My First "Clawback Casualty"

[bluediamond]

I know client's have outright lied to me early on when they figured out how to game the system. When someone has asked what income is at 400% of FPL I have always given them the income for 250% and told them they may be able to make a little more and receive a subsidy. I try to keep it low on purpose. Funny thing about client's, when they're in trouble they tend to forget how the agent advised them and comes after you.

I have also heard from one's that their agent managed a subsidy for 2014 regardless if spouse had affordable group coverage.

 

[kgmom219]

I have also heard from one's that their agent managed a subsidy for 2014 regardless if spouse had affordable group coverage.

I've gotten that one a few times. I'm not going to throw it out there, but there are ways to game the system on this one. My response is "You aren't worth my license or FFM certification"

 

[FLM2]

I have also heard from one's that their agent managed a subsidy for 2014 regardless if spouse had affordable group coverage.

I echo Kgmom's thoughts, it isn't worth my business to have a client enroll through me knowing they are lying about the group coverage (or anything else, for that matter).

 

[Ann H]

The Advance of Premium Tax Credit is indeed a callous and foolish system. Lots of Taxpayers who received APTC in 2014 will soon know what agents on Advance Commissions often experience.

A client started a new job in October and reported to the Marketplace that his income is suddenly too high for the APTC. The APTC was terminated. Since this client's 2014 (family of 4) income will likely now be over $95,000, will he have to repay all APTC $$$ received from Jan2014 thru Sep2014? After all, he did report "promptly" to the Marketplace, like they advise.

He's a CPA and is asking ME this question. duh.

http://www.irs.gov/pub/irs-dft/f8962--dft.pdf
My understanding it will be a month to month situation, according to this draft IRS form.

Tax time will be interesting here. I have of several agents telling people that the spouse's income does not matter or spouse's group coverage does not matter.

Even heard from another agent - his client (who makes 90k+) was written by another agent. The other agent got the client a "big subsidy" and told client the government wasn't going to check anyway, so why not get a big subsidy....

News stories will pop up starting mid February...

Just to be clear, the reconciliation is ANNUAL. (On the form that RusselTW posted, there are monthly lines just in case the APTC the person received wasn't exactly the same for all 12 months of the year. This gives you a method of tallying all months to come up with the annual APTC.

But the IRS uses annual household income.

So, let's take some examples. Let's say the person is at 250% of FPL when they apply for the APTC. But they do well in their job, and move to 300%, then they start making 500%. Is their subsidy 3 different levels? No. The IRS calculates their full 2014 income, and calculates what % of FPL it is. Their subsidy is based on that. Can the person argue, "but I was at 250% when I applied, so you should give me the subsidy for the months I was poor." Sorry.

Let me show that to you on the form. See line 8a? That is where you calculate your ANNUAL member's share of premium based on your annual income and family size. Line 8b is merely dividing this annual amount by 12. But nonetheless, it was based on the person's annual income, not his income in any given month. Then, lines 12-23 are for people who somehow got a varying APTC during the year. Notice that nowhere in lines 12-23 does it ask your if your income varied during the year. In fact, column C (which is the member's share of premium based on his % of FPL) refers back to the ANNUAL figures from line 8. That is the only part of those columns in lines 12-23 that depends on the person's income, and it refers back to their annual income.

So, if your income varies, it doesn't matter. The IRS will take your ANNUAL income, and decide what your subsidy should have been.

So, how many people will have to reconcile? Almost 100%. The odds of hitting it exactly is remote. After all, most people signed up in late 2013 to estimate the full household income for all of 2014. Hard to do.

 

[somarco]

So, how many people will have to reconcile? Almost 100%. The odds of hitting it exactly is remote.

Something I have said before. This law is a Rube Goldberg contraption. Overly complicated, drafted by attorneys who lack real world experience and have no clue how insurance works.

Or at least how it used to work.

 

[Lakshmi]

Every time I show the 'cliff' to a client by toggling their income by $1 and watching a subsidy go from $200+ to $0 they all gasp and go 'that's crazy!'

All we can do as informed brokers is show this to those who are in the upper ranges of the subsidy scale; it's not an issue in the lower ranges as there are boundaries to the clawback and those who fall below the 100% FPL level in the non-Medicaid expansion states (and there will be enormous numbers of them) won't be losing anything.

They will lose their subsidy, but they won't have to pay it back (so far, that's the consensus). They most likely also will not be able to afford to pay for coverage at the premium rate without the subsidy for 2015 or anytime thereafter.

So they do lose something, and that's access to affordable coverage. That's my understanding so far (In Michigan, who sort of expanded Medicaid, but not enough so that many more will qualify--after a long conversation with a social worker at FIA office, she said to qualify for Medicaid the income had to be less than about $4800 annually per individual). Those people will fall into the cracks, for example, people who claim to make only $10000 or so, and barely have anything left for gas, groceries, etc...., no Medicaid qualification, and no subsidy qualification etc. They will have exemptions from the penalty, but cannot get affordable coverage. You Go OBAMAA!!

So glad I made the choice to stay far away from this, for the most part. Just did maybe around 25 clients. Ughhhhhh.

