Market Place Insurance with Premium Tax Credit Repayment Issues

[bulldawj]

My wife had Market Place Insurance through June of 2020 but dropped it because she was able to get on Medicare with an Advantage plan starting in July of 2020.   Because our income from January through June 2020 was projected to be less than $68,960 (4 x poverty level), we took advantage of the Premium tax credit.   But starting in July of 2020 (after we dropped Market Place insurance), our income jumped because of Social Security, Pensions, and Annuities, etc. and we are now projecting above $68,960 for the year.   Is there any relief from paying back the Premium Tax Credit since our projected income was below the threshold of $68,960 when we were using the Market Place Insurance?   

[MaryK4 · Accepted solution]

Good News-

Under the American Rescue Plan Act (H.R. 1319), excess premium subsidies for 2020 do not have to be repaid to the Internal Revenue Service.

[bulldawj]

When will Turbo Tax update their software to reflect the American Rescue Plan Act (H.R. 1319).  I surely don't want to have to come up with the huge re-payment which would be a huge problem.  Should I just exclude the premiums tax credit data from my tax returns?

[BillM223]

We are aware of the change in the law.

However, TurboTax (like other software vendors) has to wait for guidance from the IRS on how to deal with all the items that are impacted by this change in the law.

For example, taxpayers who have to repay excess Premium Tax Credit are normally allowed to apply this amount to the Self-employment health insurance deduction on Schedule 1 (1040). Will that still be true when the IRS releases its guidance? TurboTax does this transfer automatically, so we need to know if that will change.

And the values of the Self-employed health insurance deduction and the Self-employed deduction for SIMPLE, SEP, and other retirement plans have a peculiar interaction such that an increase in one may decrease the other.

And there are other situations in which eliminating the PTC repayment will have unpredictable results.

So TurboTax is not doing nothing, but is waiting and working with the IRS on the right treatment of the repayment of excess PTC.

My thought is that you don't want to alter the 1095-A data on your return just to file it, for fear that the IRS will reject your return after the fact (say 3 weeks later, like they do with missing form 8962s) because your form 8962 data doesn't match the copy of the 1095-A that the IRS already has.

I understand that you may want to file, but you might just give the IRS a week or two or three to get a handle on this.

[bulldawj]

OK, Thanks.  I will just wait and see what happens.  I have to problems waiting to file.