Lump Sum SS payout

[Jack from Ohio]

Client received full SS benefit payments for 2016.  He also receive ~$9k payment for 2015.  They have only about $2K of other income, so for 2016 they are in the zero tax bracket.  Here is my question...

They had Insurance through the Marketplace and due to the $9K they are required to pay back about 1/2 of the subsidy.  Instead of using the lump-sum worksheet, can I just claim the SS amount for 2016 and amend 2015 to add the amount they received for 2015?  This would lower their MAGI to the point they would receive a small refund instead of paying back hundreds.  The 2015 return would not change due to very low income.

Is there a requirement for using the worksheet instead of amending?  Anyone with experience with this situation:

Married Couple filing joint
Total SS received in 2016 $35,819
Amount received for 2015 $8,872
1099R received for $2,003
No other income for 2016.

[Lynn EA USTCP in Louisiana]

Cash basis taxpayer - all SS monies received in 2016 are reported in 2016, even that allocated to 2015 but paid in 2016. Do not amend 2015; make use of the2016  LSE if it is more beneficial to your client.

 

[Tax Prep by Deb]

I agree.  I had a client two years ago in the same situation only they had to pay back the full amount of the subsidy, to the tune of about 7,000.00.  No way around it, the lump sum worksheet is used and the tax is calculated based on what it would have been for each year that the lump sum is allocated to. 

[Jack from Ohio]

It makes no difference.  $0 tax both years whether I amend 2015 or leave it all on 2016.

It is affecting the ACA and them having to pay back subsidy for 2016.  

[jklcpa]

Lynn and Deb are correct. Individuals are cash basis and this lump sum, although attributable to earlier years, was all received in 2016 and that is the tax year to report it. It would be incorrect to amend and report any of it in 2015.

I can see the problem with that little other income and most coming from the social security. With whatever is taxable of the SS, the income is probably reduced to zero by the standard deduction and exemptions, but the 8962 is based on household income that includes the nontaxable SS.

Jack, if what I'm seeing in my brief calcs is on track, they should be eligible for some subsidy, just not to the extent of govt's help that they accepted, right? And with no earned income and already on SS, they have no options to impact that household income figure at all or the resources to do it even if they wanted to.  That lump from 2015 bumped their FPL % above 200% so the added insult here is that on top of someone who has waited to receive that lump sum, and might have had a real fight to get it, its receipt increases the cap on repayment from the $600 up to $1,500.  What a shame. 

 

 

[Lion EA]

Did you try MFS?