Repayment of excess premium subsidies when part year on Market Place and income increased after market Place termination.

[apollog]

Situation: During 2020 you were on the Market Place and then change to Medicare in September, AND, your annual income increased substantially in December as a result of one time stock sale.

TurboTax requests the 1095-A and calculate a large amount of the premium subsidy to be paid back.

1) Since the in incomes increase happened after the termination of the market Place, will that help to eliminate the subsidy pay back?

2) If so, how to report it in TurboTax to get the pay back eliminated?

3) From another question that was posted in this forum I got this information:

"Under the American Rescue Plan Act (H.R. 1319), excess premium subsidies for 2020 do not have to be repaid to the Internal Revenue Service."

How do I make Turbotax to not request the pay back of the excess premium subsidies.

[BillM223 · Accepted solution]

I would encourage you to be patient and not file just yet.

While the American Rescue Plan may appear to be clear, it's clear on only a single issue. TurboTax (like other software vendors) has to wait for guidance from the IRS on how to deal with all the other issues that are impacted by this change in the law.

For example, taxpayers who have to repay excess Premium Tax Credit are normally allowed to apply this amount to the Self-employment health insurance deduction on Schedule 1 (1040). Will that still be true when the IRS releases its guidance? TurboTax does this transfer automatically, so we need to know if that will change.

And the values of the Self-employed health insurance deduction and the Self-employed deduction for SIMPLE, SEP, and other retirement plans have a peculiar interaction such that an increase in one may decrease the other.

And there are other situations in which eliminating the PTC repayment will have unpredictable results.

So TurboTax is working with the IRS to get the guidance needed to know how to handle excess Premium Tax Credit repayments.

Please note that this is one of the reasons that the IRS extended the filing deadline to May 17th (June 15th in Texas, Oklahoma, and Louisiana), so that the IRS would have to develop guidance on all the collateral issues and so that software vendors like TurboTax would have the time to implement and test the changes.