Medical Insurance Deduction with California Premium Assistance Subsidy

[StknCPA]

Lacerte automatically reduces the deduction (schedule A or adjustment, as appropriate) for medical insurance by the amount of federal premium tax credit as calculated on federal Form 8962.

However, Lacerte is not reducing the insurance deduction for the amount of California subsidy received as calculated on Form 3849. Shouldn't it be?

Am I missing a checkbox somewhere, or is this a program error?

(This particular client is between 401 and 500% of poverty level and has to pay back all the federal subsidy but is then receiving a very large additional California subsidy. Lacerte is not reducing the premiums at all.)

[abctax55]

I'm having trouble with how Lacerte is handling these also.... especially if there's SEHI involved.   One client has a $ 28000 CA refund.   While the client might like that, I don't think the FTB would.

[Drphibes]

Have had 2 clients where their income was too high for Federal support so that gets paid back but under for CA and CA makes up for what you did not get from Federal if you are in a certain income level.  Result is big owe Federal, but big refund from CA.  Scary.

[StknCPA]

Yes, it is a bit scary. I will have to tell a farmer (due 03/01) this on Monday.

My problem is that it appears that Lacerte is handling the deduction for medical premiums incorrectly in this situation and I do not see a way to enter it differently or to override it.

Any comment on how to get Lacerte to adjust the medical insurance deduction to account for federal and California (if required) premium assistance?

[tbolton]

Hi there - was anyone able to resolve this?  

The federal was finally updated to get rid of the payback.   I have a client that got PTC $4,981 from federal.  Made too much money.  Now that payback has been cleared for federal.  

BUT for California the client got $173 PTC.  So lacerte is calculating a big refund to the client. 

This is not logical.  It seems form 3849 line 11 (d) needs to be populated with the federal PTC.  But I can't for the life of me figure this stupid form out.   Anyone have any perspective - client really wants their return 😞

Mucho thanks to anyone that can help!

[JudyEA]

Has anyone answered your question?  I have a client that owed over 30K back to the IRS (that has been zero'd out now) but California is trying to give the client a 24,357 refund.  This does not seem correct.  I too can not get Part II line 11 (d) or (f) to bring over any federal amounts.

thank you for any help

[tbolton]

Nope

I am looking at this again right this moment.  This whole thing isn't even remotely logical.  

If I figure it out I will holler at you.  

[KMC]

I contacted Lacerte.  We went through the worksheet by Franchise Tax Board.   It was following FTBs instructions.  When you hit sweet spot of 400%, they disregard fed 11D and put zero.  I don't think FTB banked on Fed not taking money back.   FTB has a higher allowance for poverty rate too.  I have returns on hold.  As it is illogical, but it follows the instructions.  This will hurt our clients if we are wrong. 

[tbolton]

Thanks for this response.   Are you still sitting on their returns? 

I'm debating on whether to let my client file as long as he understands can come back and bite him in the a$#.....

[JudyEA]

Yes, since we have until May 17th and they do not have a refund without this I have emailed the client the situation and they agree they want to wait. 

[StknCPA]

I have been thinking that Lacerte is calculating the California credit correctly here. And, I don't think California had the foresight to say the credit is not payable if the feds end up not charging for the fed overpayment. California felt that the income level at which people still get premium help should be higher than the amount the feds used. Now the feds are rewarding people who understated (not necessarily intentionally) what their income was going to be, and if their income is still in the California help range, well...

My original question was that it seems like the deduction taken for medical insurance premiums (whether taken as SE or on Schedule A) should be reduced by the California assistance, and it did not look like Lacerte was making this reduction.

[debbieatcompass]

I am having the issue where they now fall under the 400% and federal is giving the a huge Net PTC and CA is not having them pay back the premiums they paid because of the cap.  And the Repayment cap may not apply box is not checked.  Do we just let them take the money and run and only pay back a little to CA and see what happens?  Clients will be real upset if somewhere down the line the FTB figures this out and they want the money back.  So client gets $15000 back from Federal, and only has to pay back the CA 300 due to the cap, even though they paid 10000 of his premiums.

[KMC]

Something is not right, I suspect.  What was the total premiums and Credit by Fed (from 1095a)?  % of poverty level and how many in household for this return?

[89]

Any updates on this? My client's poverty line is just over 400% this year, the federal waived the pay back, but the CA still has a huge refund due to the the premium difference between state and federal, should we wait... any solutions? thanks all.

[89]

Any updates on this? My client is also a bit over 400% poverty line.... has been search for this issue 3 months, called ftb and lacerte, no one gave me a clear answer yet

[89]

any updates on your client's return?

[debbieatcompass]

I have not had any help from either the FTB or Lacerte.

I followed the instructions on the form and let it go.  I informed the clients that this is the way it is being calculated, and from what we were instructed per the forms is to input as on the forms.  I did double check that the box for Repayment cap may not apply was or was not checked.  For one client, I left it up to him if since the IRS was giving him $12000 and the state only required $300 payback, if he wanted to pay the $11000 back to the state they may just send it back.  I was at a crossroads as what to do and there was no guidance.