CA MAGI and Excess Advance Premium Assistance Subsidy (APAS) repayment

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Topic Author
Zonian59
Posts: 110
Joined: Fri Jul 14, 2017 4:12 pm
Location: California

CA MAGI and Excess Advance Premium Assistance Subsidy (APAS) repayment

Post by Zonian59 »

For those in California state receiving Covered California subsidies for their health insurance, I have a question on calculating California MAGI as it relates to calculating the Excess Advance Premium Assistance Subsidy (APAS) repayment on Calfornia FTB Form 3849 "Premium Assistance Subsidy".

Back in January 2020, I rolled over my 401(k) distribution to a Traditional IRA. The 1099-R indicated the distribution was a Code G - Direct rollover to a qualified plan. The event is considered at the Federal level a non-taxable event.

In calculating the Excess Advance Premium Assistance Subsidy (APAS) repayment on FTB Form 3849 "Premium Assistance Subsidy", the 2020 H&R Block tax software for California State included the 401(K) rollover amount in the calculation of the California MAGI value.

The result is that the MAGI value used in the the APAS repayment calculation is overstated by a factor a factor of 19. Curiously, tax software doesn't include the 401(k) rollover value in California MAGI used to CA tax owed calculation.

I looked at how the tax software calculates the MAGI value (line 2a) in the CA Form 3849. It calculates it as follows:

a. Federal AGI from 1040 or 1040-SR, line 11
b. Tax-exempt interest from 1040 or 10SR line 2a
c. Amounts from Federal Form 2555, lines 45, 50
d If 1040 5a is more than 1040 5b, 5a-5b
e. Add lines a through d, enter on line 2a

Note: Line 5a on Form 1040 is the Pension and Annuity gross value, 5b is the taxable amount. The software includes the 401k rollover value in the MAGI.

I went to the California Franchise Tax Board website and downloaded the 2020 instructions for Form FTB 3849. The instructions calculated it as follows:

1. Enter federal adjusted gross income (AGI) from federal Form 1040, line 11
2. Enter tax expempt interest from federal Form 1040, line 2a
3. Enter amounts from federal Form 2555, lines 45 and 50
4. Federal form 1040 filers: If line 6a is more than line 6b, subtract line 6b from line 6a and enter the result
5. Add lines 1 through 4. Enter on form FTB 3849, line 2a.

Note: Line 6a on Form 1040 is Social Security benefits and 6b is taxable Social Security benefits, which in my case was ZERO.

If I accept the software calculation, the APAS repayment is considerably higher, which results in higher CA tax payment.

Questions:
For the purpose of calculating the APAS repayment, is the 401(k) rollover distribution EXCLUDED in the California MAGI calculation, if I am reading the FTB instructions correctly?

Is there a software bug in the 2020 H&R Block CA State software?

Thanks...
Topic Author
Zonian59
Posts: 110
Joined: Fri Jul 14, 2017 4:12 pm
Location: California

Re: CA MAGI and Excess Advance Premium Assistance Subsidy (APAS) repayment

Post by Zonian59 »

Any thoughts on the above? Thanks
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