My First Form 1095-A

[Lion EA]

So, her income is over 400% of the poverty level.  (Don't know how anyone can live in Fairfield County, CT, on less than $45,960.)  So, she pays back ALL of her PTC, right?

She was employed at the beginning of 2014 and covered at work.  Her Connecticare ran May-December.  Is there a place to say she was covered January-April?  If so, would that change anything?

After getting hit with a $6,000 tax, does anyone renew their health insurance for the next year?!

[Abby Normal]

Yes, she has to pay back all the PTC advanced payments.

You do the 8962 monthly so the period she was covered by employer doesn't come into play for the PTC. It does come into play about being covered all year on the 8965, which probably doesn't need to be filed in this case.

[jklcpa]

  Is there a place to say she was covered January-April?

 

To indicate full-year coverage, be sure to check the box on the 1040, pg 2, line 61. It's to the left of the column.

jmdaviscpa's answer above is correct.  She is not eligible for the PTC so all will be paid back without limitation.  Fill in the 8962 monthly, no need for the 8965.

 

ETA - I'll be moving this topic to the health care section later on, but leaving it here for now so Lion can easily find it.

 

[Lion EA]

Thanx all.  (I was thinking of tagging onto the health care section, but thought I might be hijacking a different type of question.)

[RitaB]

So, her income is over 400% of the poverty level.  (Don't know how anyone can live in Fairfield County, CT, on less than $45,960.)  So, she pays back ALL of her PTC, right? ... After getting hit with a $6,000 tax, does anyone renew their health insurance for the next year?!

Well, she's paying back a credit that she didn't qualify for, but, yeah, she'll think it's a tax.  Hope it's not YOUR fault since you are the messenger.  Just remind her it's health insurance premiums.  And I bet she never paid that much for health insurance in her life.     But, yeah, she is likely to look for cheaper coverage, and good luck with that.  

[Lion EA]

She went elsewhere for 2013, so just getting her off extension for 2014 and seeing her income and the 1095-A.  (I don't think she had any advice when she took a $42,000 distribution from her IRA during 2014 to live off of.)  She'd always been employed with health coverage.  I think she wouldn't have bought insurance at all at full price. After all, with a low-end house in a city and not a nice suburb with about $24,000 mortgage payments and $8,000 property tax and heating oil and electricity and food and gasoline, she really doesn't have $7,000 left over for health insurance out of her $48,000 income.  If I had to write a $7,000 check right now to the IRS, I'd have to cancel my health insurance going forward.

[jklcpa]

I think, we as practitioners, need to be mindful of not missing planning opportunities with clients that we put on extension that may find themselves in situations such as Lion's client is now facing. This is the sort of scenario that exposes us to more risk because of the April 15th deadline for making prior year contributions to IRAs and HSAs that have the potential to possibly save the client thousands of dollars in repayments of the APTC.

By the way, I'm not suggesting that Lion did anything wrong here, only that her client's income appears to have only slightly exceeded the 400% of poverty threshold and that in these cases it is sometimes possible to lower that AGI and lessen the burden of repayment. If this client had been $1 below the threshold, she may have still owed something back, but if the income didn't exceed that 400%, the payback would have been capped.

Also, I'd like to know if the entire $7000 is all due to repayment of the APTC, or is some portion of that because of low/no withholding on the IRA distribution or a penalty on that? She was only on the state's marketplace policy for 8 months, so if the entire $7K is all APTC repayment, then she was getting $875 per month in help paying her premiums? Just curious.

[jklcpa]

Yikes!!! I took time to look up avg costs in Fairfield for a 60 yr old woman buying through the CT marketplace. Rates are bronze $500-$700, silver in the $800s, gold plans are $900-$1000, and one for $1100 per month for platinum.  Our policy last year for the two of us with my husband at 64 was only around $1100, and we have a higher than avg cancer rate here too.

[Lion EA]

Her excess premium was $5,608 from $701/month (SLCSP $857/month).  She didn't have her 1095-A until late, so I didn't see what was going on; and she used a different tax preparer last year when she signed up at the marketplace, so I didn't know she received PTC until her form arrived.  She didn't have a HDHP, so didn't qualify for an HSA.  An IRA wouldn't get her down to 400%.  Most of her income was from a $43,612 IRA distribution.  Also, escrow interest, state refund, pension loan/distribution upon leaving employment, and unemployment benefits.  AGI $59,820.  400% poverty $45,960.  The sad part is she worked for a financial services firm that advises clients on investments, insurance, etc.

If I were writing a $5,608 check right now, I'm not sure I'd have $857 left to pay my premium, this month or for the next few months.  I can see why people let their insurance lapse.  I think people got false hope.  How much will you earn in 2014?  Well, she earned only $8,500, but she had income of nearly $60,000 because if she hadn't taken those withdrawals, she would've lost her house and car.