Unintended Consequences - IRMAA

[Car-Guy]

Quote:

Originally Posted by davebarnes Yup Only people with a lot of money whine about Medicare premium surcharges.

Except maybe one... ME!


IMO, I don't have a lot of money.... But, I guess that is relative.... Whining about it, is the only thing I'm getting for my IRMAA premiums.

[audreyh1]

Quote:

Originally Posted by Car-Guy Except maybe one... ME! IMO, I don't have a lot of money.... But, I guess that is relative.... Whining about it, is the only thing I'm getting for my IRMAA premiums.

Ha ha ha.

[pb4uski]

Quote:

Originally Posted by jazz4cash It is my understanding that you can file a request to have your premium calculation re-evaluated if your income has dropped from two years prior and you can substantiate. It may just require a tax return from one year prior instead of the 2 yrs prior that is used for the initial determination. I am barely familiar with this and trying to get up to speed. I expect one of the forum "experts" will be along shortly, but in the meantime here is something on the topic: https://www.marketwatch.com/story/sh...ges-2020-10-05

I'm not sure if it woul be successful, but it might be worth a shot to apply and claim that you were over only because you did a withdrawal from retirement accounts to pay off your HELOC and that income will not recur in future years. Only cost would be to fil out the form and send it in. Who knows, you might get a sympathetic examiner.

[Ready-4-ER-at-14]

I'm taking a chance and paying for a whole lot of movement into roth this year.
Yes it is costing a lot and will elevate medicare costs at least one year, but...

If we survive one year when there is a 40% return.. we're golden.

[pb4uski]

Quote:

Originally Posted by Ready-4-ER-at-14 ... If we survive one year when there is a 40% return.. we're golden.

A one-year 40% return as never happened that I can find... at least for calendar years.

[jazz4cash]

I was searching for something entirely different and I was surprised how often IRMAA is included in a thread title. Here's one from a few months ago that addresses the issue.....
https://www.early-retirement.org/for...ed-105433.html

[Perryinva]

It is important to remember that though they used 2 years ago to determine IRMAA, it is the income in the year that you are charged for the increase that matters. I went over in 2018 and filed the SSA-44 with retirement as the major life change, explaining with documentation 2020 income would be below IRMAA, and it was reversed. 2019 income again triggered IRMAA for 2021, and as soon as I file 2020 taxes, I will submit SSA-44 again and it will be reversed.

[statsman]

Quote:

Originally Posted by Perryinva It is important to remember that though they used 2 years ago to determine IRMAA, it is the income in the year that you are charged for the increase that matters. I went over in 2018 and filed the SSA-44 with retirement as the major life change, explaining with documentation 2020 income would be below IRMAA, and it was reversed. 2019 income again triggered IRMAA for 2021, and as soon as I file 2020 taxes, I will submit SSA-44 again and it will be reversed.

Some income increases can be ignored. Apparently, the capital gains (beyond the exemption) on the sale of a house owned through the working years and then sold in retirement will not be ignored.

[RetireBy90]

Back when I was employed I had 3 or 4 months of excessive overtime, 14 hour days 7 days a week. Kicked my income up almost double and it was 2 years before DW went on Medicare. I did the SSA-44 and we got relief. They even backdated so after extra IRMAA first months we got 0 bill for 2 months. Maybe I got an understanding reviewer or maybe there is a good chance you can get some relief when it is reasonable.

[audreyh1]

So, it looks like our 2020 income would drop us one tier. Do you think it’s worth filing form SSA-44? it doesn’t qualify as a major life change*, just lower investment income. Otherwise I guess we’ll get our break in 2022.

*Looking at the checklist it doesn’t apply.

[pb4uski]

Not sure, but seems like it can't hurt. No real downside to trying is there?

[Car-Guy]

Quote:

Originally Posted by audreyh1 So, it looks like our 2020 income would drop us one tier. Do you think it’s worth filing form SSA-44? it doesn’t qualify as a major life change*, just lower investment income. Otherwise I guess we’ll get our break in 2022. *Looking at the checklist it doesn’t apply.

Quote:

Originally Posted by pb4uski Not sure, but seems like it can't hurt. No real downside to trying is there?

My case isn't really covered by the forms selection of life changing events, but I'm going to try anyway as soon as I've filed my 2020 return next year. Plan to send in a copy of my signed 1040 return for documentation...

[pb4uski]

Quote:

Originally Posted by Car-Guy No joke! I wish I could "vent" about it here.....

Why can't you?

[RunningBum]

Quote:

Originally Posted by CRLLS What gets me is that IRMAA can be triggered by Roth conversions. This is for money earned many years ago. I know it wasn't taxed back then, but it was income then AND reported. I almost went over the trigger this years because my spreadsheet erroneously linked to my "taxable" income rather than my AGI/MAGI. I caught it about 2 hours before I pulled the trigger on the conversion while doing a final check.

I don't see this as a valid point. It was income, that you chose to defer. How was it reported? Certainly not in a way that cost you any taxes.

Contributions to tIRAs and 401Ks are not yours to spend until you pay the taxes. So now you are converting and reporting the income, which means you pay the taxes now, which could include IRMAA. If your spreadsheet doesn't count conversions as income that's a pretty basic error that's on you.

