1095A & SE Health Ins Deduction - Am I Missing Something or Program Error?

[Frustrated-in-IL]

I am hoping someone can assist me with this.  I called customer service but they were less than helpful (go figure!).

Here are the facts.  Client has been self-employed for years and income from this business increased significantly in 2021 to $250000.  Spouse does not work and there is no other income.  Insurance costs from 1095 Column A total $20360.  Column B amounts exceed those in column A.  There were advance credits in column C of $4328.  Form 8962 shows client needs to repay the $4328 in premium credits.  So far so good.

Since client income is well over 400% of poverty level, I am thinking his SE health ins deduction should be $20360.  Yet, health insurance worksheet, you know the one which does NOT show any of the calculations and says not to enter anything on the worksheet if a 1095A is present, computes the SE health deduction to be $18732, and is putting $1628 on Schedule A as an itemized deduction.

I asked customer service to show me how the program is computing the $18732 and after an hour plus I was told that was the answer and to fill out the worksheets in the instructions and to call IRS to see how it is computed.  TOTALLY UNACCEPTABLE RESPONSE!

I did fill out the worksheets and did come to $20360.  My thinking is the deduction should be the amount of the insurance, less the APTC from column C, plus the credits repaid from form 8962, or $20360-4328+4328=$20360.

Am I missing something obvious here?  Or is there another program error here?  I have a theory what the problem could be but want to make sure I am not missing something before sharing my hypothesis.

Thanks in advance!

BTW, I did a calculation challenge on a different issue a few years back and am still waiting for Intuit to respond so not interested in doing that again.

[rbynaker]

For 2021 there were modifications to the law such that the 400% FPL cliff is less relevant.  My guess is that in trying to update the (arguably already broken) software for 2021 rules they broke something in the process.  The default "I'm not smart enough to figure this out for you" response by the programmers has always been to dump part of SEHI onto Sch A Medical and hope nobody notices.  Clearly you've reached that point in their flowchart.

I agree with your analysis, the full amount should be SEHI based on the 100% repayment.  For fun try throwing in $10-20 of interest income to see if it does anything differently with the SEHI calculation.

Rick

[qbteachmt]

I think it is @TaxGuyBill who has a spreadsheet for this. Some of the math is circular reference, and the program chokes.

[Frustrated-in-IL]

Thank you both for your responses!  This is what I think the program is doing.

I noticed that the difference between the repayment amount of $4328 and the Schedule A amount of $1628 was exactly $2700.  That number looked familiar so I did some checking and saw that credit repayment is limited to $2700 when the poverty level amount is between 300 and 400%.

I then went back to my simplified calculation and substituted the 300-400% amount of $2700 into the calculation:

SEHI cost - APTC + amount repaid (using above limit) = $20360-4328+2700=$18732, which is exactly what program calculated (incorrectly, I believe).

If anyone from Intuit reads this, can someone actually check to see if program is incorrectly doing this?  My understanding is that for 2021 there was NO limit on amounts which need to be repaid for a person clearly over 400% of poverty level, such as my client.

[Frustrated-in-IL]

I have come up with what I think is a work around.  I will enter all the 1095A info so the Form 8962 and the repayment calculates but I will NOT link it to a Schedule C business.  I will then enter the total of $20360 on the SE worksheet, the one which says not to do so if there is a 1095 present.  When I do that, the SEHI deduction comes to $20360 with nothing on Schedule A, the repayment amount of $4328 shows up properly and there are no errors on the return.

[rbynaker]

That's exactly how I would have done it.

[TaxGuyBill]

Yes, if they will be repaying the entire amount, that is the way to do it.

It gets tricky for some situations.  Now that they can still get a credit when over 400%, that workaround would not work well if they are still getting some credit.  But in your case, that is the best way to do it.