the penalty (around $1750?) because of the child tax credit.

Crazy how it works. But I've never been questioned about my MAGI estimate and have done the same for this year.

 

[Dtail]

Excellent point. I consistently claim my income to be at such a level that I qualify for Silver plans with $0 deductibles and low out of pocket max.

The first year I did that (2018), my MAGI was 28% more than my estimate (but still under the cliff). Instead of having to pay a penalty, I actually received a $450 refund (I paid no taxes) because I had added my minor son halfway thru the year which would have raised the monthly subsidy.

The next year (2019), I again estimated my MAGI at the same amount as 2018. And I also went over by about the same amount (28%). BUT - the penalty amount was only $650 which was cancelled out by the child tax credit with a net due of $0. In effect, my MAGI could have been right up to a dollar less than the cliff and I wouldn't have had to pay the penalty (around $1750?) because of the child tax credit.

Crazy how it works. But I've never been questioned about my MAGI estimate and have done the same for this year.

Hey, don't ruin it for the rest of us by artificially underestimating MAGI, so you still keep the CSR subsidy.

 

[scrabbler1]

I've already discovered that with respect to the phone reps. When I told them about how my investment income was going to drop in 2020, they simply parroted what it in the marketplace's website, stuff which doesn't make much sense to me and didn't show any imagination by the reps. For example, they and the website said I needed a letter from the investment company on their letterhead stating I had sold my shares. A letter? I asked if a transaction confirmation was the same thing and they had no clue. I uploaded mine anyway.

I already got some automated reply today telling me I needed to send them proof of income. I had uploaded the documents yesterday, so I doubt anyone actually looked at them yet. I'll give them a few weekdays to review them before I call the phone rep flunkies again.

At least with an appeal I know I'll talk to a person more knowledgeable and who can make a decision.

I heard back from the NY Marketplace this morning. Someone there read my uploaded documents and they agreed with what I sent them and will maintain the APTC subsidy I am set to receive for March for the rest of the year.

Color me stunned!

 

[ShokWaveRider]

We just estimate the lowest possible income + a fudge factor so as not to raise any alarms, then pay the difference on our tax returns. We have learnt that using a broker to do the ACA paperwork on our behalf, does not raise any red flags. The only supporting paperwork we have been asked for was proof of citizenship.

E.G:

Estimated low under the radar income for 2019. This gave DW a MAX Cost Sharing Silver plan. Resulting in a VERY low insignificant premium, $0 Deductible, Small MOOP, $0 Doc CoPay and $5 Specialist CoPay.

Actual income on 2019 Tax Return was a lot higher, but we only has to pay ~$2,000 back. Still enjoyed all the cost sharing with no penalties. Yes you could call it working the system, but that is what most folks do all the time, and not just for the ACA, for anything. Just ask the Corporations that pay $0 Tax. Why should they have all the fun.

 

[Which Roger]

Loopholes, legalities, and ethics aside, the simple fact that the IRS is on the receiving end of the income estimate that I provide is enough to deter me from providing anything other than my best-faith estimate of what my actual income will be.

 

[GTFan]

Actual income on 2019 Tax Return was a lot higher, but we only has to pay ~$2,000 back. Still enjoyed all the cost sharing with no penalties.

That's odd, the max APTC you have to pay back for a 94% CSR Silver plan should be $600 if you underestimate income. I was about $5k over estimate last year and that's what we paid.

 

[GTFan]

Loopholes, legalities, and ethics aside, the simple fact that the IRS is on the receiving end of the income estimate that I provide is enough to deter me from providing anything other than my best-faith estimate of what my actual income will be.

Cap gains and divs can vary widely from year to year, there's no way I can accurately estimate income. I'm not worried about that, we're small fish in a big pond.

 

[scrabbler1]

We just estimate the lowest possible income + a fudge factor so as not to raise any alarms, then pay the difference on our tax returns. We have learnt that using a broker to do the ACA paperwork on our behalf, does not raise any red flags. The only supporting paperwork we have been asked for was proof of citizenship.

