Proving Estimated Income for ACA Subsidy

[scrabbler1]

If you have been following my tale in other threads, I went over the ACA subsidy cliff again in 2019. However, to protect myself from that happening again in 2020, I sold all my shares in an actively managed stock fund I had owned since 1996 and bought shares in a comparable index fund.

With the dividends and especially cap gain distributions projected to be much, much lower in 2020, I expect to not only qualify for an ACA subsidy in 2020 but will get a pretty big one. What I would like to do is to receive this subsidy as an advanced premium subsidy to reduce my monthly premium by about 50%.

I had to re-enroll with my state's (New York) exchange and enter the new, lower income I estimate to receive in 2020. However, the exchange has asked me to prove that my income will be this low. The only income data they have is for the last few years where I went over the cliff.

It looks like they will grant me the subsidy for a few months and have given me until early April to prove my estimate is worthy. So, at least I have some time.

What I have been putting together is a step-by-step analysis of what I believe my income will drop in 2020. This includes providing not-yet-created forms such as my 2019 income tax forms, a 1099 form, a completed sale order, and some historical data on the index fund I have bought into. I hope the exchange folks will believe me and grant me the advanced subsidy so I won't have to wait until next year to file for a large tax refund and re-apply for the advanced subsidy.

Have any of you had to prove a low estimated income amount to your state's exchange or to the federal exchange in this rather complicated fashion in order to receive an advanced subsidy? Were you successful? Did you have to file an appeal or get a hearing?

 

[RunningBum]

I found the letter I wrote for 2017. I explained that I was retired, and that my larger income in 2016 was due to selling stocks at a profit and doing a Roth conversion, and that I wasn't planning to sell stock in 2017 and could control my Roth conversion to whatever I wanted. I did a pretty complete analysis of what I expected 2017 to be, with divs+interest-HSA numbers. That's all I have a record or recollection of doing. Sounds like you are planning to do the same. From my experience, you should be good with what you're planning.

 

[ShokWaveRider]

We never had to prove anything other than Residence (Drivers License) & Citizenship (Passport), and that was this year only, never before. We have an ACA rep do ours.

 

[MRG]

I found the letter I wrote for 2017. I explained that I was retired, and that my larger income in 2016 was due to selling stocks at a profit and doing a Roth conversion, and that I wasn't planning to sell stock in 2017 and could control my Roth conversion to whatever I wanted. I did a pretty complete analysis of what I expected 2017 to be, with divs+interest-HSA numbers. That's all I have a record or recollection of doing. Sounds like you are planning to do the same. From my experience, you should be good with what you're planning.

I did about the same thing and had no problems. I really don't think they actually analyze anything you send in. It's in the script.

 

[jim584672]

NY has never asked me, even when I first signed up, and its been 5 years now.

 

[Llep]

I had the same experience as MRG and RunningBum. My situation didn’t involve a cliff but I moved states in the middle of the year from a state exchange back to a state that uses federal. They questioned my projected income as it was lower than the previous 2 tax years. I supplied both tax returns and explanations about non recurring Roth conversions and stock sales and they approved it without coming back for further explanation.

 

[footenote]

Had this situation for 2019 coverage. It took a couple tries, but it was ultimately no big deal. Just got my insurance card rather late (April) and had some catch-up costs. (Not more than I should have paid - just uneven.)

 

[truenorth418]

NY State did the same to me when I filed for a subsidy prior to my final year there (I subsequently moved my domicile to Florida). I decided it wasn’t worth the bother to constantly upload documents and spreadsheets to their clunky website that I figured they probably wouldn’t read anyway. Instead, I just went without the subsidy during the year and then collected it when I filed my FL federal tax return the following year.

PS bear in mind that NY State does not use age rating. In other words I discovered that the subsidies are much more limited for an older person there than what they could receive if they were to reside and apply in another state. Another advantage of leaving NY State I suppose.

 

[BeachOrCity]

I have to do this to get affordability exemptions so I can get a catastrophic plan. What I have done that was always accepted is show line by line comparison with my last submitted tax return. Ie now use 2018 return.
For lines where there is a significant drop I provide a detailed substantiated explanation.

