How can you keep an NOL carryforward from denying ACA eligibility?

Forum|Forum|6 years ago
July 17, 2020
1 reply
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This is long. Problem is the short version. The rest is relevant detail to help you help me.

Problem To qualify for the Premium Tax Credit (PTC), Pub 974 makes clear on pp. 4 and 5 – you have to have modified AGI (in most cases, including mine, this equals AGI) that is at least 100% of the poverty line. That is something bigger than 0.

If I apply my NOL carryforward (CF), my AGI is a huge negative number. Mechanically, as I understand it – the NOL CF goes on Schedule 1 Line 8 “Other Income”, and from there to 1040 Line 7a. AGI is derived at Line 8b.

Background
1. Large Ponzi-scheme theft loss. Large NOL, carried back 3y, and CF to 20y.
2. Income has been a challenge - wife and I have been on ACA health insurance.
3. When applying for ACA in December every year, their software requires you to expect and document some minimum AGI. Short of that minimum (~$20k/y), they determine not eligible. We have $0 earned income. So to get enrolled, I estimate about their minimum, we get enrolled and coverage is issued.
4. During the year, I make sure to produce about the income I projected, through dividends, capital gains, IRA distributions, etc.

FYIs
1. Pub 974 and the 8962 instructions don’t mention – NOL, operating loss, carryforward, or carry forward.
2. Curiously, a negative AGI does not adversely affect the calculations on 8962 – the net of 8962 works out to be the same as if there was no NOL CF and our actual AGI was what we expected.
3. I suspect the spirit of the ACA law is that we qualify, and that the NOL CF rules are not intended to disqualify us.
4. Perhaps the answer lies here – 8962 instructions page 8.

You may qualify for the PTC if your household income is less than 100% of the federal poverty line and you meet all of the following requirements.

a. You or an individual in your tax family enrolled in a qualified health plan through a Marketplace.

b. The Marketplace estimated at the time of enrollment that your household income would be at least 100% but not more than 400% of the federal poverty line for your family size for 2019.

c. APTC was paid for the coverage for one or more months during 2019.

d. You otherwise qualify as an applicable taxpayer (except for the federal poverty line percentage).

But, in “a” - how can you legally enroll in the first place if you know your AGI will be 0 because of the NOL CF?

Yikes – the 8962 text that immediately follows what I pasted above – You do not meet the requirements under Estimated household income at least 100% of the federal poverty line if: ..... You, with intentional or reckless disregard for the facts, provided incorrect information to a Marketplace for the year of coverage.

AmeliesUncle

Level 15

There is nothing to do; you don't qualify for the Premium Tax Credit (but see my bottom paragraph about Medicaid).

Just to clarify ... you don't need income to get Marketplace insurance. You just need it to get the Advance Premium Tax Credit.

And yes, not only do you not qualify for the credit if you intentionally disregard the rules and lie about your income, the penalty can be $100,000 for intentionally putting false information on your Marketplace application.

Have you checked if you qualify for your State's Medicaid program? If you live in a State that has fully 'expanded' Medicaid, you would qualify for free Medicaid insurance.

https://www.kff.org/medicaid/issue-brief/status-of-state-medicaid-expansion-decisions-interactive-map/

MaxQEDAuthor

Level 2

Thank you very much for the reply. I'm quite confounded by what you say.

1. No, not in an expanded Medicaid state. Assets knock us out, and the healthcare.gov site (ACA) says so.

2. Yes, understood -- can get a Marketplace plan w/out the USG chipping in via APTC.
3. To be clear, when applying for Marketplace coverage and the APTC, I am truthfully answering questions on expected income. I'm not misrepresenting anything, much less doing so recklessly. To my recollection, there are no questions about what I expect our AGI to be or if there is an NOL CF. Rather the healthcare.gov site asks about household income, or gross income. I've looked at an ACA site for definition -- things like cap gains and dividends are counted, and I don't see anything about NOL CF counting as (negative) income.

4. Do you believe that the spirit of the NOL rules are to disqualify people in our situation from APTC coverage? Or that the spirit of the ACA rules are to disqualify people with an NOL CF? If either, what supports that belief?

5. This past year, our itemized deductions slightly exceeded our total taxable income (w/out considering the NOL CF). What is the advisability of not using our NOL CF in such a situation? If we didn't use it, how if at all would that effect our wanting to use it in a future year still within the 20y CF window?