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Covered California and Obamacare related questions from consumers, employers and agents are answered by Phil Daigle with the best information available at the time. Archived entries may no longer be accurate as the Covered California and Obamacare knowledge-base is evolving quickly. TO REQUEST A PERSONAL RESPONSE INCLUDE EMAIL ADDRESS.

1099 for Subsidy Income?

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Question: I heard that individuals will receive a 1099 from the Federal govt for any tax credits and/or subsidies they receive and will have to report it as income for state and federal tax purposes. Can you confirm?

Answer: No. The advanced premium tax credits (“APTC”) and cost sharing reductions (“CSR”) are not types of income and therefore are not likely to be reported on a form 1099. However, it is likely that qualifying individuals will receive a statement at tax time reporting any subsidy received. This statement will be used to help reconcile the APTC received (based on estimated income) with the APTC that should be received (based on actual income) at tax filing time. The APTC/CSR are not considered income and are not taxable regardless of how they get reported.

Thank you Steven C Stasoiski, Health Insurance and Tax Professional from Seal Beach, CA for this answer.

1 Comment

My guess is that taxpayers will receive a form 1098 (not a 1099) - that may be the source of the confusion.

(If I was in charge of assigning numbers to forms, I’d probably call it an 1098-H, but I don’t have that privilege.)

I can’t predict numbering, but the 1098 designation has been historically used for reporting of potentially deductible taxpayer expenses, such as mortgage interest (1098) or student loan interest (1098-E)

I think the 1098-T (college tuition statement) is analogous, as it reports both a potentially deductible expense (qualified tuition payments) and an offset or potentially taxable benefit (grants and scholarship) — see http://www.irs.gov/pub/irs-pdf/f1098t.pdf

The information that IRS will need for full implementation of ACA from the exchanges is as follows:

1) Total amount of insurance premium charges for the year.

2) Number of months that the taxpayer was enrolled in a qualified plan.

3) Total amount of advanced tax credit subsidy received by insurer.

4) Amount of premium for benchmark (2nd lowest cost) Silver plan based on taxpayer region and ages of household members enrolled in plan

5) Amount of lowest cost Bronze plan based on taxpayer region and ages of enrolled plan members.

Items 1-4 are needed to determine the amount of premium credit that the taxpayer is entitled to. Tax software could easily be set up to have the taxpayer enter that information into a worksheet and then automatically calculate the subsidy amount.

Item 5 would be relevant to whether or not the taxpayer owes a penalty — the penalty kicks in only if an affordable policy is available. Affordable= premium of 8% of MAGI or less. Again, an easy math problem when weighed against the taxpayers modified AGI. This information would be useful for insurers to provide for taxpayers who were only enrolled in the plan for part of the year. It could also be used for taxpayers who purchase non-qualifying catastrophic policies.

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