If one has a tax loss and shows a negative number for line 37 MAGI income on their 1040 can they get subsidies in Covered CA, as they have income from a job, rentals, business or other?
A tax loss occurs when total expenses are greater than total revenues under the tax reporting rules of the applicable government jurisdiction. A tax loss reduces an entity’s tax liability only in proportion to its tax bracket.
Businesses and individuals will frequently reduce their reportable revenues or increase their reportable expenses for tax purposes in order to reduce their tax payments. Thus, an entity may report a tax loss at the same time that it reports a profit under generally accepted accounting principles or international financial reporting standards. Accounting Tools.com
Our page on the Premium Tax Credit IRS #8962 & Instructions
View our page on how the APTC Advance Premium Tax Credit is Calculated CFR §1.36 B – 3
Insure Me Kevin.com where guy had to pay back subsidies as Covered CA didn’t add that back in for line 37 MAGI.
Insure Me Kevin.com inflating income to avoid Medi-Cal
Fudging the income? Fraud & False Statements
IRS Newswire – Issue Number: IR-2016-23
Inside This Issue
Falsifying Income to Claim Tax Credits is on the IRS “Dirty Dozen” List of Tax Scams for the 2016 Filing Season
WASHINGTON — The Internal Revenue Service today warned taxpayers to avoid schemes to erroneously claim tax credits on their returns, which is on the annual list of tax scams known as the “Dirty Dozen” again for the 2016 filing season.
“Taxpayers should not falsify their income or other information on their tax returns to improperly claim tax credits,” said IRS Commissioner John Koskinen. “Misrepresenting facts is cheating and taxpayers are legally responsible for all the information reported on their tax returns.”
Compiled annually, the “Dirty Dozen” lists a variety of common scams that taxpayers may encounter anytime but many of these schemes peak during filing season as people prepare their returns or hire professionals to do so.
Illegal scams can lead to significant penalties and interest and possible criminal prosecution. IRS Criminal Investigation works closely with the Department of Justice (DOJ) to shutdown scams and prosecute the criminals behind them.
Don’t Fake Income
Some people falsely increase the income they report to the IRS. This scam involves inflating or including income on a tax return that was never earned, either as wages or as self-employment income, usually in order to maximize refundable credits.
Just like falsely claiming an expense or deduction you did not pay, claiming income you did not earn in order to secure larger refundable credits such as the Earned Income Tax Credit [or Covered CA Subsidies] could have serious repercussions. This could result in taxpayers facing a large bill to repay the erroneous refunds, including interest and penalties. In some cases, they may even face criminal prosecution.
Taxpayers may encounter unscrupulous return preparers who make them aware of this scam. Remember: Taxpayers are legally responsible for what’s on their tax return even if it is prepared by someone else. Make sure the preparer you hire is ethical and up to the task.
This is one of those unintended consequences of the PPACA. The law says APTCs are obtainable by persons with MAGI of 100%-400% FPL. This is a unique situation and I don’t believe Congress expected this as the norm. But the law is the law, and the IRS will either allow or disallow the APTCs.
Personally, I think the IRS will allow the APTCs since this person is obviously a “taxpayer” not a welfare recipient. Otherwise, it would make a great case in Tax Court.
Steve: How many will even get the chance? Has Covered CA been overlooking it? Even when a qualifying MAGI is put in, but line 37 is negative? Like this reply from Covered CA — Response By Email (R) (02/10/2016 12:22 PM) Good day Steve Shorr, Once you update their income, and it’s reflecting the negative income then they will be up for review. Please let me know if you need further assistance. Does Covered CA actually review the Tax Return? I did mention wrong information and Covered CA agreed about it not being worth the legal ramification. Fudging the income? Fraud & False Statements
I think this probably affects a significant number of taxpayers nationwide, and is “ripe” for adjudication in the federal Tax Court in order to have a definitive ruling. Theoretically, MAGI Medi-Cal eligibility is a month-to-month test, not really an annual test.
Unfortunately, I don’t know any tax attorneys, but if your client is willing to take his case to Tax Court, I can probably get a referral or two from some of the insurance attorneys I have worked with.