On Form 1040 Schedule 1 Line 16, TurboTax has generated a value that doesn't seem to come from anywhere. To make the discussion easier, let's say the value listed here is $200.
If I right-click the value->About, it says to see the "Self-Employed Health and Long-Term Care Insurance Deduction Worksheet." That worksheet (under Schedule C) shows a different (lesser) value on line 10, which is what it says it's supposed to be transferring to form 1040 sched 1 line 16. To make the discussion easier, let's say the value listed here on this worksheet is $100. $100 is a value that actually makes sense: it's what I've entered under Business->Business Income and Expenses->Other common business expenses->Insurance payments->Health insurance premiums.
If I go to the Business Income & Expenses screen, it shows this mysterious $200 value next to the "Self-Employed Health Insurance" line...but when I actually click the "Update" button, it says "We have deducted, from your income, $100 of allowable self-employed health insurance attributed to your schedule C).
In addition to the $100 entered per above, I also have some health insurance-related values entered via a 1095-A.
Where is it getting this mysterious $200 value, and why does it not properly explain where it's coming from?
When you have ACA coverage that is also self-employed health insurance, you don't need to enter the amount of premiums paid in the self-employment income and expenses section. It sounds like you entered the amount you paid in both sections.
It is not prominent, but the following message appears in the Learn more notes in this section:
"Do not include health insurance purchased through a Health Insurance Marketplace (also known as an exchange). These premiums are entered on Form 1095-A in the program."
To fix this, just click on Step by Step in the upper right corner while you are on the Health LTC Wks in Forms mode.
Click Update to the right of Health Insurance and then delete the entry.
I didn't enter it in both sections. The ACA coverage is entered only in 1095-A; there is an additional non-ACA health insurance premium (for supplemental global coverage while traveling abroad), which is what I entered in the other section.
The issue here is when you have insurance through the exchange, you have to determine your allowable premium tax credit, which is based on your income. Your income has to factor in your self-employed health insurance deduction. However, you can't use the insurance deduction to the extent that it benefits you with regard to the premium tax credit.
So, you have to go through a complicated calculation to determine what your allowable self-employment insurance deduction is. Often, that results in a deduction that is less than your insurance premiums paid as reported on form 1095-A. So, the amount on line 16, schedule 1 represents your allowable self-employed insurance deduction, which is the product of a complicated calculation based on your income and the amounts reported on your form 1095-A.
In all other cases on my return, these "complicated calculations" are shown via a worksheet. Where is the worksheet that shows how this calculation is performed (and thus, how the $200 value is derived)?
It might be adding your premiums you pay that are recording from the 1095A in addition to the amount you recorded as a schedule C expense.
You can see how the self-employed health insurance deduction amount is being calculated on the "Self-Employed Health and Long-Term Care Insurance Deduction Worksheet" in TurboTax.
No, you can't - which is exactly what I addressed in my original question. See the 3rd & 4th sentences:
The Self-Employed Health and Long-Term Care Insurance Deduction Worksheet "shows a different (lesser) value on line 10, which is what it says it's supposed to be transferring to form 1040 sched 1 line 16."
OK, I see. Sorry for my lack of attention!
I ran up some numbers and noticed that there is a note at the bottom of the worksheet that mentioned that there are calculations that affect the deductible self-employed insurance amount that appears on schedule 1. And those calculations are not reflected on the self-employed health insurance worksheet. So, the numbers don't match because of the calculation I referred to earlier.
So, there is not a worksheet in TurboTax that you can view to determine how the deductible amount is calculated.
You can review the instructions to form 1040, however, if you want to verify the accuracy of the entry, as follows:
https://www.irs.gov/pub/irs-pdf/i1040gi.pdf
>>So, there is not a worksheet in TurboTax that you can view to determine how the deductible amount is calculated.
...Right, and that brings us right back to my original issue: the software is just spitting out numbers with no explanation of how it got them, and thus no way to actually check them. Not really okay, as I'm the one who has to sign the tax return stating that it as accurate. How can I say I know it's accurate if they just output random black-box values...?
>>You can review the instructions to form 1040, however, if you want to verify the accuracy of the entry, as follows
I did actually (prior to posting this). The instructions for Schedule 1 Line 16 don't provide any more insight into how they're arriving at that number.
I did some more research and determined that you need to prepare the worksheet on page 57 of IRS publication 574 to determine your allowable self-employed health insurance deduction if you also have a premium tax credit. Here is a link to the publication:
https://www.irs.gov/pub/irs-pdf/p974.pdf
The worksheet looks like this:
You may have to complete worksheet W or X as well, and I believe that is why it does not show in Turbotax, as the basic worksheet would not be applicable to all tax filers.
>>I believe that is why it does not show in Turbotax, as the basic worksheet would not be applicable to all tax filers.
