Income cap on forgiveness of 2020 Premium Tax Credits? Intuit says "yes"?

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Topic Author
OkanePlease
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Income cap on forgiveness of 2020 Premium Tax Credits? Intuit says "yes"?

Post by OkanePlease »

My understanding of the COVID Relief Plan's forgiveness on the clawback of advance premium tax credits (PTC) for 2020 is that it applies to everyone, regardless of income. But as I do my taxes in TurboTax, I show about $7,000 in advance payments of PTC on Line 27 of Form 8962, nothing on Line 28 (as much as I'd like to force a "zero" in there!), and therefore about $7,000 on Line 29--which then gets reported on Schedule 2 and then Line 17 of my Form 1040 as tax owed.

Earlier on Form 8962 (Line 5, to be exact), I'm listed at 401% FPL, likely a number assigned to anyone exceeding 400% of Federal Poverty Level.

Am I misunderstanding the COVID Relief Plan and therefore not entitled to forgiveness of PTC, or is InTuit wrong? I called InTuit and their tax experts claim that they are reading the IRS guidance correctly, and that the software calculations I see are therefore correct.

[ETA: I just noticed PaddyMac's similar post from earlier today, though that one is about TaxAct, while mine is about InTuit and with specificity in the title about PTCs. I guess the moderators will decide whether to keep separate or merge.]
Last edited by OkanePlease on Mon Mar 29, 2021 7:00 pm, edited 1 time in total.
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PaddyMac
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Re: Income cap on forgiveness of 2020 Premium Tax Credits? Intuit says "yes"?

Post by PaddyMac »

I just asked TaxAct about that today, as I have a $9K "tax" that should be Zero too.

This was their response: The IRS and states are still making updates to their forms and systems, and issuing guidance to incorporate the tax changes included in the American Rescue Plan. We are including those updates and guidance as soon as we receive them, but it does take time for all the systems to be fully updated.

My feeling is that we just need to be patient for a while longer. It explains why the filing date was moved from April to May, as they must have realized how much work was involved.

FWIW, my TaxAct also says "401%". Sounds like that is the amount at which you lose the subsidies, so it's a trip number and not the actual % over 400.
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OkanePlease
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Re: Income cap on forgiveness of 2020 Premium Tax Credits? Intuit says "yes"?

Post by OkanePlease »

Thanks, PaddyMac. Are you also > 400% FPL?

FYI, InTuit claims they have completely assessed the American Rescue Plan and incorporated all the tax changes to be made. I hope they are wrong.

I'm currently looking at the actual text of the APR, with Section 9662 including this language in relation to Section 36B(f)(2)(B) of the Internal Revenue Code of 1986: TEMPORARY MODIFICATION OF LIMITATION ON INCREASE.—In the case of any taxable year beginning in 2020, for any taxpayer who files for such taxable year an income tax return reconciling any advance payment of the credit under this section, the Secretary shall treat subparagraph (A) as not applying. This language (of 2021) says "any" taxpayer, but if you go to the 1986 code, it shows the FPL levels up to 400%. I wonder if this might be the source of confusion?
PaddyMac wrote: Mon Mar 29, 2021 6:34 pm I just asked TaxAct about that today, as I have a $9K "tax" that should be Zero too.

This was their response: The IRS and states are still making updates to their forms and systems, and issuing guidance to incorporate the tax changes included in the American Rescue Plan. We are including those updates and guidance as soon as we receive them, but it does take time for all the systems to be fully updated.

My feeling is that we just need to be patient for a while longer. It explains why the filing date was moved from April to May, as they must have realized how much work was involved.

FWIW, my TaxAct also says "401%". Sounds like that is the amount at which you lose the subsidies, so it's a trip number and not the actual % over 400.
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plannerman
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Re: Income cap on forgiveness of 2020 Premium Tax Credits? Intuit says "yes"?

Post by plannerman »

Any guesses if 400% is a cliff or a phase out?

plannermann
Topic Author
OkanePlease
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Re: Income cap on forgiveness of 2020 Premium Tax Credits? Intuit says "yes"?

