Premium tax credit repayment exemption and SE Health deduction

[abby]

If the taxpayer is not being required to payback the excess PTC, then shouldn't their SE health deduction exclude that repayment amount and only give them credit for what was actually paid?

(I'm asking what the law is here...I know the logical answer and how to make it work in the software, but the IRS isn't about logic these days, if they ever were!))

[Just-Lisa-Now-]

@TaxGuyBill  youre the ACA guru...is it working correctly?

[pamdory]

I still haven't been able to find the IRS guidance the software companies are relying on for the changes they're making.

It would be wonderful if they could post an article that would show us the guidance so we know how to handle this issue.

After all we're the ones signing the tax returns....

[BobKamman]

Well, let's see, for devotees of IRS "guidance" -- remember when their "guidance" was not to deduct expenses paid with a forgiven PPP loan?  So I'm expecting "guidance" not to deduct health insurance paid with a forgiven ACA balance.  

Remember, you need the letters in "G-U-I-D-A-N-C-E" to spell "I Ace Dung."

[ytax]

How are you making ProSeries exclude the premium tax credit repayment in calculating the self employment health insurance deduction?

[TaxGuyBill]

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@abby wrote:

If the taxpayer is not being required to payback the excess PTC, then shouldn't their SE health deduction exclude that repayment amount and only give them credit for what was actually paid?

(I'm asking what the law is here...I know the logical answer and how to make it work in the software, but the IRS isn't about logic these days, if they ever were!))

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Although the IRS not issued any public guidance yet about this situation, Regulation 1.162(l)-1(a)(1) basically says the SEHI deduction would be the amount paid (after advance payments), plus any repayment (which is $0).

https://www.law.cornell.edu/cfr/text/26/1.162(l)-1

[BobKamman]

Except the word "paid" does not appear anywhere in that reference:

(i) The specified premiums less the premium tax credit attributable to the specified premiums; 

And the definition of "specified premiums" in 1.162(l)-2 seems to be referring to the situation where the policy also covers non-dependents.  

I would let the client make the choice between protecting his pocketbook or protecting the revenue.  Most self-employed taxpayers are willing to claim benefit of the doubt when government regulation is vague.  

[abby]

Just don't link it. Calculate what the number should be and manually enter it on the SE Health line on Sch C, or on the K-1 Additional Info 1.

[pamdory]

It looks like the update to 41.0409 this morning is following this calculation.  

Yesterday afternoon my SE "test client" no longer had a $16k PTC repayment, but had an $18k SE health insurance deduction.  This morning after the update he's down to a $2k SEHI.  Makes more sense.  Although I'll feel better when IRS publishes something.