Obamacare Health Insurance Penalty

[azdolfan]

Florida

Obamacare Health Insurance Penalty

I had Obamacare health insurance last year like prior years, but this time, I didn’t fall in the min/maximum range. Now, I owe over 5k to the IRS. I've never owed the IRS ever, and that amount is just a shock to me. All because I needed medical assistance for my health problems.

I have an auto disease & other health issues, and was approved for disability insurance (SSDI) last year. I didn’t have any earned income, but did receive a big check for months I waited for a decision.

I’m in a qualified disaster area (Hurricane Ian). It said a $5500 credit of something would apply, but it didn’t wipe out the 5k I owe. Is that only applied to “earned income” taxes?

My house & city was hit hard by the hurricane, and I didn’t get mail and was unable to cancel Obamacare, until Nov even tho Medicare kicked in right before the hurricane hit. Those months are penalizing me too, yet my disaster designation not helping my penalty at all. I also got hurt bc of hurricane and went to an urgent care.

Have minor biz expenses like LLC & Domain renewals. I’m still building website. No income (yet). I didn’t include, but would it bring down the 5k I owe? Or would it only effect “earned income”?

My elderly mom lives with me, is on SSA and a small teacher pension & does not need to file taxes bc of her low amt of money. I pay more than 60% of the bills, but did not file as head of household bc not sure I can or if would even help. I filed a single bc no kids.

I also lost a little $ selling crypto that had fallen. But, it's too complicated for me to enter in my free Taxact program. But, would that had even helped since wasn't much.

Any suggestions on how I can try to get this crazy amt down that I owe? Or is this a penalty that can not be changed? Why is the hurricane credit, not helping? I thank-you so much in advance, for those that try to help others on here. So much appreciated

 

[Taxing Matters]

Any suggestions on how I can try to get this crazy amt down that I owe? Or is this a penalty that can not be changed? Why is the hurricane credit, not helping? I thank-you so much in advance, for those that try to help others on here. So much appreciated

Did you get a letter from the IRS or HHS about this, or is that penalty figure coming from the Tax Act program? If you did, which agency sent you the letter and what is the letter number (usually printed up near the top or at the very bottom of the first page)? Did you get your health insurance monthly premium amounts reduced with advanced Affordable Care Act (ACA) payments? (The ACA the official name for what most people call Obamacare.)

My guess is that you were getting advance payments credited to your health insurance premiums during the year based on either your income from 2021 or an estimate for 2022 income when applying for the advance credit. The advance credit is very helpful for those whose income is tight because they get lower insurance payments during the year instead of having to wait to file their return to get premium credit. The only problem is that if your income is higher than you expected, your credit goes down. In that case, the government has paid out too much in premium payments and it wants the extra payments back. Repayment of that amount goes on Line 2 of Schedule 2 of Form 1040. You see where this goes on the back of the Form 1040 near the top on line 17. What that means is that most tax credits/payments that you have paid or are entitled to received would indeed reduce the amount owed for the ACA advance premium over payments. However, I can't tell you what is going without looking at your records and what you input to the computer program. You may need to call the software provider to ensure you did everything right, contact a tax professional to review your records and tell you if the computer got it right, or, if you qualify, visit an IRS VITA site for free help. If my guess is rigght as to why you owe the $5K, then look at the IRS page on reconciling your advance payments. That will explain what the computer is supposed to be doing to reconcile the advance payments you received with the advance payments you were entitled to get.

 

[LdiJ]

I echo the advice to see a VITA volunteer or a tax professional. However, I suspect that you don't have any taxable income therefore no tax to take credits against. Unfortunately, your lump sum SSDI benefits caused you to receive too much of a subsidy towards your insurance, and therefore you are having to pay back some or all of that subsidy. A VITA volunteer or tax professional can help you determine if that calculation is accurate.

It is possible to set up a payment plan with the IRS to repay that 5000.00 with interest, over 72 months.

