Figuring income for the Affordable Care Act

[Tumbulu]

I am a self employed farmer/plant breeder. My income varies greatly. Plus, my tax returns allow all sorts of amazing deductions that support the growth of small businesses and farms.

So, my total income already has the cost of medical insurance (that is about 1/5 of my income) removed from it. I get to take the depreciation of my fences and farm equipment off my income, etc.

Last year (2012) was a really bad year. If I use those numbers I am eligible for medical. But this year (2013) is way better, I would qualify for the subsidies.

I have called Covered California and the person I spoke with told me to wait until after doing my 2013 taxes to apply (I already pay this huge percentage of my income on insurance, so I am covered). On DU, I was told to estimate....what is the answer? What if I estimate, get a subsidy and then find out I am wrong? Do I get fined for taking a subsidy if I should have been on medical? And exactly how to I describe my income- before or after deducting the medical insurance costs?

I am sorry if there is already a thread about this, I looked and did not see one.

Thanks in advance for any information.

[villager]

1. I am a freelance writer in California, and have many of the same questions

income can vary quite a bit from year to year

[lumberjack_jeff]

2. If you underestimate your 2013 income, you run a risk of having to repay the subsidy in 2014.

[Tumbulu]

3. but what if you overestimate it?

and what are the mechanism for repayment? Are you in CA?

[lumberjack_jeff]

7. I'm in Washington.

If you do your taxes in 2014 and find that you were eligible for a larger tax credit (subsidy) than the one you actually took, the difference can be a tax refund on your 2014 taxes.

[Tumbulu]

11. Thanks, my big worry is that I get the subsidy

but should have been on medical. Then what? I worry that that they will fine me for that, somehow.

[upaloopa]

4. They mean cash income, depreciation is a non cash expense

They don't want your taxable income. On average how much cash do you bring in each year? That is before expenses. That compares to how much gross income is paid to a employee.
The first line on your income tax form says "income". That number is what they are looking for.

[Schema Thing]

6. uh, no.

they want your AGI. Just like everyone else.

[upaloopa]

14. they want MAGI

[Tumbulu]

8. That makes some sense, but the documentation that they ask for

are certain lines from my tax return. These lines already have these expenses (and actual cost of business expenses removed as well) taken out by then.

If I sell my wheat for $12,000, but it cost me $7500 in expenses to grow it, then my income from it is $4500, not the $12,000. It is a matter of which expenses one is supposed to take into account and the person on the phone had no idea how someone with a fluctuating business income computes these expenses.

[kelly1mm]

10. It is NOT your taxable income, that part is correct, but your Sch C/F net income (after expenses) is

part of what makes up your AGI, along with W-2 income, SS payments, rent income, pensions ect., which is number at the bottom of your 1040 p.1 (which includes Sch. C/ Sch F. 'net' income after expenses (excluding healthcare premiums for owner)) and adds in non taxable Social Security/dividends/capital gains). This is the number that is then reduced on p.2 by your standard/itemized deductions before figuring your tax due and any other credits.

[Tumbulu]

12. Thank you! So, at this point that number from 2012

(with the health care expenses already removed from my income, as I am the sole proprietor- but you are saying, do not remove that number) puts me on the Medical list. BUT my estimated income for 2013 sets me in the Bronze category. I would rather use my estimated 2013 income....but how does one do that? Farmers do not file quarterly returns unless they are profitable enough to be paying substantial taxes, which I am not. We get to file once a year.

[kelly1mm]

15. I believe (but do not know) that there is a mechanism for certifying that your 'next year'

income will be higher/lower than the previous year (like if you got a new job, retired, etc.) for figuring your income for ACA purposes.

[Zorra]

5. Maybe you can find an answer here somewhere:

http://www.irs.gov/uac/Questions-and-Answers-on-the-Individual-Shared-Responsibility-Provision

http://www.irs.gov/uac/Affordable-Care-Act-Tax-Provisions-Home

http://kff.org/infographic/the-requirement-to-buy-coverage-under-the-affordable-care-act/

http://sync.democraticunderground.com/10023648218

Good luck!

[Jacoby365]

9. I'm self employed as well

and the way I understand it, as far as Obamacare and Medi-Cal, you use the Modified Adjusted Gross Income number. This link explains what income to use for Obamacare: http://laborcenter.berkeley.edu/healthcare/MAGI_summary13.pdf

[Tumbulu]

13. When I use line 37 from the 1040

the health insurance costs have already been subtracted....which conflicts with the advice above.

And then there is the question of what year is one supposed to use? 2012 actual or 2013 estimate?

What will you use?

[kestrel91316]

16. I'm probably going with 2012 income (known) and then factor in my best guess for how 2013 compares

with 2012. Right now it's down at least 10%. If they don't like it they can bill me for whatever they think I am underpaying, lol.