Prior year SSA received in 2018 now APTC has to be repaid.

[taxmandan]

New client received $65,000 in Social Security in 2018, most of it for prior years 2015-17. Only $26,724 is for 2018. They have no other income but now the advance premium tax credit they got all year has to be repaid because they exceed the 400% of poverty line. Does ALL of the income apply for determining APTC regardless if it was for prior years? If they had received it in the correct years they would be OK for getting the premium credit. We did calculate the appropriate income tax based on their prior years AGI, etc. Doesn't seem right that a late receipt of Social Security would bounce them out of the Premium Tax Credit.

[TaxGuyBill]

Unfortunately, the entire $65,000 is used for the calculation of the Premium Tax Credit. It is based on the actual Household Income for the year, including any lump-sum payments for prior years.

[taxmandan]

Thanks Bill, that's the conclusion I came to also but just doesn't seem right.

[New York Enrolled Agent]

Perhaps it's the IRS equivalent of "paying your fair share"??

FE

The IRS is an administrative agency - the agency simply implements the laws enacted by Congress and signed by the President.

Taxpayers rant about the IRS. Practitioners should do their "complaints" about the actions of Congress.

[Burke]

It's all 2018 income, so there's not much to add. At least you apparently lessened the 2018 income tax by doing the side calculations for SS benefits paid for the prior years.
As for "seems right" there are a bunch of similar categories. My favorite is folks who get IRMAA'd and end up paying 2x or 3x the monthly Medicare B and D premiums the "normal folks" pay for the exact same coverage. Perhaps it's the IRS equivalent of "paying your fair share"??FE

Yes, these laws were designed to make the system "fair" by tying all these items to income on the tax return. (Note wealth does not come into it, so that in itself is not fair.) The problem is that the laws are not flexible at all to take care of windfall income, like income averaging used to do. I have had taxpayers who are quite well off, qualify for all sorts of tax benefits, because the income from that wealth was minimal. In the case above, it seems more or less fair to pay back the PTC as he did receive the income and could have afforded the health insurance. This is what happens when Congress tries to use the tax code to enact social policy.

[kathyc2]

It's not widely known, but the Medicare payroll tax is only for Part A. Parts B and D are subsidized by general funds. Roughly 25% of cost comes from premiums and the 75% balance from general tax collections. Not sure why anyone would think that the insurance of someone with 200K plus income in retirement should be subsidized at all by the rest of us.

[Maude Lebowski]

Not sure why anyone would think that the insurance of someone with 200K plus income in retirement should be subsidized at all by the rest of us.

Why not? We do it all of the time. Employees making that kind of money almost always have employer-provided health insurance, which amounts to tens of thousands of dollars of tax-free income.

[kathyc2]

Why not? We do it all of the time. Employees making that kind of money almost always have employer-provided health insurance, which amounts to tens of thousands of dollars of tax-free income.

True. Vast majority of health insurance is in one way or another subsidized by gov't. As a result, very few people see the actual cost of insurance, which, IMO is a significant reason why our per capita spending is significantly higher than other countries.

[TAXNJ]

Why not? We do it all of the time. Employees making that kind of money almost always have employer-provided health insurance, which amounts to tens of thousands of dollars of tax-free income.

It is not only employees “making that kind of money almost always have employer-provided health insurance, which amounts to tens of thousands of dollars of tax-free income.” that receive such a benefit. It also includes employees making less than 200k. Also, as some say there are many non citizens that are getting a lot of health care that is free to them adding to the health care costs.

[kathyc2]

Quite simple. I don't see it as they are required to "pay more" but because of their income qualify for less public assistance.

[Rapid Robert]

New client received $65,000 in Social Security in 2018, most of it for prior years 2015-17. Only $26,724 is for 2018. They have no other income but now the advance premium tax credit they got all year has to be repaid because they exceed the 400% of poverty line.

I don't understand. If they had no other income, how did they qualify for APTC? Wouldn't they have been below 133% of FPL and therefore eligible for Medicaid, not APTC?

[kathyc2]

I believe you meant you were paying MC tax since 1966, not premiums. The tax supports Part A. Part B is largely paid for by the taxpaying public. Whether I call it public assistance or society helping to care for the elderly does not change the fact of where the money comes from.