This has worked two years in a row.

 

[BeachOrCity]

PS bear in mind that NY State does not use age rating. In other words I discovered that the subsidies are much more limited for an older person there than what they could receive if they were to reside and apply in another state. Another advantage of leaving NY State I suppose.

Actually that is an advantage to staying in ny. While it may make you feel better by getting a larger subsidy, for a person late 50s or 60s non age rating makes premiums lower. And reduces the impact of a single year even that could eliminate your subsidy.....like a jackpot at the slots for example.

If you are subsidy eligible what you pay for insurance is “baked in” to some degree. It’s one of the problems with the aca in that insurers know this so why try to control costs? Your cost and their profit are controlled by the government (I support the aca though so don’t flame me).

 

[Aerides]

I haven't had to do anything other than the form estimator in healthcare dot gov:

First year sign up was for 2019 - All prior years incomes would have exceeded subsidy levels, but estimated under the cliff - accepted
This year, (now that 2018 was filed and also exceeded, we had sold a bunch of old stuff ready to "hunker down") - got a note on the site saying hmmm... but re-estimated for 2020 and they accepted it.

We've yet to go over in a year AFTER after accepting a subsidy, and there's no state-extra thing here. I doubt you need to submit as much detail as you're assembling, but it can't hurt to have it.

 

[mckittri2000]

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

 

[wmc1000]

Like others I sent in a letter explaining why my income would be lower than the previous year when we first went on the ACA in 2017.

Actually they called me after the fact and said my submitted W-2 for the previous year showed an amount that would disqualify us. I asked them if they read my accompanying pdf file letter explaining the change. Took them a few minutes and then was told they send it on for review. A few weeks later my file was updated to accepted.

 

[Livefree]

I'm going through this right now with them. Our income for 2018 was over the cliff, due to a property sale. They called me asking for specifics. and they wanted income proof for 2019 and 2020.


I told them about the property sale, and that we paid back all the subsidies/tax credits at tax time, and that our income had dropped down to subsidy levels.


They said to write a letter explaining the drop in income, and also a signed statement from my wife that she doesn't earn an income anymore. I'm waiting to hear back.


If this doesn't work, my 2019 1040 will be available soon, for further proof.

 

[scrabbler1]

Thanks for your replies.


I will call the NY Marketplace to see if they need the documentation (attachments) or would just my one-page letter without the attachments be good enough.

 

[scrabbler1]

So, I called the NY Marketplace to see what they want. It will be a PITA, of course, as they are not well suited to handle my outlier situation. (Yet another way I am an outlier.)


They want me to redo my application (again) to remove any estimated income from the new stock fund. As that fund generates its income (in June and December), I will have to amend my application each time to reflect the added income. I hope this will be needed only for 2020 so there will be track record (i.e. 2020 tax forms) for future years. The online process takes about 15 minutes but is a minor PITA. There is some question as to what is sufficient proof of the added income. The transaction confirmation letter should be enough proof, but I am leery of that.


When I get my 2019 1099 form and complete my 2019 taxes, they will need some of that, too (which was going to part of what I planned to send anyway). Nothing unexpected there.


Still, I hardly expect this to go smoothly. I expect more hurdles throughout the year.

 

[I am He]

Probably not a horrible idea to bite the bullet by enrolling in the coverage and pay for it all out of pocket and get a big tax (premium reimbursement) return the year after.

I've considered it as I thought that if I did go over the cliff, that I would have pretended the account, so to speak.

 

[scrabbler1]

Probably not a horrible idea to bite the bullet by enrolling in the coverage and pay for it all out of pocket and get a big tax (premium reimbursement) return the year after.

I've considered it as I thought that if I did go over the cliff, that I would have pretended the account, so to speak.

What you describe is what I did in 2014 and 2015. Back then, the subsidy was small, $400 a year tops, so not getting a $40 per month reduction in my premium payment wasn't a big deal. Also, my federal taxes due the following April was more than $400, so I simply regarded the overpayment of my premium a backhanded federal tax withholding.

In 2016, after I changed insurance companies (but not sure if that had anything to do with it), I began seeing the $40 per month reduction in my premium. This continued into 2017 and 2018 although in those 2 years I had to repay the entire $480 subsidy at tax time. In 2019, I didn't get a subsidy and went over the cliff anyway.

