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bonjelo
Level 1

Self-Employed Health Insurance Deduction Worksheet - 2020

At the bottom of the Self-Employed Health Insurance Deduction Worksheet there is a comment

 

"A self-employed health insurance adjustment of $XXXX.XX from premiums paid through an
exchange is included as an adjustment to income but does not appear on these worksheets".

 

The $XXXX.XX is added to the amount on line 10 of the worksheet and transferred to Form 1040 Schedule 1 line 16.  Whats going on here with the "adjustment".  Is this correct?

26 Replies
DaveF1006
Expert Alumni

Self-Employed Health Insurance Deduction Worksheet - 2020

A  self-employed health insurance adjustment is listed in Line 16 of Schedule 1. What is meant by an adjustment is that this will reduce taxable income in your return so that you will have less tax liability. This is normal as this how your self-employed premium is handled on a federal tax return.

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arewedoneyet
Level 1

Self-Employed Health Insurance Deduction Worksheet - 2020

I'm seeing the same situation, and I'm concerned there is a problem. I understand that I'm entitled to the self-employed health insurance deduction. The problem is that TurboTax is making an "adjustment" over and above the amount the premium amount that I paid, and TurboTax doesn't explain how it arrived at the new number.

 

As with the person who started this thread, TurboTax generated a "Self-Employed Health and Long-term Care Insurance Deduction Worksheet" for me. Line 5 of the worksheet shows $500 (to use a round number) for the deduction, saying I should enter $500 for the self-employed heath insurance deduction on Form 1040 or Schedule 1. Great! I agree! That is the amount I paid for the premium and is the amount I can enter on schedule 1.

BUT the bottom of the worksheet says: "A self-employed health insurance adjustment of $<number> from premiums paid through an exchange is included as an adjustment to income but does not appear on these worksheets." 

 

In other words, the ACTUAL number TurboTax places on Schedule 1 and line 10a of the 1040 is $900 (the sum of $500 plus the $400 amount listed at the bottom of the worksheet). I determined after a lot of sleuthing that the number at the bottom of the worksheet (say, $400) is from column A of Form 1095A. I don't see any justification for this extra adjustment to income. I don't qualify for the premium tax credit or related credits. 

 

I have spent hours on the phone with TurboTax support, have spoken with my accountant, and have read numerous IRS publications. No one can explain what TurboTax is doing. It seems that Turbox tax is incorrectly calculating the amount of the self-employed health insurance deduction it puts on line 22 of Schedule 1 and on line 10a (adjustments to income) of form 1040.

 

In my particular situation, I'm the single employee of an LLC that is taxed as an S-Corp. I'm entitled to claim the self-employed health insurance deduction although I'm not a schedule C filer. I believe TurboxTax should be ignoring the information in Form 1095A and should only pay attention to the health insurance premium amount included in box 1 of the employee's W2.

sailor4
Returning Member

Self-Employed Health Insurance Deduction Worksheet - 2020

Arewedoneyet,

 

I think TT is trying to do an iterative calculation to deal with the recursive issue resulting from interplay between premium tax credit (even if that is zero) and self-employed health insurance deduction and AGI.

 

1. In the memo at the bottom of "Self-Employed Health and Long-term Care Insurance Deduction Worksheet" they are showing the result of their (incorrect in my case) iterative solution PLUS the sum in column A of Form 1095. 

 

2. AND... Their iterative calculation is incorrect in fringe cases. See here: When TurboTax and H&R Block Give Self-Employed Wrong ACA Subsidy (thefinancebuff.com) and here: Self-Employed ACA Subsidy Calculator - The Finance Buff.

 

Your solution ("I believe TurboxTax should be ignoring the information in Form 1095A and should only pay attention to the health insurance premium amount included in box 1 of the employee's W2.") will not solve the problem for my case, but an ability to override line 16 with the result derived from Financial Buff calculator WILL. Unfortunately, I can't do that. 

