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.
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Paging @TaxGuyBill - he's our resident expert on all things APTC.
You can try splitting the return to MFS to see if it helps.
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.
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..........
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