E.G:

Estimated low under the radar income for 2019. This gave DW a MAX Cost Sharing Silver plan. Resulting in a VERY low insignificant premium, $0 Deductible, Small MOOP, $0 Doc CoPay and $5 Specialist CoPay.

Actual income on 2019 Tax Return was a lot higher, but we only has to pay ~$2,000 back. Still enjoyed all the cost sharing with no penalties. Yes you could call it working the system, but that is what most folks do all the time, and not just for the ACA, for anything. Just ask the Corporations that pay $0 Tax. Why should they have all the fun.

My 2020 income estimate included all the 2019 income from the holdover bond funds, nearly all of it monthly dividends with a tiny part of it cap gain distributions. To that I added an estimate of the dividend income from the new stock index fund based on a 3-year average of the DPS for the fund. I didn't include any cap gains because they are quite low and very erratic. But I did include some realized cap gains from 2 January sales from the holdover bond funds. I don't plan on updating my income again in 2020.

I wonder what the SLCSP they use in their subsidy estimate. I also don't know what the %-of-MAGI figure they use because the chart which will appear in the 2020 instructions for Form 8962 isn't out yet. I have to insert my best guesses on both figures in my tax spreadsheet. (I use the 2019 %-of-MAGI chart and a 110%-of-2019-SLCSP amount, for now.)

If I am undershooting on the subsidy, any remaining subsidy will help pay my income taxes due, as I have no taxes withheld and make no estimated tax payments.

 

[ShokWaveRider]

That's odd, the max APTC you have to pay back for a 94% CSR Silver plan should be $600 if you underestimate income. I was about $5k over estimate last year and that's what we paid.

I do not think so, at least not for us in Florida. I simply remove the ACA subsidies from TT and the $2500 goes away. So it must be related to the ACA. It was the same last year too.

 

[Dtail]

Loopholes, legalities, and ethics aside, the simple fact that the IRS is on the receiving end of the income estimate that I provide is enough to deter me from providing anything other than my best-faith estimate of what my actual income will be.

I am with you on this one, but everyone feels different about different loopholes.
Assisted my parents with the Medicaid planning.......

 

[GTFan]

I do not think so, at least not for us in Florida. I simply remove the ACA subsidies from TT and the $2500 goes away. So it must be related to the ACA. It was the same last year too.

Well if you're getting a max CSR Silver plan (estimated income less than 150% FPL) and your actual income is between 300% to 400% FPL then yeah the ACA PTC penalty is $2650. (Line 28 in form 8962 is what I'm talking about: https://www.irs.gov/instructions/i8962)

But you're seriously underestimating income in that case, and that goes beyond what I'd call gaming the system if you do it every year.

 

[SecondCor521]

I wonder what the SLCSP they use in their subsidy estimate.

It is based on your zip code and family size (and maybe ages and tobacco use, not 100% sure on that).

You should be able to figure it out by putting your zip code and family information into your marketplace, shop for plans, then select Silver plans, then look at the second lowest premium. That should be it.

Theoretically if the insurance companies competing in the marketplace change their prices or enter or leave the marketplace mid year, then it could change, but I suspect that is not common.

 

[SecondCor521]

I do not think so, at least not for us in Florida. I simply remove the ACA subsidies from TT and the $2500 goes away. So it must be related to the ACA. It was the same last year too.

You repay whatever APTC you were not entitled to receive, up to a limit.

The repayment limit depends on what your AGI for the year turns out to be (and your filing status). The higher your actual AGI, the higher your repayment limit.

If your AGI is above 400% FPL, then your repayment is unlimited. Also, if you're above 400% FPL you don't get any PTC, so you'd have to repay all of your APTC.

 

[ShokWaveRider]

You repay whatever APTC you were not entitled to receive, up to a limit.