That rationale doesn't make any sense to me. "It would not be applicable to all tax filers" could be said of virtually every worksheet in a return. It's not like TT excludes worksheets related to retirement accounts, for example, even though those would not be applicable to all tax filers either. So why on earth would they just skip this one, requiring us to dig through IRS instructions & re-fill them from scratch to understand how they get their numbers? Isn't that the whole point of tax software - that it fills out the worksheets for you, and shows what it's doing...? There's not one other place in the return where it does this...
I also have complaints about this section. It doesn't seem like TurboTax has this correct. First of all, self-employed health insurance deduction is an above the line deduction, an adjustment to income. See 1040 instructions for Schedule 1, Line 16. I meet the criteria and the premiums were reported as wages on my W2 in box 1. However when I go to enter the self-employed health insurance premiums below income, in the Other Business Situations section, it says that this is deducted on the W2 or K-1 (or something like that) and there isn't a place to enter the amount. This needs to be fixed.
Has anyone conclusively figured this out?
TT just pulled a random number into line 16 on schedule 1.
We paid around $10,400 in premiums and received around $8,000 in ACA tax credits.
So line 16 should list $10,400 in self employed premium expenses but instead it lists almost $19,000. Not even sure how TT got that number since it's not the sum of $10,400 and $8,000.
May I assume that you had to pay back all of your Premium Tax Credit? Your health insurance expense would be the $10,400 that you paid, and the $8,000 that the government paid for you but which you had to pay back.
There is also some not-very-obvious interaction between your Schedule C net income and your contributions to Self-Employed SEP, SIMPLE, and Qualified Plans.
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.
Since we in the Community cannot see your private tax data, I can't hazard a guess as to down to the penny, but if you had to pay back your PTC, then about $19k is close to correct.
@mikej724
Again, the issue here is that TurboTax spits out numbers without any information on how it got them, which pretty much makes it impossible to actually check its work. Clearly I'm not the only person this is causing problems for.
It felt odd that it was doing this last year, but it utterly baffles me that a full year later, they still couldn't be bothered to fix it (despite this being reported here *and* despite my calling them to report it). I'm again looking at numbers it's producing out of undocumented, black-box calculations and forced to just sign a tax return that I don't fully understand.
I'm really not able to understand why they neglect to fix issues in their software.
Correction: reviewing my notes, I actually reported this to them for the first time *two* years ago, but they just deleted the thread from this forum. Thus, I re-posted again last year.
We'll see what happens. I tried to use worksheet P and X in publication 972 to confirm the number turbo tax spit out but my head literally exploded trying to follow the iterative process to reconcile premium tax credit with AGI limit etc.
So in the end I went ahead and submitted the return with the number turbo tax entered. I really don't think that number is right since it's about 2x the amount of health insurance premiums we paid. We'll see what happens.
yes super not comfortable submitting a return where i don't understand the number but i made every effort to reconcile this and the IRS publication 974 related to this isn't even available for 2020. So i went ahead and submitted it. Even if they approve the return (what are the odds they would catch it of the number is incorrect?) I still won't have an answer if the calculation was actually correct or if IRS is as confused by this circular relation of PTC and AGI as I am.
Regarding paying back the PTC that is exactly the issue.
If we pay all of the PTC back then our AGI is below 400% FPL so we'd become eligible to keep the PTC we had received throughout the year. If we get to keep the $8000 in PTC our AGI is too high to be eligible for the PTC. According to publication 974 TT is supposed to do an iterative calculation to figure out what our AGI is and how much PTC we can keep. I don't think it makes that calculation and instead just jumps straight ahead and assumes we have to pay back all $8000 and adds them to the $10400 we paid in insurance premiums and says we can claim $19000 in expenses against the self employment income. But then later when it comes to ACA stuff it then determines that we get to keep the $8000 in PTC. So TT gets confused by this circular relationship between AGI and PTC and doesn't seem to follow the process of calculation outlined in publication 974. Which btw is not yet available for 2020 so maybe that's why TT doesn't do those iterative calculations since the 2020 version of that publication is not available.
I also reported it to them on Facebook, but they wanted me to call in so they can "help me". No, how about you take the detailed information I am giving you, including the rules and guidance from the IRS and get it fixed!!
The value randomly entered here for me is "-1." and TurboTax has asked me to review this value since it can not be a negative number. I've been trying to figure out how this number got here for a week now! Did you get any more information on your situation?
The first step I suggest you do is "unlink" your 1095-A from Schedule C, and then link it again. To do that, uncheck the box shown on the screenshot below.
If that doesn't work, there is a workaround available for TurboTax Desktop version for this. Follow these steps:
1) Go to Forms Mode
2) Find 1040/1040SR Wks
3) Scroll down to the section with the negative number on line 16.
4) Just above it you will see a box for Self-Employed Health Insurance Premiums Tax Credit Smart Worksheet.
5) Remove amount from box B.
For TurboTax Online, you have two options:
1) File an extension and wait for the fix.
2) Do not claim the health insurance adjustment to income for self-employed. You can do that by unchecking the box for the question in the 1095-A interview about whether you were self-employed. See the screenshot. You can file an amendment after the fix comes through (TBD).
Here are instructions on how to amend your tax return.