SS lump sum payment and Premimum Tax Credit Issue

Forum|Forum|6 years ago
June 30, 2020
3 replies
36 views

I have a client that received a lump sum social security disability payment in 2019 for years 2016, 2017,2018, and 2019. They also had health insurance through the marketplace and received a 1095-A. Their 2019 taxable income is zero. My understanding per research is that the entire lump sum has to be included in modified AGI for the premium tax credit and a section 86(e) election for the lump sum social security payment has no affect. This of course causes a very large repayment. Is anybody aware of any recent tax law changes that would help in this situation? This is a MFJ return also.

ProSeries Professional

This topic has been closed for replies.

abctax55

Level 15

Paging @TaxGuyBill - he's our resident expert on all things APTC.

You can try splitting the return to MFS to see if it helps.

HumanKind... Be Both

T

TaxGuyBill

As was mentioned, all you can really do is try out filing Separately. Although that disqualifies the credit, the lower-income spouse may have a lower repayment of their 50% portion of the Advance credit. But filing Separately may cause other tax, such as taxing some of the Social Security.

In the event they have any "earned" income from a W-2 job or self employment profit, contributing to a Traditional IRA may lower MAGI. If you can get MAGI below 400%, that is what you are aiming for.

J

josephfolsomcpaAuthor

Level 5

Thanks for the help. The normally "fixes" like putting money in a IRA like you said won't work since they have no positive earned income. Looks like I get to make a call with bad news. I thought we were doing taxes, not health insurance..........

Sign up

Login with SSO

Let's get you signed in

Login with SSO