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Self employed health insurance deduction

dasnowball
Level 3

If a self-employed taxpayer has to repay all of the premium tax credit received in 2020, can that amount be added to the amount actually paid for premiums during the year to determine deduction for the SE health insurance on Schedule 1?

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TaxGuyBill
Level 15

Does the 8962 show 400%, or 401%?

As Rick says, your first step is to see if you can do ANYTHING to get income below 400%.  Between IRAs, SEPs and the other things Rick mentioned, is that possible?

Because the program is giving weird SEHI results, it seems very likely that it is possible without a huge amount of contributions (if the taxpayer can afford to contribute to a IRA or SEP).  That is most likely your best option, to avoid the full repayment.

 

If absolutely nothing can be done to reduce MAGI below 400% to avoid the full repayment (which seems unlikely), then just don't 'link' the 8962 to Schedule C on the 1095-A worksheet.  Then enter the actual full amount paid (including the repayment) on the spot on Schedule C for SEHI payments.

 

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16 Replies 16
Just-Lisa-Now-
Level 15
Level 15

If you use the Link to Sch C at the bottom of the 1095A, the program should do all that for you. 

Is that not happening?


♪♫•*¨*•.¸¸♥Lisa♥¸¸.•*¨*•♫♪
dasnowball
Level 3

It calculates a deduction on Schedule 1 for less than the amount the TP actually paid and then increases tax by the entire amount of the premium tax credit.  I think the deduction on Schedule 1 should be the amount the TP actually paid and possibly the premium tax credit repayment.

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Just-Lisa-Now-
Level 15
Level 15

Its limited to the net profit on Sch C (but just in case that isn't what's happening), lets page the resident ACA guru and see what his take is

@TaxGuyBill 


♪♫•*¨*•.¸¸♥Lisa♥¸¸.•*¨*•♫♪
dasnowball
Level 3

The net profit is considerably higher.  How do we page resident ACA guru?  Thanks

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rbynaker
Level 11

I can fill in until Bill arrives. 🙂

Is your AGI near 400% of the Federal Poverty Level (FPL)?

There is a "zone" of income where the PTC/SEHI results in unsolvable math.  I don't know about this year specifically but in prior years that would result in a reduced SEHI deduction and the software seemingly randomly coughing up medical expenses on Schedule A.

Try plugging in a few thousand dollars of IRA contribution and see if your results line up with your expectations.  I have seen cases where the taxpayer can pay $6K of APTC repayment or they can put $3K into an IRA instead.

Rick

dasnowball
Level 3

AGI is at 400% level and I already have an IRA but I am still concerned about the amount of SEHI.  It is too low and if the TP has to pay back the entire premium advance shouldn't that count as SEHI?

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rbynaker
Level 11

AGI is at 400% level and I already have an IRA but I am still concerned about the amount of SEHI.  It is too low and if the TP has to pay back the entire premium advance shouldn't that count as SEHI?

Yes, that is considered SEHI.  Problem is that when you deduct that as SEHI it drops the AGI below 400% of the FPL.  Then the math on the 8962 changes and the taxpayer does not have to repay as much (or in some cases any) APTC.  So then you go back and reduce the SEHI deduction accordingly.  But that causes the AGI to go over 400% FPL and then all of the APTC has to be repaid.  Rinse, repeat, ad infinitum.

What about setting up a SEP-IRA?  Basically the best result is if you can beg, steal or borrow enough tax deductions to get AGI below 400% FPL.  If the insurance is HDHP, what about HSA contributions?  If there are capital gains, what about reinvesting in QOFs?  Did you already max out asset deductions with Bonus/179/de minimis election?  There are plenty of legal ways to reduce income.  If you've exhausted all of them already then you're stuck with the APTC repayment.

TaxGuyBill
Level 15

Does the 8962 show 400%, or 401%?

As Rick says, your first step is to see if you can do ANYTHING to get income below 400%.  Between IRAs, SEPs and the other things Rick mentioned, is that possible?

Because the program is giving weird SEHI results, it seems very likely that it is possible without a huge amount of contributions (if the taxpayer can afford to contribute to a IRA or SEP).  That is most likely your best option, to avoid the full repayment.

 

If absolutely nothing can be done to reduce MAGI below 400% to avoid the full repayment (which seems unlikely), then just don't 'link' the 8962 to Schedule C on the 1095-A worksheet.  Then enter the actual full amount paid (including the repayment) on the spot on Schedule C for SEHI payments.

 

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dasnowball
Level 3

Thank you that should work.

I have another problem with the PTC - On Part II of 8962, #10, I have checked Yes and want to enter annual totals on line 11 but cannot get it to activate or even override.  Any suggestions for that?

 

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rbynaker
Level 11

I have another problem with the PTC - On Part II of 8962, #10, I have checked Yes and want to enter annual totals on line 11 but cannot get it to activate or even override.  Any suggestions for that?

 


It was broken the first year.  Then we got them to fix it.  Then the next year it was broken again and they refused to fix it.  As far as I know it's been broken ever since.  Does $0.50 x 12 still = $12?

 

TaxGuyBill
Level 15

@dasnowball wrote:

I have another problem with the PTC - On Part II of 8962, #10, I have checked Yes and want to enter annual totals on line 11 but cannot get it to activate or even override.  Any suggestions for that?


 

Are all 12 months of the 1095-A exactly the same?  If not, Line 11 of the 8962 is not used.  That is only used if all 12 months are the same.

As Rick mentioned, Intuit is bad at math, and when Lines 12-23 are used it doesn't necessarily add up correctly.  But if I remember correctly, you can override the total (on the 1095-A?) and it will work.

dasnowball
Level 3

I can't seem to override the totals, but thanks

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dasnowball
Level 3

Thanks, that works!

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thcpa
Level 1

Rick,

 

Do you know how to force the seemingly random medical expenses that lacerte coughed up on schedule A and force it to show as a deduction on Schedule 1?  Our client does not itemize and we can't seem to figure it out. thanks. 

rbynaker
Level 11

Sorry, I don't know Lacerte.  The original post was in the ProSeries forum.

Forcing it is probably not the answer though, the best bet is usually to have the taxpayer (or spouse) make a deductible retirement or HSA contribution.  The issue likely isn't that Lacerte can't figure out the math, the issue is that you have a math problem with no solution.  Forcing it would be like telling the software that 2 - 2 = 1.

dasnowball
Level 3

Thanks.  I think I have this problem figured out.

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