Medicare Prems / High Income

[Burke]

Part B premiums are increased for higher income folks. Have a client who will turn 65 in Oct. Received notice of higher prem based on 2007 tax return. Is this correct? Should it be based on 2008? Client filed extension and has not yet sent 2008. Is this the reason 2007 was used, or is this normally the way it is done?

[S T]

Medicare

Burke, maybe this will answer your question.

https://questions.medicare.gov/cgi-bin/medicare.cfg/php/enduser/std_adp.php?p_faqid=2099&p_sid=2wC_hPEj&p_lva=2100

Appears Medicare uses 2 years prior income information or if unavailable then 3 years. If income has decreased, then you can ask for consideration, if the criteria has been met (not sure what criteria).

Sandy

[Burke]

Thanks. Client's MAGI income was over $170K for 2007 due to one-time sale of property, but way under in 2008. Looks like he is out of luck, however. Criteria for change is divorce, widowed, pension stopped or reduced, stopped work, etc. etc., not just lower income.

[Roland Slugg]

Two years makes sense ...

... when you realize that the immediately preceding year's income isn't known until several months into the following year. For example, a T/P's 2009 income won't be reported to the IRS (and, thus to the SSA) until some time in 2010. But a medicare recipient's premiums must be known by January of each year, so the 2010 premium is based on the person's 2008 income.

[OtisMozzetti]

permanently lower income CAN be accepted

... Criteria for change is divorce, widowed, pension stopped or reduced, stopped work, etc. etc., not just lower income.

I know an MFJ woman who had $165K income on her 2007 return, including $52,000 dividends on a little over $1,000,000 Bank of America stock. Along came 2009, and Bank of America is required to pay maximum 4 cents per share dividends for at least the next 3 years, i.e. the dividend income will be about $1000, an income reduction of $50,000 (aside from an unrealized capital loss of about $1 million).

She mailed Soc. Sec. a copy of the 2007 Form 1040 with the Schedule B highlighted on the $52,000 dividends, a graph of the stock price running down from about $50 to about $4, and a simple statement that the 2009 income would be at least $50,000 lower than earlier.

Three or four weeks later, Social Security wrote back and brought the Medicare premiums back to the regular amount.

[S T]

I would try

Burke, As Otis has posted, I would try and contact Social Security/Medicare, to see about lowering the premiums, due to the "one time" event represented on the 2007 Tax Return.

Sometimes there are always exceptions, even if it doesn't meet the "published" criteria

Keep us posted,

Sandy