I've seen one company sign over 200 clients. I'm talking many of whom are say, hairstylists or something similar, who claim WAY under what they truly make on their taxes, but who also said on their MP ACA apps they make just enough to cover qualifying for a major subsidy. I'm wondering if this will be seen as gross and severe misconduct for an agent when so many are blatantly done that way, even though the client signs the online app. Although most likely the client in these types of situations will be off the hook, but no longer be able to get coverage without being more HONEST about what they make....part of the reason for all the IRS noses being involved to begin with...there's more than just OBAMACARE.

I don't know....this whole thing keeps turning my stomach. I refuse to even consider a client sign up unless they are buying other products like life, disability, AND I see with my own two eyes the gross adjusted income. Not to mention, I just tell them how to set up their own account and help them choose...after that, I just give the number and put the ball right in their own court. No way can I find the patience to deal with the aftermath of this mess. I have a feeling it's going to be one hell of a train wreck. I don't even want to use my agent # on the app to even bother with it. Not enough in it for me. I cannot get comfy with this whole deal

Edited...I mean $400 a month to qualify for Medicaid...my head automatically does annual math. lol. I DO know that Medicaid is based on monthly income.

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There's just an over abundance of conflicting info out there. Not even half a dozen CPAs I've talked to can be consistent. No one truly knows it seems what's going on.

I've been told to look at line 37 for adjusted gross income...but then again, I hear something different from some other professional.

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One more quick thing.

I would also not be one bit surprised if the people who should've fallen through the cracks and chose to take a subsidy plan, will lose part of their "earned income credit" in the form of a clawback. I'm watching close to see how this all unfolds.

Part of me feels like I've left a lot of $ on the table by not participating more, but we shall see. So far I've only had one phone call and it was an easy no brainer. I'm a little worried about a few who did not know what they would make for the total of 2014. But not that worried, since I stayed very conservative for round one.

 

[Ann H]

They will lose their subsidy, but they won't have to pay it back (so far, that's the consensus)...

So glad I made the choice to stay far away from this, for the most part. Just did maybe around 25 clients. Ughhhhhh....

There's just an over abundance of conflicting info out there. Not even half a dozen CPAs I've talked to can be consistent. No one truly knows it seems what's going on.

I've been told to look at line 37 for adjusted gross income...but then again, I hear something different from some other professional.

I would also not be one bit surprised if the people who should've fallen through the cracks and chose to take a subsidy plan, will lose part of their "earned income credit" in the form of a clawback. I'm watching close to see how this all unfolds.

So far I've only had one phone call and it was an easy no brainer.

Why are you giving out "facts" when you are not highly involved with the details, and even admitted that some CPAs give conflicting information? This was dangerous advice. How can you say on a public forum that they will lose their subsidy but NOT be required to pay it back? If that is just opinion, please state it so. But it's certainly not the law, nor the intention of the IRS who created the form (the one RussellTW posted in this thread) which is intended to calculate the clawback. Why state that you think this would mess with Earned Income Credit? Do you have facts, or is this just a scare story or personal opinion? And why mess with the definition of MAGI by saying that you've been told to look at line 37 of the tax return, then told something different? If you don't know what MAGI is, or don't know what the clawback is, then please don't post as if you do.

 

[scagnt83]

They will lose their subsidy, but they won't have to pay it back (so far, that's the consensus). .

According to the IRS that is completely false. You will have to pay it back via income taxes (if they are on subsidies it will be via deducting it from tax returns most likely).

You are giving very dangerous advice.

 

[somarco]

You are giving very dangerous advice.

He could work for Enroll America.

 

[jefflange]

Just to be clear, the reconciliation is ANNUAL. (On the form that RusselTW posted, there are monthly lines just in case the APTC the person received wasn't exactly the same for all 12 months of the year. This gives you a method of tallying all months to come up with the annual APTC.

But the IRS uses annual household income.

So, let's take some examples. Let's say the person is at 250% of FPL when they apply for the APTC. But they do well in their job, and move to 300%, then they start making 500%. Is there subsidy 3 different levels? No. The IRS calculates their full 2014 income, and calculates what % of FPL it is. Their subsidy is based on that. Can the person argue, "but I was at 250% when I applied, so you should give me the subsidy for the months I was poor." Sorry.

Let me show that to you on the form. See line 8a? That is where you calculate your ANNUAL member's share of premium based on your annual income and family size. Line 8b is merely dividing this annual amount by 12. But nonetheless, it was based on the person's annual income, not his income in any given month. Then, lines 12-23 are for people who somehow got a varying APTC during the year. Notice that nowhere in lines 12-23 does it ask your if your income varied during the year. In fact, column C (which is the member's share of premium based on his % of FPL) refers back to the ANNUAL figures from line 8. That is the only part of those columns in lines 12-23 that depends on the person's income, and it refers back to their annual income.

So, if your income varies, it doesn't matter. The IRS will take your ANNUAL income, and decide what your subsidy should have been.

So, how many people will have to reconcile? Almost 100%. The odds of hitting it exactly is remote. After all, most people signed up in late 2013 to estimate the full household income for all of 2014. Hard to do.

What about a client who enrolled his family in say January, he was unemployed and his income qualified him for a subsidy. Then in June he got a job, cancelled his subsidized plan due to employer coverage.
I think my interpretation of the Claw-back would be dependent on his year end family's Modified Adjusted Gross Income as to what amount he will owe back to the Government ?
The final calculation would be based on his Annual Income not what he made the prior 6 months when he was unemployed and on a subsidized plan.
Am I correct in this interpretation?