Post by OkanePlease »

plannerman, clearly a cliff according to Intuit and the current calculation on my return. I hope they're wrong, and if so, it would be total forgiveness in 2020--not a phase-out.
plannerman wrote: Mon Mar 29, 2021 7:24 pm Any guesses if 400% is a cliff or a phase out?

plannermann
opus360
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Re: Income cap on forgiveness of 2020 Premium Tax Credits? Intuit says "yes"?

Post by opus360 »

I don't know the answer to OP's question, but on H&R Block software, they are still haven't updated the software to reflect the changes. My income turned out to be a couple of thousand higher than the original estimate, and H&R Block software said I need to pay back premium tax credit. I am well under 400%.
Topic Author
OkanePlease
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Re: Income cap on forgiveness of 2020 Premium Tax Credits? Intuit says "yes"?

Post by OkanePlease »

opus360, I appreciate your post as a data point.

I think you're in a better position in terms of avoiding clawback of the PTC. Maybe H&R Block is wise in not updating the software too soon? I think other tax software companies might be having trouble interpreting the ARP text, so we have to wait.
opus360 wrote: Tue Mar 30, 2021 9:01 am I don't know the answer to OP's question, but on H&R Block software, they are still haven't updated the software to reflect the changes. My income turned out to be a couple of thousand higher than the original estimate, and H&R Block software said I need to pay back premium tax credit. I am well under 400%.
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plannerman
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Re: Income cap on forgiveness of 2020 Premium Tax Credits? Intuit says "yes"?

Post by plannerman »

H&R Block update including forgiveness of premium tax credit is out. However, mine is not correct. Eventhough form 8962 is showing an Excess advanced premium tax repayment on line 29, it is not carring to line 2 of schedule 2.

Anybody else try this yet?

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jackrabbit14
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Re: Income cap on forgiveness of 2020 Premium Tax Credits? Intuit says "yes"?

Post by jackrabbit14 »

I just updated my Turbo Tax software, and I now get the same thing.

According to a TT Community Forum post (purportedly from an IRS announcement dated April 9):

"The Internal Revenue Service announced today that taxpayers with excess APTC for 2020 are not required to file Form 8962, Premium Tax Credit, or report an excess advance Premium Tax Credit repayment on their 2020 Form 1040 or Form 1040-SR, Schedule 2, Line 2, when they file."

So, it looks like TT and H&R Block have now incorporated this PTC forgiveness (and correctly).

Now I need to figure-out the proper process for filing an amended return. Glad I hadn't sent a payment check for taxes owed as now I am getting a refund.

ETA: IRS says not to submit an amended return; they will true it up: https://www.irs.gov/newsroom/irs-suspen ... -form-8962
Last edited by jackrabbit14 on Mon Apr 12, 2021 7:06 pm, edited 1 time in total.
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plannerman
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Re: Income cap on forgiveness of 2020 Premium Tax Credits? Intuit says "yes"?

Post by plannerman »

In adition, the instructions for Form 8962 list the federal poverty level for a sinle person hosehold as $12,490. Other published sources list the number for 2020 as $12,760. Any ideas why this is?

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plannerman
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Re: Income cap on forgiveness of 2020 Premium Tax Credits? Intuit says "yes"?

Post by plannerman »

jackrabbit14 wrote: Mon Apr 12, 2021 5:49 pm I just updated my Turbo Tax software, and I now get the same thing.

According to a TT Community Forum post (purportedly from an IRS announcement dated April 9):

"The Internal Revenue Service announced today that taxpayers with excess APTC for 2020 are not required to file Form 8962, Premium Tax Credit, or report an excess advance Premium Tax Credit repayment on their 2020 Form 1040 or Form 1040-SR, Schedule 2, Line 2, when they file."

So, it looks like TT and H&R Block have now incorporated this PTC forgiveness (and correctly).

Now I need to figure-out the proper process for filing an amended return. Glad I hadn't sent a payment check for taxes owed as now I am getting a refund.

ETA: IRS says not to submit an amended return; they will true it up: https://www.irs.gov/newsroom/irs-suspen ... -form-8962
Wow! What a gift from the IRS. My son will be very happy. Sounds way too good to be true.

plannerman
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