And I am good with that, more than happy to pay my dues. I just prefer doing it at the end of the year, rather than monthly or up front. One still pays one way or another so I do not feel guilty.

 

[scrabbler1]

It is based on your zip code and family size (and maybe ages and tobacco use, not 100% sure on that).

You should be able to figure it out by putting your zip code and family information into your marketplace, shop for plans, then select Silver plans, then look at the second lowest premium. That should be it.

Theoretically if the insurance companies competing in the marketplace change their prices or enter or leave the marketplace mid year, then it could change, but I suspect that is not common.

I tried doing this in the first few years of the exchanges, sorting the Silver plans and using the second lowest. But what I used was never what I saw in the 1095-A form I got early the following year. Sometimes, it wasn't even close. So, I abandoned the estimate based on that.

I also called the NY Marketplace to try to get it from them before the 1095-A form came out. The phone reps had no clue (big surprise!), telling me to wait until the 1095-A form came out.

Now, I just take the previous year's and multiply it by 110%. Can't be any worse than any other guess.

 

[jim584672]

NY is unusual in that subsidies are from 200% to 400% FPL only. Under that and it goes to Essential Plan or Medicaid. This year I'm estimating 149% FPL to get a free Essential Plan. 150% to 200% FPL is $20 a month premium per person.

 

[bingybear]

Sent a letter explaining my income for the upcoming year and they accepted it without any questions.

I did that and got denied. All my data from the prior year and noted I would not be doing the roth conversion. I was 15 to 20 k under the cliff. I was denied . It was a good thing as I think the subsidy is not in my best interest.

 

[BeachOrCity]

The weird thing about the 'cliff' and the forced into essentials / medicaid etc below certain FPL's, is that many people cannot know their income until AFTER the tax year is over.

This is the case for me as I have numerous real estate K-1's where they can be huge profit, or huge loss.

As such I just do the catastrophic plan where there is no subsidy, but it functions close in price / subsidy to a bronze plan around 399% FPL...atleast in my state.

One of the biggest changes I hope they make to ACA is to just cap premiums at 10% of family income regardless of income (lower percentages still under 400% FPL). To me this would be fair and not a give away, yet keep costs out of the stratosphere for people just over the cliff.

It would also mean you get the same subsidy whether in advance or in arrears.

 

[GTFan]

And I am good with that, more than happy to pay my dues. I just prefer doing it at the end of the year, rather than monthly or up front. One still pays one way or another so I do not feel guilty.

So you're good with estimating less than $25k income to get a max CSR Silver plan and actually reporting over twice that every year?

I wondered whether HHS would accept lowball estimates like that when actual reported is much higher year after year. Guess I know now they don't care, but this is the kind of stuff folks here rail about when they can't get subsidies.

 

[ncbill]

Loopholes, legalities, and ethics aside, the simple fact that the IRS is on the receiving end of the income estimate that I provide is enough to deter me from providing anything other than my best-faith estimate of what my actual income will be.

One always settles up at tax time...go over the cliff...simply repay any prior credits taken.

Claim significant credits but go under 100% FPL...repayment is limited...but note that would be relatively rare...the above is much more common.

In either case...still get to benefit from cost-sharing reductions.

 

[scrabbler1]

I want to add a sequel to the issues I had with the NYS Marketplace and income verification and the ACA subsidy.

This has been a frantic week and while some of the major issues have been resolved, I still have some more annoyances which are either not dealt with yet or remain uncertain.

Back in May I had received an odd letter from the Marketplace telling me my health insurance coverage had been terminated. It was odd because it wasn't true. I had been paying my premiums monthly, and on time, the entire year. Furthermore, I had been receiving my premium subsidy routinely, cutting my payment in half since March when the income verification issue had gotten straightened out. The letter told me to call my IC to get the coverage reinstated, something which would have been totally unnecessary, of course.

