Form 7206 Line 1 is Incorrect

[cowdogman]

I'm self employed and buy health insurance on the Exchange and I'm entitled to ACA credits.  This means that TT allocates my premiums between SEHID and ACA credits.

TT seems to be doing this correctly, but Line 1 in 7206 doesn't reflect the allocated Exchange premiums from 1095-A.  Instead there is a note on the bottom of 7206 reading:

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

TT:  Does that work?  Has the IRS accepted this way of reflecting the premiums (even tho it makes various amounts in 7206 incorrect)?  Could you at least change "these worksheets" to "this form".

[CatinaT1]

We know some of our customers have had issues with Form 7206. Please use this FAQ to sign up for notifications.

[submicron]

Line 1 is not supposed to include amounts already included on Form 1095-A.  This line should include premiums paid in excess of the amount on Form 1095-A, if any.  In my case, the premiums I actually paid were $143 more than what was shown on Form 1095-A.  This is because the plan I picked contained some coverage above and beyond what the ACA mandated. The problem I am having is that TT is adding this $143 back in to the MAGI calculation on Form 8582 (Passive Activity Loss Limitation), which it should not. TT refuses to admit the error.

[CatinaT1]

 We would like to take a deeper dive into this message to assist you.  In order to do this, it would be helpful to have a TurboTax ".tax2023" file that is experiencing this issue. You can send us a “diagnostic” file that has your “numbers” but not your personal information. If you would like to do this, here are the instructions: Go to the black panel on the left side of your program and select Tax Tools.

1. Then select Tools below Tax Tools.
2. A window will pop up which says Tools Center.
3. On this screen, select Share my file with Agent.
4. You will see a message explaining what the diagnostic copy is. Click okay through this screen and then you will get a Token number.
5. Reply to this thread with your Token number. This will allow us to open a copy of your return without seeing any personal information.

Here are the instructions if you are using TurboTax CD/Download:
 

1. Click on Online in the top left menu of TurboTax CD/Download for Windows
2. Select 'Send Tax File to Agent'
3. Write down or send an image of your token number then place in this issue.
4. We can then review your exact scenario for a solution.
5. Please also tell us any states included in the return.

We will then be able to see exactly what you are seeing and we can determine what exactly is going on in your return and provide you with a resolution.

[submicron]

Good afternoon,

The token number is 1216333.  I am running the desktop Windows 10 version of TT Home and Business with the latest update as of today (3/23/24). Here is a summary of the problem (which did not exist in TT 2022):

I am self-employed by an S-Corp.  The total health insurance payments for the year were $12,346.  Enrollment premiums reported on Form 1095-A were $12,203.  The difference of $143 was entered on page 4 of the K-1 S Additional Information, under Outside Expenses, Self-Employed Health Insurance for more-than-2% S corporation shareholders, Line 1: Health insurance premiums paid or reimbursed by the S corporation that were not reported on Form 1095-A.  This $143 was correctly carried over into (the new for 2023) Form 7206 by TT and the amount on Line 14 of Form 7206 is correct.  A PTC of $6,105 is calculated on Form 8962, leaving a Self-Employed Health Insurance deduction on Line 17 of Schedule 1 of $6,242.

The problem is found on the MAGI worksheet for Form 8582, the Adjustment on the Self-employed health insurance line should be $6,242, which is the deduction shown on Line 17 of Schedule 1.  Instead, it shows $6,099 (which is $143 less than it should be).  When I right-click on the $6,099 and request "Data Source" a box pops-up stating "Schedule 1 SE Health $6,242"!!  It seems pretty clear that TT is erroneously subtracting out the $143 from Form 7206.  This incorrect MAGI is then used on Line 6 of Form 8582 and results in a reduction of the Passive Loss I am allowed to take.

Furthermore, the instructions published by the IRS for line 6 of Form 8582 make no mention of adding back any type of Self-employed health insurance deduction into the MAGI calculation.

I look forward to your reply and hope that this problem is resolved by TT soon.

Best regards,
Rick

[AnnetteB6]

Thank you for providing your token number.  After taking a closer look at the situation, information was submitted to the development team for resolution.  

Please take a look at the following TurboTax help article and use the link to register your email address for further updates.

Why is my MAGI on Form 8582 not including my full self-employment health deduction?

@submicron 
 

[submicron]

Thanks @AnnetteB6 

The extremely frustrating part is that I called in to TT on 2/23 to report this problem and, after over 1.5 hrs on the phone, including a screen share session, was told that TT was correct.  I called again on 3/6 and the phone rep agreed with me, and then had me upload a diagnostic copy of my return.  Upon receiving it, she escalated the issue to the appropriate department, and once again, TT refused to admit that there was an error.