Thanks for the info. I'm not saying this will happen I'm just saying it might. From what it looks like to me the people who fall in between the 100% to 135% that do not qualify for sunsidies in the states that did not expand Obamacare ..would be better off over estimating there income to qualify for subsidies. The subsides would be several thousand and worse case they would owe $300. If they didn't hit the 135% threshold. Am I correct in this assumption? Thanks
As far as we know, if your actual income comes in BELOW your filed estimate, then you're not subject to any repayment/clawback. The guidance is for when you underestimate your income, not overestimate.
But yes, worse case scenario, she'll be facing a $300 clawback on the thousands received.
I did found the law and read it to get clarification. I guess I'm now looking at having an ethical dilemma. Agents fiduciary responsibility to the client is to do the best job for them. with that in mind. check out the scenario that agents could force. Obama has done his job. I now feel dirty!!!
LAW
Dave Camp Sponsor.
House Ways and Means
H.R.705 - Comprehensive 1099 Taxpayer Protection and Repayment of Exchange Subsidy Overpayments Act of 2011
112th Congress (2011-2012)
Law:
SEC. 4. INCREASE IN AMOUNT OF OVERPAYMENT OF HEALTH CARE CREDIT WHICH IS SUBJECT TO RECAPTURE.
(a) IN GENERAL.—Clause (i) of section 36B(f)(2)(B) of the
(b) Internal Revenue Code of 1986 is amended to read as follows:
(c) ''(i) IN GENERAL.—In the case of a taxpayer whose
(d) household income is less than 400 percent of the poverty
(e) line for the size of the family involved for the
(f) taxable year, the amount of the increase under
(g) subparagraph (A) shall in no event exceed the
(h) applicable dollar amount determined in accordance
(i) with the following table (one-half of such amount in the case of a taxpayer whose tax is determined under
(j) section 1(c) for the taxable year):
(k) ''If the household income (expressed as a
(l) percent of poverty line) is: The applicable dollar amount is:
(m) Less than 200% .......................................... $600
(n) At least 200% but less than 300% ............ $1,500
(o) At least 300% but less than 400% ............ $2,500.
(p) (b) EFFECTIVE DATE.—The amendment made by this section
(q) shall apply to taxable years ending after December 31, 2013.
60 yr old couple making $65,000 MAGI. Couple does not qualify for tax credits.
Couple buys HSA qualified health plan and max funds account $6,650 + $1,000 catch up totaling $7,650. Bringing MAGI down to $57,350. Couple now qualifies for tax credits of $665.26 month or $7,983 a Year
Couple projects only $24,000 MAGI instead of $57,350. Couple then qualifies for $1,036.91 or $12,442 a year. By estimating there future income at a lower level qualifies them for an additional $4,459 in tax credits. Who would not pay $2,500 to receive $4,459 in tax credits?
Yes, you're right-underestimating income results in a net subsidy gain. It's a pretty gaping loophole in the subsidy system.
We're supposed to follow the instructions on how to apply for a subsidy, which includes estimating next year's income as accurately as possible. Knowingly providing false information to a government entity (and attesting that it is correct) with the sole purpose of defrauding sums of money from the government is a surefire way to get yourself in a bad situation. No one here will advise you to do this.
It's one thing to take the more favorable estimate of a variable income employee (I've done both ways, over and under estimating, depending on situation) when both figures are entirely within reason. It's another thing entirely to claim a household that takes home $57k+ only makes $24k.
I understand what you are saying and my example was just a what if....
With that said . An estimate is a hypothetical figure to begin with. One could argue a pessimistic view or an optimistic view of the Future equally. Know one knows what they are going to make next year. You could lose a job, get a better job have the gov. take away 70% of your commissions or die..I don't think anyone could ever argue fraud of an estimate....my point is I'm required to fully and properly disclose options to my clients with that Information a client could become very pessimistic of the future..