I ignored the letter and it came back to somehow bite me in the ass in December. I usually get a premium notice for the next month about 10 days into the current month. But I never got one. I did, however, get a letter telling me what my unsubsidized premium would be, so that seemed to indicate that all was okay. I began inquiring with my IC and after a few inquiries they told me they had been told by the NYS Marketplace that my coverage was terminated for 2021.

When I called the Marketplace, they reminded me about the May letter. I told them my coverage was never terminated, and I had been paying premiums every month and getting my claims paid promptly. They told me I had to call my IC and tell them they needed to tell the Marketplace I had been insured the whole year, not only to get off this blacklist but to also get my upcoming 1095-A form done correctly. As it stood, that form would show me having coverage only through March. That form won't be coming out until late January, so I had some time but not a lot of time.

I called my IC back and replayed what the Marketplace told me. They put my case on their priority list. They also told me to re-enroll for 2021 with the Marketplace so I could get back on the with-coverage list. I did that and my IC got the confirmation and sent me a premium notice yesterday which I paid on line, as I had been doing for a few years. So, I am covered for January, my biggest priority. Whew! And the Marketplace has been told I was covered for all of 2020 so the 1095-A form should be okay. I'll check with the Marketplace next week on that.

But there are still issues with the subsidy. I had to pay the full price for January, which isn't a big deal because that will be reconciled when I file my 2021 taxes. I thought this time would be easier than back in January and February 2020 because I could simply upload all the same 3 documents I sent them back then as proof of income. One of the documents, not a 1099 form, was rejected as invalid, while the other 2 documents, 1099s with some handwritten notes, were accepted (so far). Strange that the same document was accepted last time got turned down this time. It is the last critical of the 3 documents, thankfully, so proof of income may be okay without it. However, I simply resubmitted the document as an “other document" instead of as a 1099.

When i call the Marketplace next week to inquire about the upcoming 1095-A form I will ask about the income verification issue, too. They generally aren't too bright at the Marketplace, so I am a little dubious about getting the answers I want. However, I was similarly dubious last year before they accepted the 3 documents and granted me an advanced subsidy based on my predicted 2020 income (which has turned out to be very, very close to actual). That got resolved pretty quickly, so my goal there is go see the subsidy applied to my February premium.

Another thing working in my favor is that the Marketplace has given a 3/31 deadline for income proof, which by then I will have received 2020 1099s and filed a 2020 income tax return, stronger proofs of income than what I gave them already.

It still seems like a lot of work and stress due to an untrue letter back in May which had unforeseen consequences 8 months later.

 

[jim584672]

I reported more income to NYSOH in 2019, that would put me in the Essential Plan. In NY Medicaid is approved in 1 year blocks, so early 2020 I was supposed to leave Medicaid, but COVID happened and they locked everyone in Medicaid as long as the public health emergency is declared. They renewed it another year so this year I should leave. If the emergency is still going in May they will probably give me another year. They won't let me out. Not really complaining since being in Medicaid gets me lower electric rates.

 

[Sue J]

Good luck scrabbler!

A few years ago I had something that maybe could be in the similar vein. We had coverage all year, with a subsidy, no issues with payments, nothing looked amiss.

But we never got the 1095-A form and it wasn't in our Marketplace account. I wanted to file our taxes in January and had no 1095-A so I called the Marketplace and they said our insurance had been cancelled in January and that we weren't insured all year. I knew that was not the case, I had invoices, payment receipts and all our claims had been paid as expected!

The folks at the Marketplace issued a ticket to look into the discrepancy and after a few months they were able to issue us our 1095-A. In the meantime I figured out what the 1095-A would show and verified that with an agent at the Marketplace. I filed our taxes using those numbers.

After filing I got an IRS letter stating that there was a discrepancy. Very soon after that I got the official 1095-A and sent it off to the IRS with an explanation note. It all worked out in the end, even though it didn't complete until late May or early June.

Yes, you are dealing with a huge complicated bureaucracy but I found the Marketplace to be competent and they did follow through. Of course, this was in a year without a pandemic, so I wish you luck!