Catch-22 SEHI PTC

[Abby Normal]

If someone knows the resolution to this, I'd appreciate a link.

MAGI over 400% of poverty level so has to pay back all of the APTC.

Taxpayer is self-employed so APTC is added to SEHI amount.

Increased SEHI puts taxpayer under 400% of poverty level, qualifying for some PTC.

Subtracting the new PTC from the SEHI puts taxpayer over 400% of poverty level.

And around and around we go.

I've googled and not been able to find an answer but this can't be the first time this has happened. I feel like claiming just enough SEHI to put them under 400% and letting the PTC be what it will be might be the best solution?

 

[Abby Normal]

I think instead of iterative you can do the calc just once, which would give you the full amount of premiums before PTC as SEHI, and some PTC as well.

[Bart]

The amount of the SEHI is the full premium without subtracting any PTC or APTC.

[mwrightea]

 I have this exact problem and am using ATX software

MFJ  No dependents Total income $82932. SE Income  73, 045.  Deductible SE 5161.00.

1095A Part III   Col. A 17634.48   B. 17662.56 C. 11644.32 Taxpayer paid $5990.00 in premiums.

8962. payback $11644.00  but when added  to SEHI  $5990.00  Total 17634.00 SEHI  then the 8962.  shows a net premium credit of $192.00 and no payback? 

I know this cannot be right. I have been wrestling with this for days and I just want to poke my eyes out!

 

[RitaB]

39 minutes ago, mwrightea said:

 I have this exact problem and am using ATX software

MFJ  No dependents Total income $82932. SE Income  73, 045.  Deductible SE 5161.00.

1095A Part III   Col. A 17634.48   B. 17662.56 C. 11644.32 Taxpayer paid $5990.00 in premiums.

8962. payback $11644.00  but when added  to SEHI  $5990.00  Total 17634.00 SEHI  then the 8962.  shows a net premium credit of $192.00 and no payback? 

I know this cannot be right. I have been wrestling with this for days and I just want to poke my eyes out!

 

I've been dinking with your numbers for about two hours (from the other thread) and I'm with you on the throwing up.  I'm not getting anywhere with this one.  I'm sorry, this is no help, except to say I commiserate and have not come up with a solution. 

In the final paragraph of this old article, the author saw this coming:

https://obamacareguide.wordpress.com/2014/07/25/self-employed-health-insurance-deduction-the-iterative-calculation/

[Lion EA]

Pub 974 is a real bear; just tried to skim it.  Not only is the iterative Method pages long, but the Simplified Method is not even close to being simple or short.

[mwrightea]

This has been going on for days,  and the clients are not my favorite to begin with......... and now I will lose any money I hoped to make on this return. 

I have filled out everything in pub 974  at least twice and I am ready to throw in the towel !!! 

I don't think the iterative method can be used as this is way more than a $1.00 difference.

Back to clawing my eyes out!

 

 

[RitaB]

There's a caution in Pub 974:  If you are unable to complete Step 6 because changes between steps are always $1.00 or more, do not use the Iterative Calculation Method. Instead, use the Simplified Calculation Method or any computation method that satisfies the rules for the self-employed health insurance deduction and PTC as long as the sum of the deduction claimed for the premiums and the PTC computed, taking the deduction into account, is less than or equal to the premiums.

 

If you use 17,634 as SEHI, you can't have any PTC or APTC.  You're limited by the premiums. 

I think your guy uses 17,634 as SEHI, pays back the premium, and no PTC allowed.  Now to get there.

The other thing you can try is MFS, allocate 99% of APTC to lower earning spouse.  I couldn't get ATX to allow zero where I did an allocation like this, not MFS, but an allocation that was 1% and 99%.  Payback will be limited.   They can never pay us enough for dealing with this.

 

[RitaB]

5 hours ago, Abby Normal said:

If someone knows the resolution to this, I'd appreciate a link.

MAGI over 400% of poverty level so has to pay back all of the APTC.

Taxpayer is self-employed so APTC is added to SEHI amount.

Increased SEHI puts taxpayer under 400% of poverty level, qualifying for some PTC.

Subtracting the new PTC from the SEHI puts taxpayer over 400% of poverty level.

And around and around we go.

I've googled and not been able to find an answer but this can't be the first time this has happened. I feel like claiming just enough SEHI to put them under 400% and letting the PTC be what it will be might be the best solution?

 

 

Caution from Pub 974:  If you are unable to complete Step 6 because changes between steps are always $1.00 or more, do not use the Iterative Calculation Method. Instead, use the Simplified Calculation Method or any computation method that satisfies the rules for the self-employed health insurance deduction and PTC as long as the sum of the deduction claimed for the premiums and the PTC computed, taking the deduction into account, is less than or equal to the premiums.

 

The sum of the SEHI plus the PTC can't exceed the actual premiums.   That actually makes sense, so I think a single taxpayer would just be stuck paying it all back.  Which really is reasonable because they didn't qualify for the APTC to begin with, but because SEHI is an above the line deduction, we have an oh sh*t scenario of epic proportions.

  

Excuse me while I also poke my eyes out.

