Wednesday, January 28, 2015
OBAMACARE AND 2014 TAX RETURNS
In the course of researching my MainStreet.com Tax Tips on how Obamacare affects 2014 tax returns (which will be published in early February), and preparing my first 1040 involving the Premium Tax Credit, I have come across the following items of interest -
(1) The Modified Adjusted Gross Income (MAGI) used to determine the individual shared responsibility penalty and calculate the Premium Tax Credit begins with Adjusted Gross Income and adds excluded foreign income from Form 2555 or 2555-EZ and tax-exempt income report on Line 8b of the 1040 or 1040A. However when calculating the Premium Tax Credit you must also add any nontaxable Social Security benefits (including tier 1 Railroad Retirement benefits).
(2) Because the calculation of the individual shared responsibility penalty and the Premium Tax Credit begins with AGI, you can reduce the penalty or increase the credit by making, or increasing, a deductible IRA or self-employed retirement plan contribution.
(3) The IRS does not have the power to enforce the collection of the individual shared responsibility penalty. There is no enforcement mechanism for collecting the individual shared responsibility penalty other than reducing a taxpayer’s current and future refunds. The Affordable Care Act does not permit the IRS to levy or attach a lien to wages, bank accounts or personal assets to collect the penalty, and no criminal prosecution or penalty may be imposed on anyone for refusing to pay the penalty.
(4) The IRS has announced some penalty relief for returns that include a payback of excess advance premium credits. Trish McIntire goes into detail in her post "Premium Tax Credit Penalties" at OUR TAXING TIMES.