Does a Taxpayer owe a penalty for part of a year on HSA. Due to Medicare Coverage
Taxpayer’s DOB 10-24-1950 - age 66 in 2016
Taxpayer was employed in 2016 and enrolled in Employer Medical program along with HSA option
Taxpayer Medicare Part A should have been automatic at age 65 as I understand.
October 2016 , taxpayer became eligible for ex-husband's Social Security--the whole amount, since he passed away earlier 2016
Since it took SSA until January 2017 to get everything set up, taxpayer did not receive any of that income in 2016, However, in order to get the retroactive payment in January 2017for what SS owed back to October, 2016 taxpayer was forced to be retroactively enrolled in Medicare for the four months prior to October through the end of 2016. Which would be June – Dec 2016 or 7 months
Taxpayer received a year 2016 form 1095-B from Medicare for Part A that shows enrollment in Medicare for June - December of 2016.
Since the penalty for contributing to an HSA while also being on Medicare is a MONTHLY penalty, taxpayer would owe for 7/12tshs of 2016: 1) 7/12 X $4349.90 or $2537.44 that needs to reported ordinary income tax , and 2) an additional penalty of 10% times $2537.44 or $253.74 additional taxes on top of the ordinary income.
I do understand that at attained age all recipients are automatically enrolled in Medicare Part A - Part B can be deferred if recipient is still working and under Group Insurance at Employer
Question - Is there an exception to this as it is spread over 2 tax years. Taxpayer had no knowledge and was not able to make any adjustment at the employer level for the fact that SSA retroactively initiated the Medicare Benefit. For her HSA contributins.
Or due to the fact that Taxpayer was automatically covered at age 65 for Medicare Part A - and continued HSA through employer - the penalty applies?
Thoughts would be appreciated.
Sandy
Taxpayer’s DOB 10-24-1950 - age 66 in 2016
Taxpayer was employed in 2016 and enrolled in Employer Medical program along with HSA option
Taxpayer Medicare Part A should have been automatic at age 65 as I understand.
October 2016 , taxpayer became eligible for ex-husband's Social Security--the whole amount, since he passed away earlier 2016
Since it took SSA until January 2017 to get everything set up, taxpayer did not receive any of that income in 2016, However, in order to get the retroactive payment in January 2017for what SS owed back to October, 2016 taxpayer was forced to be retroactively enrolled in Medicare for the four months prior to October through the end of 2016. Which would be June – Dec 2016 or 7 months
Taxpayer received a year 2016 form 1095-B from Medicare for Part A that shows enrollment in Medicare for June - December of 2016.
Since the penalty for contributing to an HSA while also being on Medicare is a MONTHLY penalty, taxpayer would owe for 7/12tshs of 2016: 1) 7/12 X $4349.90 or $2537.44 that needs to reported ordinary income tax , and 2) an additional penalty of 10% times $2537.44 or $253.74 additional taxes on top of the ordinary income.
I do understand that at attained age all recipients are automatically enrolled in Medicare Part A - Part B can be deferred if recipient is still working and under Group Insurance at Employer
Question - Is there an exception to this as it is spread over 2 tax years. Taxpayer had no knowledge and was not able to make any adjustment at the employer level for the fact that SSA retroactively initiated the Medicare Benefit. For her HSA contributins.
Or due to the fact that Taxpayer was automatically covered at age 65 for Medicare Part A - and continued HSA through employer - the penalty applies?
Thoughts would be appreciated.
Sandy
Comment