 

[davew9128]

You may want to use the social security lump sum election for the back benefits received. It may lower your income and MAGI to a point where the PTC repayment is reduced.

 

[azdolfan]

Thank-you all for your feedback! Taxing Matters (responder above), to answer your question, I did not get an IRS letter. I'm just using my 1095-A and SSA-1099. And, yes Obamacare is the ACA program through healthcare.gov website. I got max credit.

Note, I tried looking up getting help with the VITA program, but all appts are booked. I was not aware of this program, so will keep in mind for the future, because I do qualified being disabled, older, with a low income. Unless there is one I can call? Because everything I saw in my area, were book an appt.

Today, I ran the numbers through TurboTax to see if questions were different/easier, and see the outcome. They both came were similar, but TurboTax a little less owed by about $100 (but then pay that back in a filing fee with them. In TurboTax, it did ask me about lump sums. Allowed me to select that I received money in 2021, but paid in 2022. I didn't see that question in TaxAct.

I also itemized this time, with casualty loss via hurricane, charity donations, and medical out of pocket. My itemilized deductions came to over 16k, which is more than the standard. Why it was so high, is because it added the Affordable Care Act (7k) with my other medical supplies. It also, gave me $6,900 for my items destroyed in hurricane along with the other smaller itemizations.

However, TaxAct won't allow me to change the Standard Deduction to Itemized. I again, wonder if this is because of no unearned income? Seems, there is no way of getting down the "penalty" I'm facing. Thx again in advance for any help.

Oh, one other question, if I filed an extension so that I can be sure I file correctly with the best outcome for me, what's the penalty in Fla? So, if I file an extension possibly oweing 5k+, but file in less than a month away? I googled, but it's so vague on my results. Thx

 

[azdolfan]

You may want to use the social security lump sum election for the back benefits received. It may lower your income and MAGI to a point where the PTC repayment is reduced.

Not sure how to do that. I just answer the questions. Taxact used the term MAGI, but TurboTax never used that term. I had to google that term. I have done my taxes in the past, but always got a refund, so was easier than. lol

 

[azdolfan]

Not sure how to do that. I just answer the questions. Taxact used the term MAGI, but TurboTax never used that term. I had to google that term. I have done my taxes in the past, but always got a refund, so was easier than. lol

I found a way to reduce it to $325 owed! But, I don't want to file incorrectly if wrong, so want to be sure I'm doing it right.

Here's my numbers for my SSA-1099:
* Paid out in 2022: $70,945
* $22,116 for 2021, but paid in 2022
* $21,828.00 for 2020, but paid in 2022
* $ 3,582 for 2019, but paid in 2022

In TaxAct (went back to that b/c no filing fee and TurboTax wasn't much different)
In my Lump Sum Section, I found a way to enter it individually for each year.
This caused one year to have an extra $350 taxable (which is fine, I understand why).
But, in reality I only got $23 419 in income (if you subtract years 2019-2020).
This amount of income would not penalize me because I fall back in the ACA range.
However, federal amt owed did nothing until I got to MAGI. It's like it still thinks I'm getting 70k this year.
I entered in MAGI -$47,526, which was the pay out amts for years 2019-2020 (which is what I thought the program would automatically do).
It dropped my Federal Owe amount to $325.
Does this seem like I did it right?

 

[davew9128]

Not sure how to do that. I just answer the questions. Taxact used the term MAGI, but TurboTax never used that term. I had to google that term. I have done my taxes in the past, but always got a refund, so was easier than. lol

Consider this a situation where you are better off using a professional than a tax program. Nobody here is going to be able to answer questions about how or why these programs are doing or asking what they are.

 

[LdiJ]

Consider this a situation where you are better off using a professional than a tax program. Nobody here is going to be able to answer questions about how or why these programs are doing or asking what they are.

I agree. There is too much risk that you could make a mistake that would end up seriously causing you problems later. See a tax professional to make sure that it is done right.