Self Employeed with a 1095-A from a Marketplace plan

[hairinid]

I was self-employed for all of 2020, my wife doesn't work (we have no access to other coverage). We bought a health insurance plan through our state's website, and had coverage all year. On our 1095-A, we have about $9K in col A, about $15K in col B, and $0 in col C.

I did not enter the expenses in the business section in TurboTax Home and Business. When I am in Personal --> Deductions & Credits, and enter the information for our 1095-A, on the next page there is a checkbox "I'm self-employed and bought a Marketplace plan."

If I check this box, our refund drops by $9K. If it is unchecked, it goes up by $9K. 

This is a huge difference. Does this need to be checked? Does this behavior indicate something else is wrong? If I check it, the next page lets me pick my Schedule C, and I enter January to December for starting and ending months. 

As a test, I left it checked, and then changed Col A and B to 0 for a few months, the refund amount did not change at all, indicating that the premiums aren't being included at all in calculations.

Any suggestions? 

[BillM223 · Accepted solution]

This may be a case of watching the Refund Meter too closely.

Out of pocket health insurance premiums by someone who is self-employed appears on line 16 of Schedule 1 (1040). Is there anything there?

As you know, the way the Affordable Care Act works is that you estimate your annual income at the beginning of the year and tell the Marketplace.

The Marketplace estimates how much assistance you need to be able to afford the health insurance using formulas. Then the Marketplace sends that assistance to your health insurance company as partial or full payment of the health insurance premiums.

This assistance is called the Premium Tax Credit (PTC).

Then, at the end of the year when your final income is known, there is a reconciliation of the Premium Tax Credit that was paid for you with the amount that you should have received based on your actual income. This is done on form 8962.

On your tax return, if you were paid too much PTC, then this amount is added to your tax bill on line 2 of Schedule 2 (1040). If you were paid too little, then you receive additional PTC on line 8 on Schedule 3 (1040).

Please do us the favor of finishing the data entry of your return and then looking to see what the numbers are on these lines. Then please come back and ask us your questions if your explanation is needed.

[hairinid]

Bill,

Thank you for the quick reply. Your suggestion did seem to fix the issue, although I think it just worked around some bug. You told me to finish my other numbers. I had finished everything, except my income for my business that was not on a 1099's was just temporary estimate of about $11K. I calculated the final number (about $27K). Prior to doing this I had the issue where that checkbox would add or remove over $9K from my final Federal number. After putting in the proper number, that checkbox has no effect anymore. My refund has settled in the middle of the two extremes, which based on adding $16K in income, is about what I expect.

I didn't even restart the program before it started working. 

As a computer tech and sometimes programmer, this leads me to believe that either:

1: My income was at some threshold that caused it to either count the health payments or not, depending on that checkbox. I don't think so, since when it was happening, my AGI was about $31K, and now it's mid 40's.

2: There is some bug, either changing or maybe just revisiting the income sections fixed it.

I've since restarted the program and verified that checking and unchecking that checkbox have no effect. I will leave it checked since it seems like it should be. Thank you very much for your help!

[BillM223]

There is a peculiar interaction between the self-employed health insurance deduction, the net income from Schedule C, and contributions to Self-Employed SEP, SIMPLE, and Qualified Plans. That is, as one increases, the other may decrease, particularly if these amounts are close to your net business income.

Please see the 1040 Instructions (Schedule 1 instructions begin on page 84), especially for line 14, 15, and 16. Also see the Self-Employed Health Insurance Deduction Worksheet at the top of page 89. 

You need to step through this worksheet line by line because you will find that a large enough retirement contribution will wipe out the self-employed health insurance deduction. Read line 2 in the worksheet closely.

[hairinid]

Thank you Bill, this has cleared it up. I appreciate your quick and insightful answers.