Officer health insurance is correctly in box 1 on W-2, officer also receives a 1095-A with no Premium Tax Credit. Pro Series is not allowing full amount on 1040 line 29?

[jbb]

Why is Pro Series not allowing an S Corp shareholder health insurance correctly on W-2 to flow to 1040 line 29 when shareholder also receives a form 1095-A (with no premium tax Credit?

[sjrcpa]

How much income or loss (compared to the W-2) was shown on the S Corp K-1? EDIT-Ignore this.

[PhoebeRoberts]

Doesn't matter. FICA wages are the SE income for S-corp shareholders.

[TaxGuyBill]

@sjrcpa   You beat me to it.  

@PhoebeRoberts   ???  SEHI will be limited to Box 5, minus Line 28 on Form 1040.

@jbb   What is Box 5 of the W-2?  Any retirement contributions on Line 28 of Form 1040?  Double check no Premium Tax Credit - check Line 24 of Form 8962.

[PhoebeRoberts]

Right; K-1 income (or loss) isn't relevant for S-corp SE health.

[TaxGuyBill]

Ah, I misread Susan's comment, I just saw "W-2".   :smile:

[jbb]

So the plot thickens, what the program is doing is deducting the PTC from the SEHI, and putting the difference on line 29, however, it is not giving them the PTC on line 69 because after it reduces the SEHI for the PTC the AGI is over 401%. IF the full amount of SEHI goes to line 29 then AGI is below 401% and the program gives them $9,373 of refundable PTC.  So which is right? They are right on the edge and it makes a huge difference in refund.

[rbynaker]

Any chance you can do a deductible IRA contribution?  SEP-IRA?  HSA?

This is the point where I start doing the math by hand and stop the software from trying to calculate this for me.  Spend some time with the Rev Proc that TaxMonkey mentions below.

[TaxGuyBill]

ProSeries has a 'glitch' in this scenario.

The proper calculation goes back-and-forth until it gets an answer (or it gives up).   When the calculation goes past 400% of the Federal Poverty Level, ProSeries stops the calculation and denies the credit, even though calculation should keep going back and forth until there is an answer..

As was mentioned, manually calculating it (which can be gruesome) would give a true answer, but contributing to a deductible IRA or HSA would probably solve the problem as well.

[jbb]

Holy Crap, if I enter a $10,000 IRA ($5,000 each) they qualify for about $10,000 in refundable PTC, that is huge.........and without that entry, Pro-series is just wrong with its computation of both deductible health insurance and the Premium Tax Credit........because they are right on the edge of the 401%, are they going to fix this?  Everybody be careful with this, it's a bigger deal than you may think when you are close to the 401%. In my case it was just obvious that the amount of deductible health insurance was wrong.

[rbynaker]

I agree, makes a HUGE difference if you can get under 400% FPL.  Since I haven't said it in a while, these tax cliffs are a really bad idea, and this was a horribly written piece of legislation.

[TaxMonkey · Accepted solution]

This is governed by Revenue procedure 2014-41, and leads to an unfavorable taxpayer conclusion, where essentially the PTC which they do not end up being allowed to claim reduces their SEHI adjustment.

https://www.irs.gov/pub/irs-drop/rp-14-41.pdf

[jbb]

So, add an IRA, if possible, and it magically makes it resolve to an acceptable answer. For my situation a $10,000 IRA (2 @ $5,000) it gave them about $10,000 in refundable Premium Tax Credit. This is basically free money to fund the IRA..........only works when you are initially close to the 401% number

[abctax55]

My *best* one so far is $ 18500 into IRA's & a SEPP to avoid repaying $ 16500 in APTC.

[rbynaker]

My second guess (much less likely since it's not hiding on some obscure worksheet somewhere like the medicare wages box) is that your 1095-A is not linked to the S Corp.  At the bottom of the 1095-A there's a "Business Related Premiums Information Smart Worksheet" where you can double click in the "box" next to "Schedule K-1, S-Corp" and link this form to the S Corp.  You also have to fill in the start/end months at the very bottom.

Rick

[rbynaker]

My first guess (as others have alluded to) is that you're running into an income limitation for SEHI.  Here's the first place I'd look:

On your Sch K-1 Wks for this S Corp, right above "Part III" there is a QuickZoom to enter health insurance paid.  That will take you to the K1S Addl Info 1 worksheet and put you at the bottom of the form in a section for "Outside Expenses".  The interplay with the 1095-A is going to be weird so I'd leave box 1 blank "Health insurance premiums paid . . . that were not reported on 1095-A" but the important entry will be box 2, "Medicare wages from this corporation".  Put the number from box 5 of the W-2 here.

Rick

[jbb]

When you enter as advised above "my first guess", it allows the full amount paid in SEHI on line 29 ($13,450) which it was not before entering it in that spot, but then allows a full amount of PTC on line 69, ($9,760) which therefore makes the line 29 wrong because now it's not subtracting the PTC from the SEHI.  Aren't I assuming correct that you have to subtract the PTC from the SEHI to get the correct adjusted SEHI?