 

Hope my use case might help you, or someone else.

sailor4
Returning Member

Self-Employed Health Insurance Deduction Worksheet - 2020

More info in case anyone at TT is reading these things. I closed and re-opened TT. Now I am getting this result:

 

Total premiums paid from 1095-A line 33 column A

PLUS

The result of the calculation shown in the memo at the bottom of "Self-Employed Health and Long-term Care Insurance Deduction Worksheet"

POPULATES Line 16 of 1040

 

Please help

 

 

sailor4
Returning Member

Self-Employed Health Insurance Deduction Worksheet - 2020

@DaveF1006 

 

I am using desktop Windows version

 

K-1 is linked to 1095-A

K-1 shows medicare wages over health insurance premiums paid, but the box underneath is empty as instructed because the health insurance premiums are recorded in 1095-A

 

I believe that the calculated memo at the bottom of "Self-Employed Health and Long-term Care Insurance Deduction Worksheet" is doing an iterative calculation to resolve the recursive issue between premium tax credit and self-employed health insurance deduction and AGI. That's good.

 

However, the sum appearing 1040 Line 16 is the sum of 1095-A line 30, column A and the sum calculated in the the calculated memo at the bottom of "Self-Employed Health and Long-term Care Insurance Deduction Worksheet" 

 

This is incorrect. The 1040 line 16 should be LESS than 1095-A Line 30 Column A, not more. 

 

The 1040 Line 16 should not be greater than the total in 1095-A Line 30 Column A, and should be reduced by something close to the PTC.

 

This is a bug. I am dead in the water. And I cannot be the only one.  Hope you can help.

 

 

libbyurner
New Member

Self-Employed Health Insurance Deduction Worksheet - 2020

I'm having the exact same issue.  What TurboTax seems to be doing is adding what I ACTUALLY PAID for self-employed Health Insurance to what my total premium cost was (some of which was paid by subsidy, which I ended up not qualifying for and need to pay back.)  I don't seem to be able to override this anywhere.

Help?

arewedoneyet
Level 1

Self-Employed Health Insurance Deduction Worksheet - 2020

I'm doing my return by hand because I see no way out of this problem.  I need to manually adjust Schedule 1 because no one at Turbo Tax can override the incorrect calculation for the self-employed health insurance deduction that TT makes on line 16 of schedule 1. I've spent hours on the phone with support, to no avail. This is my first experience with Turbo Tax. I won't be back.

BillM223
Expert Alumni

Self-Employed Health Insurance Deduction Worksheet - 2020

(In a normal year) The Self-employed Health Insurance Deduction as shown on line 16 for a taxpayer who has Marketplace insurance is generally the sum of the amount of after-tax dollars that you paid in health insurance premiums as shown on the 1095-A PLUS any excess Premium Tax Credit (PTC) that you have to repay (more on that later).

 

Then the amount that is carried to line 16 has to be potentially limited; there is a worksheet in the 1040 Instructions for calculating it - see page 89).

 

For example, what typically catches taxpayers is that the line 16 entry can't be larger than your net profit minus the deductions on line 14 and 15 (the deductible part of the SE tax and the contributions to your Self-Employed SEP, SIMPLE, and Qualified Plans). So increasing your retirement contributions can actually decrease your self-employed health insurance deduction. So you need to complete the worksheet for line 16 to see how TurboTax actually calculates the Self-employed Health Insurance Deduction.

 

***

 

Now, having said all this, you guys know that the American Rescue Plan now states that no one has to pay back excess Premium Tax Credit. Unfortunately, that's ALL the law says.

 

What about the excess PTC that is carried to line 16? Is it still deductible even though you no longer have to repay it?

 

The IRS has yet to issue "guidance" on this, which means that we simply don't know how to implement this correctly. As a result, the only thing we know is that this calculation may change.

 

TurboTax will implement and test the changes as soon as the IRS releases its guidance. Until then, we ask for  patience.

