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Negative Modified AGI

I am preparing a tax return for a client that had to close during COVID because they were a venue. They are a MFJ couple that had W2 earnings of $40K , unemployment which nets to zero on schedule 1 due to American Rescue Act, joint Schedule C income of $20K etc but after their large S Corp losses ($-66K)(limited to basis) their Modified AGI is negative ($-6K) so when my software is calculating their premium tax credit they are getting a full premium tax credit refund for all the insurance they paid and because the Modified AGI is negative I'm having to mail in their return. Is there any risk in this? Is it possible they may lose their insurance or have to pay anything back or be at audit risk?
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2 Replies 2
IRonMaN
Level 15

As long as the return is prepared correctly and as long as the 1120S was prepared correctly, there is noting to sweat - life is good.

ACME Taxes, Tatoos, Tires and Tomatoes (I had to get rid of the turtles - they kept running away)
George4Tacks
Level 15

This also sounds like you might have an NOL (Net Operating Loss). You need to carefully consider making an election to NOT carry the loss back, or maybe you do want to carry it back to prior years. 

Here is a little light reading to get you started. https://www.irs.gov/publications/p536

 


ex-AllStar