But now, in 2020, the subsidy's value has increased tenfold compared to 2014-2016, and it will be much more than my federal taxes due. Getting a $360 per month reduction in my premium will have a significant effect on my cash flow from month to month. I'd like to see that reduction throughout the year instead of having to wait until next April to reclaim it.

 

[scrabbler1]

Pleasant surprise! One hurdle gone, with my insurance company having already received notice about the subsidy and processed it through their billing system. They sent me a revised February bill reflecting the subsidy which turned out to be $100 more than I originally thought!


My remaining hurdle is to send sufficient proof that my 2020 income will be low enough to deserve this. I have until early April, so I will wait until I have some 2020 monthly statements showing my new portfolio and low income.

 

[pb4uski]

....They want me to redo my application (again) to remove any estimated income from the new stock fund. As that fund generates its income (in June and December), I will have to amend my application each time to reflect the added income. I hope this will be needed only for 2020 so there will be track record (i.e. 2020 tax forms) for future years. The online process takes about 15 minutes but is a minor PITA. There is some question as to what is sufficient proof of the added income. The transaction confirmation letter should be enough proof, but I am leery of that. ....

For one, that is stupid on their part. You currently own the stock fund and the timing and amount of dividends can probably be reasonably estimated from their 2019 distributions. In any event, it makes no sense to amend your application for the December income since your December subsidy will have been paid by then.

But nonetheless, can you exclude the new fund as they ask and then conveniently forget about the amendment and the true up will get caught up when you file your 2020 tax return in early 2021?

 

[scrabbler1]

For one, that is stupid on their part. You currently own the stock fund and the timing and amount of dividends can probably be reasonably estimated from their 2019 distributions. In any event, it makes no sense to amend your application for the December income since your December subsidy will have been paid by then.

But nonetheless, can you exclude the new fund as they ask and then conveniently forget about the amendment and the true up will get caught up when you file your 2020 tax return in early 2021?

I surely agree it is stupid on their part. I have never updated my application midyear to reflect any "lumpy" income source.

I am strongly considering not updating the application for any income changes the way you described, and simply reconcile any differences early next year.

I actually had some experience trying to send proof of income back in 2014-2015 when these exchanges and subsidies began. I uploaded either an annual or monthly account statement and possibly a 1099 and the NY marketplace ignored all of it, refusing to grant me any advanced PTC (which was maybe $40 a month at the time). They kept sending me more emails asking me for proof, too. I called them after the third email and after I told the agent I wasn't seeking any advanced PTC because it was so small and would reconcile it at tax time, he told me to ignore the emails and they would disappear (they did).

I don't really want to go that route this time because the subsidy is so big. I do wonder if anything I send them will be ignored again so they end up canceling the advanced subsidy. I would then have to take the Appeal route, requesting a hearing (over the phone) so I could actually speak to a PERSON and explain my situation to someone who can actually understand it and do the right thing. It would be a PITA, for sure.

 

[pb4uski]

I think I would amend my application once, but if that doesn't stick be prepared to find some way to front up the $4,320 for the year and just get it back at tax time rather than deal with those bozos.

 

[scrabbler1]

I think I would amend my application once, but if that doesn't stick be prepared to find some way to front up the $4,320 for the year and just get it back at tax time rather than deal with those bozos.

After receiving my 1099s, I made copies of 2 key pages and wrote some notes on them from the letter I had prepared, arriving at the 2020 (revised) estimated income I entered elsewhere in the website. I then scanned them and, along with the sales confirmation order with its own notes, uploaded the 3 pages into the website.

On the shaky assumption that some bozo at the other end will actually READ and understand what I wrote, I do expect them to somewhat reduce the subsidy I got for February but keep it in place for the rest of the year. If they don't, then I will either appeal or pay the full freight for the whole year, not sure which (probably the former).

Next year may renew this problem if they use my 2019 tax return. But I can then give them my 2020 tax return around this time to more easily prove I am deserving of the subsidy.

 

[Which Roger]

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".

 

[jim584672]

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.