 

[mwrightea]

These clients itemize deductions my first thought was SEHI $5990. which they paid.   The $11644.00 excess advance premium  to Schedule A medical and I can E file the return.

Or Check the  box not taking PTC on 8962.  payback 11644. take 17634.00 SEHI and then paper file the return.

I have never been this perplexed by a tax issue in the thirty years that I have been in practice. 

I gave these clients the option of IRA and SEP-IRA  and they can't swing it.  They had an exceptional year last year Earning over 100k in gross SE income and didn't bother to notify marketplace about change in income or make any estimated payments......they really need a hug!

Thanks for letting me vent and I  really appreciate your help!

 

      

[Abby Normal]

I wouldn't put any on Sch A if I could take it on 1040 above the line. And I don't see any reason to paper file either.

[mwrightea]

29 minutes ago, RitaB said:

 

Caution from Pub 974:  If you are unable to complete Step 6 because changes between steps are always $1.00 or more, do not use the Iterative Calculation Method. Instead, use the Simplified Calculation Method or any computation method that satisfies the rules for the self-employed health insurance deduction and PTC as long as the sum of the deduction claimed for the premiums and the PTC computed, taking the deduction into account, is less than or equal to the premiums.

 

The sum of the SEHI plus the PTC can't exceed the actual premiums.   That actually makes sense, so I think a single taxpayer would just be stuck paying it all back.  Which really is reasonable because they didn't qualify for the APTC to begin with, but because SEHI is an above the line deduction, we have an oh sh*t scenario of epic proportions.

  

Excuse me while I also poke my eyes out.

 

I know isn't it great (eye rolling snark)  if my taxpayer underestimated their income for 2017,  got an advanced premium credit of 12K for their HI and then get to deduct it all on their tax return saving themselves from paying back the APTC of $11644.00 that they didn't qualify for in the first place , as their income was too high.

 

14 minutes ago, Abby Normal said:

I wouldn't put any on Sch A if I could take it on 1040 above the line. And I don't see any reason to paper file either.

I can take it above the line on 1040 but if I check the box to not take the PTC on 8962 ATX will not let me Efile.

[RitaB]

1 hour ago, mwrightea said:

These clients itemize deductions my first thought was SEHI $5990. which they paid.   The $11644.00 excess advance premium  to Schedule A medical and I can E file the return.

Or Check the  box not taking PTC on 8962.  payback 11644. take 17634.00 SEHI and then paper file the return.

I have never been this perplexed by a tax issue in the thirty years that I have been in practice. 

I gave these clients the option of IRA and SEP-IRA  and they can't swing it.  They had an exceptional year last year Earning over 100k in gross SE income and didn't bother to notify marketplace about change in income or make any estimated payments......they really need a hug!

Thanks for letting me vent and I  really appreciate your help!

 

      

That is exactly what I told my kids (well 24 years) when I got home after figuring out the 1% / 99% allocation deal.  It was made sooooo much worse because ATX wouldn't allow zeros in column f of 8962 and it took me forever to realize that was the hold up.  And when the clients picked up, they really had no idea what I saved them.  Yes, I made it very clear.  $8,778.  It's burned on my brain.  Did the returns three ways and gave them copies of all.  They didn't like the $475 charge for two returns.  Let me tell you, I didn't either.  They came in two days ago to pay me (yes, I extended credit after all that).  They were all smiles and appreciative.  Yes, there was hugging that did not end in death.  I feel better about it.  But HOLY ACA H*LL.

[B. Jani]

I had the same problem. I have worked as follows with ATX:

(1) take above line deduction on 1040

(2) Form 8962 - Do not check first box above Part 1.

(3)  Part 2 line 9 marked no and line 10 marked yes.

(4) Line 11 - box A to E leave blank and box F enter amount that returning PTC. When I did this way it did carry to Line-46 on form 1040 and was able to Efile the tax return.

I think all you looking for (1) claim SEHI and (2) return APTC. keep both separate and hopefully this should work.

 

[mwrightea]

B. Jani

Nope sadly that doesn't work in this situation. I appreciate the effort all have put into this problem.   

[G2R]

Resurrecting this beast as I'm really trying hard to do this RIGHT, and it genuinely feels impossible using the 974 as a guide.  I'd honestly LOVE to see an IRS auditor explain this whole thing.  I'd bet many can't.  Regardless I've got a CRAZY method and I'm hoping one of you can logically talk me out of it.  

I'm using ATX.  I've already completed the SE Health Ins. worksheet, Worksheet W & Worksheet X and form 8962.  The only thing blank on W is the very bottom where it asks for the simplified or iterative method results. 

THEN, I took total premiums listed on 1095A (ie $16k) minus premium tax credit listed on 8962, line 24 ($13k) = $3k.  So I then reduce my SE Health insurance deduction by $3k.  Let's assume I was deducting $7k in premiums originally, so now it only says $4k.  I go back to 8962, see what the newly calculated premium tax credit says and continue to adjust the SE Health insurance number up and/or down until I get a summation of SE Health insurance and Premium tax credit that's most closely totals the total premiums.  

Is this crazy?  Is this in effect the Iterative calculation?