All Social Security Goes to Part B Medicare; Received SSA-1099 for 2020, but not 2021: How Do the Premiums Get Entered?

[bricxjo]

My wife receives a minimal Social Security benefit.  It is not enough to cover the Medicare Part B premium.  The problem for 2021 is that no SSA-1099 was received!  For 2020, it was simple: the SSA-1099 gave the yearly amount of her benefit and then showed that all of it was deducted for the Part B premium.  We could enter that into TurboTax on the Social Security Benefits Worksheet.  We paid the balance out-of-pocket, and added that to our itemized deductions.

But with no SSA-1099, there is no way to enter the info for the benefit going to the Part B premium.  I tried looking at the issue two different ways, and it made a $300 difference in the size of our refund:

If I pretend that we received an SSA-1099, and enter the total benefit amount and then deduct the same amount as a premium, then the refund we are otherwise entitled to is about $300 less than if I simply treat the amount paid for Part B Medicare as an additional Medical cost on Schedule A.  But if we do the latter, that seems wrong, because we would not be reporting the Social Security Income that paid for the premium.  Yet, if we report the income (minus the premium, so a net of zero), can we legally do so when we never received an SSA-1099?

On the other hand, if we don't enter the benefit amount,  then for itemization, can we deduct the full premium actually paid (my wife's full benefit plus out-of-pocket, or just the out-of-pocket part (even though her benefit amount is paying the bulk of the Part B premium)?

I think the $300 difference is because my wife's benefit amount (from the theoretical SSA-1099) is treated as income to her (even though offset by the premium paid from it).

Bottom line: how should her benefit be treated if there is no SSA-1099?  We've spoken with both Social Security and Medicare, and all they can say is that she didn't receive any money in 2021--but they do acknowledge that her benefit was and is still being used to pay for Part B, and that she received the 5.9% COLA for 2022.

Any thoughts on our dilemma?

[ThomasM125]

You can report the social security benefit if you received it, even if you didn't receive the form that reported it. The social security benefit is tax-free income in your case, evidently. The insurance premium is a legitimate medical expense itemized deduction even if it was deducted from the tax-free income. 

So, I think it would be ok to treat it the same way you did in previous years, provided you can verify that you are entering the correct numbers.

[bricxjo]

Thank you ThomasM125!

Just for clarification, we file a joint tax return, and I have substantial Social Security that is taxed and is substantially in excess of Medicare premiums.  My wife's Social Security goes into the "Spouse Column" on the Social Security Benefits Worksheet.  It is essentially added to mine, when the taxable amount is calculated--so it definitely is responsible for some tax--in fact, TurboTax computed $300 more than when I simply left it out (since TurboTax only asks you for the amount in Box 5 of all SSA-1099 forms, and we never got one for my wife).  But even though my wife never received an SSA-1099, it seemed to me that I needed to include it anyway, because otherwise the IRS would say that we were not including all the benefits paid to both of us--even though 100% of my wife's benefit went to paying her Part B Medicare.  The small balance remaining on her Part B, as well as IRMAA add-ons for Parts B and D, were paid out-of-pocket.  My Social Security benefits more than covered the premiums, including IRMAA, for me, and would have covered both of us, but Social Security and Medicare treat each person separately, and my Social Security couldn't be used to pay her shortfall.

So, it seemed to me that I needed to truthfully include my wife's benefit on our joint return, even though we never received an SSA-1099 for her.  But then I was also concerned that that could raise some sort of red flag, because no SSA-1099 was ever reported to the IRS and yet, by including the benefit (and Part B deduction), we are stating that the info is coming off of an SSA-1099 (per TurboTax wording).

Then it occurred to me that perhaps, if no actual money is paid to a person, and the entire benefit is used to fund the Medicare premium, with the balance being paid out-of-pocket, the tax laws changed to automatically treat the benefit as nontaxable.  But that didn't make sense, because why would the IRS forego receiving the extra tax that was definitely created by inclusion of the Social Security benefit?  And my conclusion now, based on your response, is that I that I better include the relevant benefit information, even if no SSA-1099 was ever created.

In other words, if we do nothing about my wife's Social Security benefit (because she never received an SSA-1099), our taxes are about $300 less than it is when we do include the proper info.  But I figure that if we did that, somewhere down the line someone at IRS will conclude that we failed to report Social Security income for my wife and that the $300 plus penalties are overdue!  So, looking at your advice in your reply to my original message, I think the most correct way to proceed is to pretend that my wife actually received an SSA-1099 and to report her benefit and its 100% use to pay Part B Medicare (based on the amount of her benefit and the amount of the premium).

BTW, I can verify the info, because at the end of 2020, Social Security sent a letter explaining my wife's new benefit for 2021 and the amounts owed for Medicare in excess of the benefit, which we subsequently paid out-of-pocket.  Sadly, no such letter was received at the end of last year--but when I telephoned Social Security, they confirmed that my wife's benefit went up 5.9% like everyone else's.  Still, I suspect that next year there will also be no SSA-1099 for her!  And we will use the same method for our 2022 taxes.

Thanks, again, for responding to my original query.  By asking the question and getting your reply, it clarified in my mind what I need to do.

[AnnetteB6 · Accepted solution]

After reading through your situation, you should report the Social Security income for your wife even though it was all spent for Medicare premiums.  

You are correct in your thinking that it is better to include the Social Security income and claim the deduction for the Medicare premiums even though it does increase your tax liability.  Doing so is filing a more accurate tax return.

@brixcjo

[bricxjo]

Thank you, AnnetteB6!

We are going to report the income under the SSA-1099 section, based on what the never-sent SSA-1099 should have said.

As an added note: For 2022, we asked Social Security for a letter explicitly laying out what the new 2022 benefit is.  We're awaiting its arrival!  That way we will have something in writing even if no SSA-1099 is ever sent.  Fortunately, no IRMAA applies for 2022.