How do health care reform and taxes connect? The Affordable Care Act is single largest change to the tax code in two decades. Find help navigating the complexities of the new health care legislation, Medicare, Medicaid and other medical deductions.
04-12-2015 02:14 PM
I was granted permanent disability in December of 2012 and received my first disability check in July of 2013. At the time, I purchased a low-cost private health insurance policy. Last February I signed up for Health Insurance through the Marketplace. I was told I had to, as my private policy was no longer available. I projected my income according to the monthly SS Disability payments I was receiving. In October of last year (2014) I received a lump-sum payment representing back disability from 2011 and 2012. When I used your on-line service to file my taxes, I was told I would need to pay $3,949. (This represents over 20% of my annual income.) I calculate this to be ALL my premium credits plus a $70 penalty. I did not know if I was going to get back disability, when it would be paid, or how much it would be. Am I missing something here or are my worst nightmares a reality?
04-12-2015 06:00 PM - edited 04-12-2015 06:04 PM
04-15-2015 09:23 AM
Welcome to the Community. I shared your question with an associate with The Tax Institute. Their feedback is below:
Unfortunately, because your actual household income is so much higher than projected, you will have to repay the entire amount of the advance premium tax credit.
When a taxpayer receives the advance premium tax credit (APTC), they will have to reconcile the amount of APTC received with the amount o APTC for which they are eligible. The amount of received APTC is derived from the projected household income and family size, and the amount of eligible APTC is based on the actual household income and family size. If there is no difference between the projected household income and family size and the actual household income and family size, the difference between the received APTC and the eligible PTC would be zero. However, if there is an increase in actual household income, it would lead to a smaller eligible PTC and thus an excess
APTC that would have to be paid back.
The household income for the purposes of the PTC is the modified adjusted gross income, or MAGI, which is the AGI plus:
As a result, any SSDI income you receive would be added back into your AGI to arrive at MAGI. Since you had retroactive SSDI in 2014, this would be added back into your AGI. Also, taxpayers are no longer eligible for the PTC once their MAGI becomes more than 400% of the federal poverty line (FPL). Your retroactive payment covers two years of benefits, thus your MAGI would be so large that it would disqualify you for the PTC. This is why you have to pay back the entire amount of APTC given to you. Your high MAGI also disqualifies you from taking advantage of the repayment limitations, because it is based on MAGI (household income) and the limits do not apply to those with household income of over 400% of the FPL. The excess APTC ultimately becomes an additional tax liability.
Excess APTC Relief
However, if you expect to have problems paying the tax, relief is available and it applies to two situations:
You can seek relief by doing the following:
In order to take advantage of the waiver, you must be current with your filing and payment obligations and report the amount of excess APTC on a 2014 tax return timely filed, including extensions.
I’m sorry I couldn’t give you better news.
07-08-2017 03:09 PM
I got hit by this same issue.
In Jan 2016, I was signed up for healthcare, and got subsidies.
But then, later in January, I got approved for Soc Sec Disability, and got a lump-sum payment, and, I also got put on medicare.
The following year, I got a whopping bill for taxes. I thought it had something to do with miscalculating the lump-sum payment.
It didn't. It had to do with this: You cannot get both healthcare subsidies (obamacare) AND have medicare.
Should the goverment have notified me of that? Yes, they should have, I think. After all, I didn't *ask* for the medicare (although, it was nice to get it). But, effectively, it was the government that broke their own rules: I already had obamacare, and they themselves put me on medicare at the same time. And then? They let it go an entire year, and I have to pay back the whole of the subsidies.
Yeh, it stinks. Big time.