[Car-Guy]

Quote:

Originally Posted by pb4uski Why can't you?

I'd likely violate many of the forums rules if I "vented" on this topic without sugar coating it. So no sense in poking porky.

[pb4uski]

Quote:

Originally Posted by RunningBum I don't see this as a valid point. ...

+2

[pb4uski]

Quote:

Originally Posted by Car-Guy I'd likely violate many of the forums rules if I "vented" on this topic ...

[CRLLS]

Quote:

Originally Posted by RunningBum I don't see this as a valid point. It was income, that you chose to defer. How was it reported? Certainly not in a way that cost you any taxes. Contributions to tIRAs and 401Ks are not yours to spend until you pay the taxes. So now you are converting and reporting the income, which means you pay the taxes now, which could include IRMAA. If your spreadsheet doesn't count conversions as income that's a pretty basic error that's on you.

First I agree on your last point. My spreadsheet was wrong. That is on me.
As far as where was it “reported” years earlier?

1) In the case of employment income, employee’s gross income is reported on the annual W2 IRS form.
2) FICA withholding is calculated on one’s “gross income”, not net after 401K deductions,
3) FICA includes both SS and Medicare contributions
4) IRA deduction to gross income is done (today) on Schedule 1 as an adjustment to income on tax form 1040.

So both IRA’s and 401Ks were reported (albeit, not taxed) in the year contributions were made.

BTW, I didn’t chose to "defer the income" back then, I chose to defer the tax paid on that income in exchange of having limited access to that as retirement savings.

Considering #2 & #3 above, I have already paid the FICA tax (includes the Medicare tax) on all 401K contributions when they were made way-back-then as reported on my W2 years ago. As such, IMO, it should be excluded from any of today’s income based additions to Medicare. A point could be made about a Roth conversion from an IRA being treated differently because there was no FICA paid on those IRA contributions. However any rollover from a 401K to an IRA before today would mix those dollars making treatment today as being difficult at best.

To be clear, as I am paying the conversion tax from IRA monies, I have no issue about including that tax as income in the year of the conversion and thus subject to IRMAA. It wasn’t “converted” to the Roth. I do think that IRMAA should not be based on the total Roth conversion amount.

[pb4uski]

Quote:

Originally Posted by CRLLS What gets me is that IRMAA can be triggered by Roth conversions. This is for money earned many years ago. I know it wasn't taxed back then, but it was income then AND reported. I almost went over the trigger this years because my spreadsheet erroneously linked to my "taxable" income rather than my AGI/MAGI. I caught it about 2 hours before I pulled the trigger on the conversion while doing a final check.

Quote:

Originally Posted by RunningBum I don't see this as a valid point. It was income, that you chose to defer. How was it reported? Certainly not in a way that cost you any taxes. Contributions to tIRAs and 401Ks are not yours to spend until you pay the taxes. So now you are converting and reporting the income, which means you pay the taxes now, which could include IRMAA. If your spreadsheet doesn't count conversions as income that's a pretty basic error that's on you.

Quote:

Originally Posted by CRLLS First I agree on your last point. My spreadsheet was wrong. That is on me. As far as where was it “reported” years earlier? 1) In the case of employment income, employee’s gross income is reported on the annual W2 IRS form. 2) FICA withholding is calculated on one’s “gross income”, not net after 401K deductions, 3) FICA includes both SS and Medicare contributions 4) IRA deduction to gross income is done (today) on Schedule 1 as an adjustment to income on tax form 1040. So both IRA’s and 401Ks were reported (albeit, not taxed) in the year contributions were made. BTW, I didn’t chose to "defer the income" back then, I chose to defer the tax paid on that income in exchange of having limited access to that as retirement savings. Considering #2 & #3 above, I have already paid the FICA tax (includes the Medicare tax) on all 401K contributions when they were made way-back-then as reported on my W2 years ago. As such, IMO, it should be excluded from any of today’s income based additions to Medicare. A point could be made about a Roth conversion from an IRA being treated differently because there was no FICA paid on those IRA contributions. However any rollover from a 401K to an IRA before today would mix those dollars making treatment today as being difficult at best. To be clear, as I am paying the conversion tax from IRA monies, I have no issue about including that tax as income in the year of the conversion and thus subject to IRMAA. It wasn’t “converted” to the Roth. I do think that IRMAA should not be based on the total Roth conversion amount.

Its not any deep, dark secret that IRMAA is based on your tax return income and that tax return income includes any Roth conversions. It's not like they changed the rules on you.

And you didn't defer the tax as you claim... the only way you can defer tax is by deferring income... that's why it is called an income tax. You deferred the income (being recognized as such in your tax return) which in turn deferred the tax.

FICA income and the timing of FICA taxes have nothing to do with it... never had and never will.

[Hermit]

I am carefully working at keeping my income under $163k which is a step for IRMAA as well as the break point for the top of the 24% tax bracket for singles. I want to pull some cash out of the traditional IRA so I can add posts to the "Spend That Dough" thread. RMDs are just around the corner so I will be paying IRMAA taxes for the rest of my life.