Heath insurance through market place Healthcare.gov

[Sam Khan]

I have two kids and they work part time to make some money. They have submitted their tax file but they are depended on me because I am claiming them as a depended. Do I need to include their income in my tax return? I am already paying back to market place about $11K even though my income is not over $100K. Why I have to pay too much money back to Healthcare? Is there any limit? 

[RobertG]

If you are claiming them as dependents, and they are filing their own returns, you do not need to include their income on your return.

The only money you should be paying with your return is for repayment of advance premium tax credit.

There are repayment limitations based on your income, TurboTax will compute them for you.

[Sam Khan]

What is advance premium tax credit? Is there a way to reduce my money that I need to pay to IRS? I am paying quite a bit money about $10K to IRS due to market place health insurance

[BillM223]

The way that the Affordable Care Act (Obamacare) works is that to enable to "afford" health insurance, the government pays some or all of your health insurance premium. This is paid directly to the insurer so you never see it (this is part of the confusion among taxpayers).

This amount paid directly to the insurance company is called the Premium Tax Credit (PTC). It is reconciled on form 8962.

When you first sign up with the ACA, you estimate what your income will be for the year. The amount of PTC that is paid for you is dependent on your estimate.

However, at the end of the year, you now know your actual income for the year. If you underestimated your income at the beginning of the year, then you were advanced too much PTC, which you have to pay back at the end of the year. (the IRS might also give you some more PTC, if the circumstances were reversed).

NOTE: the amount of PTC you get is based on your tax family income, not your income. So you have to include the income of any dependents in entering your ACA information. (Of course, you don't normally report your dependents' incomes elsewhere on the return).

One of the very confusing things about the PTC is that it is calculated on your annual income, not month-by-month (although you would think so when looking at the 8962). So if you start the year not making much money, but end up getting a large increase during the year, what matters is how much you made for the year, not what you made month by month.

There is no way to reduce the repayment of the PTC when you file. Instead, if your income increased or you got married or divorced or had a baby or a number of other life changes, you were supposed to contact the Marketplace and tell them that so they could adjust the amount of PTC you were receiving. You can't adjust it after the end of the year - well, actually, you paying back the PTC IS the adjustment.

What are the entries on lines 24 through 29 on your 8962?

[Sam Khan]

What is the max amount you pay at the end of the year? 

[CatinaT1]

[Sam Khan]

Thank you. Is there any limit to full amount or they can charge any amount if making >$94 and higher?

[BillM223]

The IRS says:

"

The amount of your excess advance credit payments that that increases your tax liability may be limited if your household income is less than 400 percent of the applicable federal poverty line. On the other hand, if your household income is 400 percent or more of the applicable federal poverty line, you will have to repay all of the excess advance credit payments.

See the Instructions for Form 8962, Premium Tax Credit, for information about repayment limitations.

" See this IRS webpage.

The 400% of the federal poverty level depends on your income and your family size. If indeed your income is larger than 400% of the federal poverty line for a family of your size, then you would have to repay all of the PTC.

Indeed, if you made $94k, I don't understand how you got any PTC in the first place. When you applied at the Marketplace at the beginning of the year, did your estimate a substantially smaller income number (and perhaps left your dependents' income off, too)?

[Sam Khan]

I work as a contractor, at the beginning I didn't have any contract/job for three months. I estimated littler lower because I didn't know how long my contract will last. How can you forecast  salary if you don't know how long your contract will last? I don't want to pay too much premium if I don't know about my contract. What's best way to handle this situation? 

[BillM223]

Sam, you have identified a flaw with the Affordable Care Act - it requires you to know the future.

For this reason, some taxpayers tell the Marketplace that they are refusing the PTC so that they won't be surprised at the end of the year by paying it all back, if things improve income-wise. Other taxpayers over-estimate their income at the beginning of the year in order to reduce the amount of PTC they get per month.

Let's say that you tell the Marketplace at the beginning of the year that you don't want any PTC. Then you reach the end of the year, and you show some income (but not over 400% of the federal poverty level). You get the 1095-A, and on your tax return, you are given the PTC as a credit on your return - which means that you eventually will be reimbursed for some of the premiums anyway, if you qualify.

So it's a question of when do you want the PTC, during the year or at the end of the year? Yes, during the year is nicer, but then you have this reading the future problem.

And if you end up making over 400% of the federal poverty line for your family size, you won't get any PTC anyway.

In your case, Sam, what happened is that the federal government loaned you the PTC, and when it found that you had made a lot of money, it called the loan.

P.S. when you have significant changes that affect your return, you need to call the Marketplace during the year to tall them, so that they can adjust the PTC. This at least limits the amount they pay for you (and which you might have to repay).

[Sam Khan]

Not sure which flaw you are talking about. Affordable Care Act is good for those who have their own company or have small business because they can show low income and yet get Affordable Care Act with low monthly premium. Salaried people have limited options either they need to pay high premium at the beginning or pay at the end of the year. I think I need to shop around to find better insurance company.