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Missed Marketplace insurance BIG TIME


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OMG

I missed a 1095 for a newly married client. It's right here in his file. GAHHHHHHH

He married a bartender who apparently had a daughter and she and daughter were on Marketplace insurance all year. 

Wife was covered by husband's insurance beginning in August after they got married, but the Marketplace covered her and the daughter all year. 

I filed a joint return and didn't have the daughter on it at all. I'll ask how old the daughter is, but I think she's grown because they never mentioned her. I should have asked many more questions. No excuses. I blew it. 

They just got a letter from the IRS. 

I'm sick over this. 

Is there any salvation for this return? 

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It seems you have at least most of the information you need to file an amended return.  Maybe double check what the daughter did, file herself? Is she a minor?  Dependent?

If tax is owed, well, it's owed but my engagement letters stipulate that if I make an error, I will cover any penalty or interest but not tax owed. Perhaps a discount on return prep?  Do you have a questionnaire that must be completed to include dependents?  It's not great that you completely missed a document but, well, it happens so don't beat yourself up. 

I would get the missing info, do some research (although I think you know the answer here), prepare the corrected return and consult with the client with many apologies.  We are human, you know.

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I once missed the darn form too, however the IRS was holding off on releasing the refund until we filed out the form and submitted it, no problem since the income they said they were going to make when they applied matched.  Now another TP didn't take into account side jobs and the spouses' part-time job that turned into full-time when they applied, that was a bummer.  Now to your case, when you combine their income is that going to affect it?

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There is a repayment max at some lower income levels. Hopefully the daughter does not qualify as a dependent , and has lower income on her return. (I assume your client would have to repay all, hence the upset stomach).

Check out the instructions to the premium tax credit form carefully about allocating between tax households-- --you can hopefully allocate premium to the daughter's return to minimize the damage. 

Two amended returns and some repayment, so no magic bullet. . . but not worst case either.

I agree with Margaret CPA in OH -- it happens -- you apologize and show value by working to minimize the damage and make it right by paying any penalties and interest. The correct tax liability was theirs either way. 

 

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No client can admonish us for a mistake more than we admonish ourselves.  I still regret the first error I made over 20 years ago, and the CPA I worked for still agonized over his first that was older than that.  We made a pact that we were each allowed one guilt-free error per year, but that was easier said than done.  Torturing yourself won't help, so you need to focus on fixing it. In this special case, I think in addition to paying interest and penalties, I would refund their tax prep fee.  It would at least show that you feel awful and are doing your best to help them.

We have all clients fill out a yes-no questionnaire (well, that doesn't always happen) that asks the questions we should ask for every return, e.g., foreign accounts, cryptocurrency,  and marketplace insurance.  It's a CYA, but it also alerts us to things we need to know.  I scan the "yes" column to note that they have a new address, bank account, dependent, spouse, etc.  You can't go back there now, but you may want to consider it going forward. 

You made one big mistake, but I bet you've prepared hundreds or thousands of perfectly accurate returns over the years.  Congratulate yourself and then be the professional you are and fix this one boo boo.

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Thanks, y'all. 

I contacted the client and will do my best to minimize the impact. 

The daughter is 25 years old and does the same kind of work as her mother, according to my client. So, her income is probably mostly tip income and she likely qualifies for the credit. 

I'll work on the allocation after I get a copy of the daughter's tax return. Allocating a portion to the daughter will certainly help. When I can amend the daughter's return, from what my client said, she most likely qualified all year. 

 I've never split one, so I'm not sure how that will work, but I'm sure I can figure it out. 

I am pulling back on my business and not doing as many returns as before. There is no excuse for this one. It was right there. Thanks for the encouragement. I'll make this right and won't beat myself up. Too much... 

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7 hours ago, ILLMAS said:

I once missed the darn form too, however the IRS was holding off on releasing the refund until we filed out the form and submitted it, no problem since the income they said they were going to make when they applied matched.  Now another TP didn't take into account side jobs and the spouses' part-time job that turned into full-time when they applied, that was a bummer.  Now to your case, when you combine their income is that going to affect it?

Yes. When she married my client, the joint income is way over the top. They married in July and she went on his insurance in August.

The Marketplace didn't end for her at that time, though. She kept it running until the end of the year. 

I wonder if they left it in place to cover her daughter  who is 25 and files her own return. 

AND, I wonder if she ended it at the end of the year. For all I know, she is still the primary social security number! Another question to ask....

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I totally agree with what Sara told you.  We aren't perfect, we are just doing the best we can in a stressful situation.  We try to do enough work between February and the middle of April (most years) to carry our business the whole year.  So no matter what procedures we put in place to make sure we get things right, something eventually is going to slip though the cracks.  But boy do I hate having finding these errors.  And I can tell you do to, which tells me you are trying the best you can to do it right the first time.  Hang in there, and remember - it is only money!  As much as I stress over these issues, imagine if I were a doctor and my mistakes cost lives!

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Well, God is really looking out for me. If only I would trust more and be less fearful. 

My client never received his initial refund (grace) because the IRS was missing those forms. 

After splitting the PTC with the daughter, they went from a refund of about $4k to owing $155. 

My client extended every grace and thanked me for getting him through this practically unscathed. 

I'm still pulling back on my business. My ration of errors to home runs is small, but it still makes my stomach hurt when they surface. 

I love y'all. Honestly, I do. 

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Thanks for letting us know the outcome.  Yes, it could have been so much worse.  And your client is to be treasured for being so understanding.  For sure their emotions were on a roller coaster, too, thinking first of how to use that big refund in this challenging time to having to pay a bit, even if not a lot.

I understand about that ratio and have implemented a second review before return completion.  And I'm so glad to have said bye to my small businesses and the last remaining partnership.  My remaining individual clients are friends, too, even if we communicate just annually.  So two more years on my license.  It will be really hard to tell my clients but the tax laws are not getting easier or more stable.  This forum is so very important to many of us for technical and emotional support. 

We love you, too, Possi!

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I am glad this turned out as well as it did.  I have always had my share of mistakes, but it seems like it is getting harder for me to accept that.  And I don't want to stay in this business past the time that I can keep up with the changes.  As fast as they are coming these days, I don't know how much longer that will be.

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I have an old invoice and she finally contacted me and said she would not pay it as I took too long to do it  - I did pay 1/2 of her interest - that was 100% her fault as she was to do estimates and therefore she said she did not owe my fee either.. how did I file it without paying - you learn..

You did the work - I would not charge her for the amend as that was your error - pay the interest if any and aploogize

But with the Marketplace - did you play around with the %'s as the daughter can get 99-100% of the amount  - is correct and sometimes that does make a huge difference.

What is the worst that can happen - they move on next year and you downsize that way

and then they usually come back the next!

We are all human.

Living the dream! Get lemons, make lemonade - as what else can we do!

Best,

Darlene

 

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