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rebsrogers
Returning Member

Self-Employed Health Insurance Deduction Worksheet - 2020

I hav the exact same issue with turbo tax inventing not using the worksheet but adding what appears to be some random number for the self-employed insurance premium deduction, that is $3k less than what I paid in premiums after the premium credit. Have also spent hours on the phone with turbotax and they even sent me the desktop version for free telling me I could manually put in the correct number (but you can't). I searched online and it seems the only work around is to use H&R block!

rebsrogers
Returning Member

Self-Employed Health Insurance Deduction Worksheet - 2020

It seems there is a glitch in the turbo tax software that is causing this issue and the only fix is at a software level. See https://thefinancebuff.com/when-tax-software-gives-self-employed-wrong-aca-premium-subsidy.html

Can turbo tax provide a way around this? - when the amount paid for health insurance premiums after applying the premium credit is not the same amount as turbo tax enters for the self-employed health insurance deduction - and turbo tax generates this additional text about a different amount being applied from premiums paid through an exchange. Is there any way for the user to enter actually edit the form and put in the correct amount?

 

BillM223
Expert Alumni

Self-Employed Health Insurance Deduction Worksheet - 2020

@rebsrogers

 

Until you have done the worksheet that I described above, I cannot be sure that your situation is due to the iterative situation as described in the links or due to your self-employed health insurance deduction being reduced by the SE tax deduction and the SIMPLE/SEP/qualified plan deduction. Most taxpayers are unaware of this limitation so I have to point it out.

 

Having said that, you indicated the desire to "edit the form".

 

In TurboTax Home & Business (the CD/download version), the self-employed health insurance deduction appears on line 16 of Schedule 1 (1040).

 

As you note, you cannot override it there. But in practice, if you follow a number to its origin, you should be able to modify the number there.

 

In this case, however, because of that line quoted above - "A self-employed health insurance adjustment of $XXXX.XX from premiums paid through an exchange is included as an adjustment to income but does not appear on these worksheets", we see that there is no worksheet showing the actual calculation (where we would normally do the override). The "$XXXX.XX" is $5,169 in my test

 

However, there may be a way to modify the line 16 entry, if you want to make it larger (it doesn't work to make it smaller).

 

Write down the line 16 amount. Then go into step-by-step mode and go back to expenses for the Business. Where it asks for health insurance expenses, go into that section. Yes, do this even though the numbers are actually coming from the 1095-A calculation. 

 

When I entered $2,000 on my test for the Health Insurance Premiums in the Business interview, it increased my $5,169 line 16 amount to $6,991. 

 

This new number is the result of the hidden calculation being reduced from $5,169 to $4,991 and then having the $2,000 added to it. This does not affect the net income on Schedule C.

 

Thus, if you know the number you want, and the number you want on line 16 is larger than what is there now, you can increase the line 16 amount in a somewhat unpredictable way by adding health insurance premiums in the regular Business interview. A little iteration and you should have something close to what you want.

 

 

Now I have to create a test case showing that the initial calculation is wrong (which may not be the case)...unless you have a case that fails that you would like to share.

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S_H_B
Level 1

Self-Employed Health Insurance Deduction Worksheet - 2020

After the last update, Turbotax continued to deduct my excess PTC even though it also said I no longer have to repay it. Then my return was rejected with a note saying that "Updates to the Self-Employed Health and Long-Term Care Insurance Deduction Worksheet are estimated to be completed by 4/30/21." Is this the issue that this next update will be addressing?

SMB1959
Level 1

Self-Employed Health Insurance Deduction Worksheet - 2020

I had the same error message . I get the impression that we will just have to wait until they change the form.  Hopefully, it will happen before the 4/30/2021 date .  I can't seem to override the number in question ,  To me it's an easy fix but TT has to wait to get approval from the government

Todd808
New Member

Self-Employed Health Insurance Deduction Worksheet - 2020

Since the IRS has failed to provide guidance, Turbotax should just make an assumption and roll with it.  I live in Hawaii and my taxes are due on 4/20/21.  

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