ACA Penalty refund received

[51notout]

I just received a refund of the ACA penalty levied for too high earnings on 2020 tax return. I read something about “take no action…IRS will take care
of it”. They did.

Hopefully, others have either had, or will have, their penalty refunded imminently.

I do enjoy sitting on my deck receiving a a hefty bank deposit notification [emoji3]

 

[zinger1457]

I received a small refund yesterday for 'excess advance premium tax credit repayment', income came in a little higher than I estimated on my ACA application so my subsidy was a little higher than it should have been but I never looked at the repayment as a penalty. Is this what you are referring to? Not going to refuse the money but never understood the reason for this change, seems to be rewarding someone for underestimating their income. If I had known they were going to do this I would have done an even worse job of estimating my income.

 

[51notout]

I think you are correct Zinger, that it wasn’t a penalty. I received too much subsidy when my final 2020 income was calculated and I had to repay some of that subsidy.

COVID relief eliminated that repayment I think. I’d already submitted my tax return which included me making that repayment. I received notification today that that amount was repaid back to me [emoji3]

 

[SecondCor521]

Not going to refuse the money but never understood the reason for this change, seems to be rewarding someone for underestimating their income. If I had known they were going to do this I would have done an even worse job of estimating my income.

They only eliminated the repayment of excess credit for one year: 2020. And they did it retroactively.

There are still structural incentives to estimate income low, although it's against the rules to underestimate on purpose. First, there is a cap on the repayment, so if you get way too much subsidy and your income is midrange, then you won't have to repay it all. Second, CSRs are done based on estimated income, not actual income, and are not reconciled at tax time.

 

[GTFan]

Yep it's way more beneficial to estimate low for ACA, as long as healthcare.gov doesn't start rejecting you in future years for estimating too low every year. They have a 5-year lookback at past returns, IIRC, but I haven't seen anyone post that they rejected an income estimate when they've had ACA for a few years.

We also got our penalty refund this week, amount was about what I was expecting.

 

[mebden]

Hey I got a question on the AFCA? isn't there a way to get this for nothing if you have a small taxable income? and also isn't there a minimum that you have to make to even get any coverage/ subsidiary from the government?

 

[RetiredAndLovingIt]

Yes, you can either go on Medicaid if your income is below the Federal Poverty Limits or ACA if you're above. It all depends on your state so here is a good place to start. You don't have to sign up to get information and you can play with the numbers to see what you might qualify for.
For example I'm in California with an income of less than $20K. I qualify for some of the silver plans that start at $1 a month his year but I'm paying a little bit to get a silver Kaiser plan.
https://www.healthcare.gov/medicaid-chip/getting-medicaid-chip/