In order to sign up for ACA coverage you have to provide an estimate of income for the following year. During the sign up phase, the Healthcare.gov asked if I wished to contribute to a IRA account. I answered yes. However I had no earned income for 2020. TurboTax will not allow a IRA contribution without a penalty.
The Healthcare subsidy was calculated based on the income value after the IRA contribution.
The return is complete no there are no errors but I expect this retrn to be flagged by the IRS if it is filed.
How do I fix this?
there is nothing to fix. your allowable ACA premium tax credits are based on your modified household income. if you underestimated that when applying you'll now have to repay some or all of the excess PTC. the amount to repay will show up on form 8962 line 29 which carries to schedule 2 line 2.
As Mike said, the only purpose of that question was to estimate your income to determine how much "Advance" credit they would give you (column C of the 1095-A).
However, one feature of the new law that passed last week means that for the 2020 tax return you do NOT need to repay any of the Advance credits that you received. So if your tax return is showing a repayment, WAIT to file the return until TurboTax updates its software to reflect that portion of the new law.
I just applied the 3/26 update. It did not change the numbers on my return. All the numbers are the same including the penalty for APTC. Form 8962 did not change.
I thought the American Rescue Plan was supposed to addressed this and advanced credits were forgiven.
Am I incorrect here?