Form 8962

[EarlineLaBuy]

My client received an inherited annuity in Dec 2019, which made her income be over 401% of poverty level and 100% of her premium tax credit be taxable. According to Covered Calif, this amount from the inherited annuity should not affect her taxable premium tax credit $. How do I adjust her modified gross income on Form 8962 to reflect that? I was on hold with Intuit yesterday for 1.5 hours without being able to speak with anyone.

[TaxGuyBill]

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@EarlineLaBuy wrote:

According to Covered Calif, this amount from the inherited annuity should not affect her taxable premium tax credit $. 

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Did they state why?

According to Federal law, income from a taxable annuity IS counted as income for the Premium Tax Credit.

As a side note, inheriting the annuity does not make taxable income.  So perhaps that is what the person at Covered California was referring to?  It is the 'getting' money out of the annuity that is taxable income.

There are also some lump-sum payments that would not affect Medicaid (Medi-Cal), so it is possible that is what they were referring to (although offhand, I'm not sure if this would qualify for that or not).

[MichaelD]

Unfortunately, we do not allow the modified AGI on Form 8962, line 2a to be overridden. We follow the instructions for Form 8962 in calculating this number which makes no mention of subtracting inherited annuities. If you feel this is incorrect, please use the overrides "Excess advance premium tax credit repayment [O]" or "Net premium tax credit [O]" in Screen 39 "Premium Tax Credit" and prepare Form 8962 manually.

Michael D

[IntJimmy]

The tax program calculates modified AGI for line 2a per the instructions for this line in the Form 8962 instructions. Please see the worksheet for this line on page 6 of the instructions. 

https://www.irs.gov/instructions/i8962

There is not an adjustment code for this line as there are only 2 modifications to AGI which are automatically calculated by the program.