Overriding AGI in Form 8962 to Figure Premium Tax Credit when self-employed (using Premier)

[LisaNMex]

TurboTax is not providing the best numbers for a PTC under ACA. I am self-employed and able to deduct premiums. I followed IRS "iterative" instructions to come up with best numbers for credit and deduction. I now need to override AGI on Form 8962 to reflect the numbers. I followed TT instructions for override, but it doesn't work. Nothing happens when I click override or use shortcut keys. The credit difference is about $150 and the deduction difference is almost $900. So it's a substantial amount of money. Credit and deduction should add up to total premiums. Unfortunately TT is not providing numbers that add up. I don't want to do tax forms by hand but may have to. Any advice? Working in Windows. Thank you.

[AmeliesUncle]

You are correct, the program does not let you override Form 8962.

The Iterative Calculation sometimes does not work out cleanly, and there is no clear directly for what to do with the 'odd' amount left over, so TurboTax just puts it on Schedule A (rather than trying to work it into the SEHI deduction and PTC credit).

First thing to consider is if you are interested in contributing to a Traditional IRA.  Sometimes even a small contribution can alter the Iterative Calculation so it works out cleanly.

The other potential option is to go to your business section and look for the area where it asks you to enter non-Marketplace health insurance.   Sometimes entering small amounts there can effectively create your own Iterative Calculation.  Enter a small amount, see what it does to the SEHI deduction and the PTC, and then alter the amount on health insurance spot again to make closer adjustments.  It doesn't always work, but it often will get you much closer.

[dmertz · Accepted solution]

In the ACA section, unmark the box where you previously indicated "I'm self-employed and bought a Marketplace plan."  Then enter your allowable self-employed health insurance deduction in the business section.  Make sure that the amount of that deduction plus the resulting amount of your PTC does not exceed the premiums paid.

[LisaNMex]

This seems to be working. The numbers are correct now -- might be off by $1 -- I'll correct that. My only concern is that the guidance explicitly says not to enter the health insurance deduction as a business expense. Any thoughts on this? I appreciate the help.

[dmertz · Accepted solution]

The TurboTax guidance says that to make sure that you don't claim a combined total of deduction and PTC that is greater than premiums paid.  Marking the box causes TurboTax to do its iterative calculation which ensures that.  This prevents undesirable feedback from the IRS (and claims of TurboTax error that could cost Intuit money) but might not give the taxpayer the best taxable result.

Even if TurboTax implemented a check to make sure that the sum of the deduction and the PTC did not exceed premiums, TurboTax would not be able to tell you how to adjust the deduction to correct that and would just leave the user hanging with a tax return that could not be filed.

[LisaNMex · Accepted solution]

Thanks for the solution and explanation. I'm glad to resolve this.

For anyone reading this, I recommend this calculator to come up with best "iterative" calculation for PTC credit and health insurance deduction. I followed IRS iterative calculation instructions (very tedious and will make a person insane) and my result was within $6 of the calculator. Save yourself some time....

https://thefinancebuff.com/self-employed-aca-subsidy-calculator

For more explanation of the issue:

https://thefinancebuff.com/when-tax-software-gives-self-employed-wrong-aca-premium-subsidy.html

Sounds as if this isn't a problem for everyone who is self-employed and buys Marketplace insurance. My theory is that it is a problem for us because our AGI is right around 400% of poverty level--it is just below at 396% when credit/deduction is to our best advantage. TT put us in the 401% group.

[LisaNMex]

Thank you for the ideas. I used another proposed solution so didn't need to try these. Problem is resolved.

[dmertz · Accepted solution]

"My theory is that it is a problem for us because our AGI is right around 400% of poverty level--it is just below at 396% when credit/deduction is to our best advantage."

You are correct.  The normal iterative process fails to converge when it flips back and forth over the threshold, so TurboTax substitutes a solution provided in IRA Pub 974 that is guaranteed to be legal but is usually sub-optimal.

[AmeliesUncle]

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@dmertz wrote:

when it flips back and forth over the threshold

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Maybe it changed in recent years, but the last time I checked it doesn't flip flop over the threshold.  Once the Iterative process goes over 400%, TurboTax incorrectly stops the Iterative process and uses that number.  But perhaps it has changed in recent years.