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Reply to Question on Subsidy/tax Credit Payback at Tax Time     
Old 08-05-2017, 09:27 AM   #1
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Question on Subsidy/tax Credit Payback at Tax Time Question on Subsidy/tax Credit Payback at Tax Time
Hypothetical situation- A client lost their job and employer based health insurance, and goes on an individual medical plan OFF-exchange because she believes she will get a new job soon and doesn't want to mess with the subsidy/tax credit potential issues. The rest of the year (2016) comes and goes, and low and behold it's Open Enrollment and she's still unemployed. She then decides to go on O'Care, for January 2017 and gets a big subsidy/tax credit because she's projecting her income to be approx $15,000/year (based on remaining unemployment compensation payments and new part-time work).

Fast forward to August 2017, and her part-time work is actually forecasting to place her yearly income under $10,000 thus making her overall annual income at Medicaid level, but she decides to stay on O'care because she doesn't want to report her lower income and get moved to Medicaid.

Crystal Ball time: Please tell me what will happen when she files her 2017 taxes in the spring of next year? Will she have to pay all her subsidy back because her income was too low and she should have gone on Medicaid? OR, let's say she reports the income change and gets switched to Medicaid now. Will she still have to repay the subsidy/tax credit that has been given to her up to this point? OR, will she not have to worry about paying anything back?
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Old 08-05-2017, 09:33 AM   #2
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STIBROKER on Question on Subsidy/tax Credit Payback at Tax Time
 
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Question on Subsidy/tax Credit Payback at Tax Time Re: Question on Subsidy/tax Credit Payback at Tax Time
Well first off she can kiss a tax refund goodby.......

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Old 08-05-2017, 12:51 PM   #3
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Question on Subsidy/tax Credit Payback at Tax Time Re: Question on Subsidy/tax Credit Payback at Tax Time
She doesn't have to worry. I had a few tax clients in this boat last year. It only becomes an issue if the Income is HIGHER than reported.
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Old 08-05-2017, 01:07 PM   #4
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Question on Subsidy/tax Credit Payback at Tax Time
There was an irs ruling passed that covers this situation. I will let you Google it. It states zero clawback if actual income ends up Medicaid eligible. But you should report it to market place now by law, and wouldn't advise she do it again in 18' if income projects below 138%

Oops the first time. Fraud the second time.
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Old 08-05-2017, 09:04 PM   #5
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Question on Subsidy/tax Credit Payback at Tax Time Re: Question on Subsidy/tax Credit Payback at Tax Time
Originally Posted by STIBROKER View Post
Well first off she can kiss a tax refund goodby.......
How so?????????????????
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Old 08-07-2017, 12:21 PM   #6
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Question on Subsidy/tax Credit Payback at Tax Time Re: Question on Subsidy/tax Credit Payback at Tax Time
In this situation, I STRONGLY encourage them to get whatever hours they need to have more than $12,000 in income. I tell them I can't guarantee that they won't have to pay back the entire subsidy (IRS rulings can and do change). So far, not a single one of mine in this situation has made less than FPL. Or if they have, they haven't told me.
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Old 08-09-2017, 10:56 AM   #7
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Question on Subsidy/tax Credit Payback at Tax Time Re: Question on Subsidy/tax Credit Payback at Tax Time WiscBroker is the thread starter for: Question on Subsidy/tax Credit Payback at Tax Time

Originally Posted by TN_agent View Post
In this situation, I STRONGLY encourage them to get whatever hours they need to have more than $12,000 in income. I tell them I can't guarantee that they won't have to pay back the entire subsidy (IRS rulings can and do change). So far, not a single one of mine in this situation has made less than FPL. Or if they have, they haven't told me.
Excellent advice, thanks.

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Originally Posted by Neil813 View Post
She doesn't have to worry. I had a few tax clients in this boat last year. It only becomes an issue if the Income is HIGHER than reported.
That's nice. Thanks

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Originally Posted by Yagents View Post
There was an irs ruling passed that covers this situation. I will let you Google it. It states zero clawback if actual income ends up Medicaid eligible. But you should report it to market place now by law, and wouldn't advise she do it again in 18' if income projects below 138%

Oops the first time. Fraud the second time.
That's very nice., thank you.
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Old 08-09-2017, 04:32 PM   #8
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Question on Subsidy/tax Credit Payback at Tax Time Re: Question on Subsidy/tax Credit Payback at Tax Time
You should read the IRS instructions for filling out the 8962.

Seems the law mentions a clawback of up to $300 per person or $600 per family if under 100% FPL.

However the IRS form basically says to treat you as if you made 100%.
https://www.irs.gov/pub/irs-pdf/i8962.pdf
Page 7, under "Line 6"

I tell clients I am not a tax person and they need to take this form to their tax prep person and ask those questions.

I personally haven't had an issue for people who make under what 100% when their estimate was above 100%.

The BIG issue is when they make over 400%. That's painful. Even more so when they are older and make $1 over 400%...that's sad.

Had one guy get an inheritance from an aunt (40k). It cost him $13k in paying back his subsidy. He wasn't very happy.

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Old 08-10-2017, 07:54 AM   #9
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Question on Subsidy/tax Credit Payback at Tax Time Re: Question on Subsidy/tax Credit Payback at Tax Time
Originally Posted by russelltw View Post

Seems the law mentions a clawback of up to $300 per person or $600 per family if under 100% FPL.
Trump's first executive order when he took office was to direct agencies below him not to enforce any ACA rules that pose any burden to taxpayers/states/businesses.

There's a very real possibility that no clawbacks, penalties, fees, etc. are assessed for the 2017 tax year.

Not saying we should rely on that or advise clients to fudge their numbers, but just keep in mind that it all might not matter.
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Old 08-10-2017, 08:54 AM   #10
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Question on Subsidy/tax Credit Payback at Tax Time Re: Question on Subsidy/tax Credit Payback at Tax Time
@russell: Since when does "inheritance" count as taxable income to the recipient? Perhaps if he received an IRA then withdrew from it but simply receiving inheritance isn't a taxable event.

Did someone fill out the tax return incorrectly?
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