Tax Prep by Deb Posted December 14, 2015 Report Share Posted December 14, 2015 I have a client, (husband and wife filing jointly) who just received a letter indicating that there may be a mistake in the way I calculated the shared responsibility payment on their return. It doesn't give specifics but does indicate that a possible waiver could be taken or that a miscalculation occurred in figuring their penalty. The husband was fully covered thru m\Medicare, the wife was not and had no insurance thru out the year. The both are under 60 years old (husband is disabled and receiving social security and Medicare) There only income is as follows: IRA Distribution: $15,000, Rental Income: $7,435, Social Security $26,411 of which only $821 is taxable. Thus there adjusted gross income is $21,256. Because the income is $21,256 there is a need to file (so no waiver here). When I calculate the penalty I have to use modified AGI so I include all of the social security which makes there modified AGI $48,846 and the shared responsibility payment should be $265. Can someone please explain to me what I did wrong, or what I am not seeing here? I sincerely appreciate it. Deb! Quote Link to comment Share on other sites More sharing options...
jklcpa Posted December 14, 2015 Report Share Posted December 14, 2015 Is there a typo somewhere in your #s above? If I add up your numbers and assume the taxable SSA is correct, I would get AGI of 23256. When I input this into my program, I get taxable SSA of 1821 and AGI of 24256. I'm getting a penalty of $95. MAGI for the Shared Responsibility Payment has add backs, but the n/t portion of SSA benefits isn't one of them. (MAGI for the PTC does include the n/t portion, but not for the SRP). That may be where you went wrong. I'll send you the 1040 and two worksheets for the penalty by PM so you can take a look at those. Quote Link to comment Share on other sites More sharing options...
jklcpa Posted December 14, 2015 Report Share Posted December 14, 2015 For 2014, for adults, not minors, the penalty per person is the greater of $95 or 1% of MAGI less exemptions and std deduction for the filing status. Then there's another cap where the penalty can't exceed the national average bronze level premium for the family size. I sent the pdf so that you can compare it to what ATX generated for your client. Quote Link to comment Share on other sites More sharing options...
jklcpa Posted December 14, 2015 Report Share Posted December 14, 2015 Topic will be moved to the ACA forum once the OP sees the response. Quote Link to comment Share on other sites More sharing options...
Possi Posted December 14, 2015 Report Share Posted December 14, 2015 I got 2 letters this week. Yes, let the "fun" begin! Quote Link to comment Share on other sites More sharing options...
jklcpa Posted December 14, 2015 Report Share Posted December 14, 2015 On basic returns like the OP had, wasn't ATX calculating this automatically? Quote Link to comment Share on other sites More sharing options...
Tax Prep by Deb Posted December 14, 2015 Author Report Share Posted December 14, 2015 I did make a mistake in the numbers I gave. Everything is correct except the IRA it was for 13,000.00 not 15,000. ATX did not populate the modified AGI we had to make an entry and I think where I messed up was adding back the non taxable part of the social security. Re-reading the instructions seems to indicate that we do not take the non taxable part of social security into consideration in figuring the shared responsibility payment, it is however factored in when calculating the credit for those who bought thru the exchange and ATX does handle that on it's own. I feel so dumb!!!! I read and re-read so much of this and somehow I still got it wrong. Oh well my client will be happy that she has some money coming back! Quote Link to comment Share on other sites More sharing options...
RitaB Posted December 14, 2015 Report Share Posted December 14, 2015 12 hours ago, Tax Prep by Deb said: I feel so dumb!!!! I read and re-read so much of this and somehow I still got it wrong. Don't feel like that! I have an insurance agent friend on FaceBook putting out completely incorrect information about ACA, the penalty, etc. Do you think I'm going to correct him?? Heck, no. Then I'll have eight million non-clients sending ME questions. He's the only one getting paid to understand this crap. I resent so much having to deal with this. Yes, I know, someone will say, "Charge accordingly". Well there's no way, in Small Town, TN, that I can charge enough to cover the time I spend on ACA without losing clients. 6 Quote Link to comment Share on other sites More sharing options...
jklcpa Posted December 14, 2015 Report Share Posted December 14, 2015 Rita is correct. Don't feel like that, and please continue to ask questions because that is what the forum is here for. This is a new area of law for us with a lot of complexity, and of course we have many definitions of MAGI in the tax code depending on what limitation we are working with. It's very understandable what happened with your calcs. 7 Quote Link to comment Share on other sites More sharing options...
Tax Prep by Deb Posted December 15, 2015 Author Report Share Posted December 15, 2015 That's why I feel at home here! I'm a one person office and try hard to keep up on things but ever so often miss what should be obvious. Ironically I have a great insurance agent and we talk through out the year when we have questions about the ACA. Best advice he gave me was when I was thinking of going through the exchange for my insurance. I have a grandfathered plan and the cost through the exchange with the subsidy would be about the same in monthly premiums but coverage looked a little better so I thought. He told me keep my old policy as long as it's available. Not many doctors in my area are provers. Sure enough last year I maxed out my deductible and was told by my doctors that had I had Covered California they would not have taken my insurance. Same thing again this year (summers are beginning to suck for me). So when it comes to questions on taxes I have everyone here and insurance I have Larry who is serious about his job! Thanks again for your help and encouragement! 5 Quote Link to comment Share on other sites More sharing options...
Lion EA Posted December 15, 2015 Report Share Posted December 15, 2015 Yep, I tell people I have a virtual water cooler. 2 Quote Link to comment Share on other sites More sharing options...
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