John Bullis: Another marriage penalty

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The income tax law still has some penalties for married folks. But a “new” one was illustrated in the tax court case of Timothy T. and Christina Fisher. This was about the advance premium assistance tax credit that Christina applied against her monthly health insurance premium.

She submitted an application to the Exchange (Health Insurance Marketplace) in December 2014. She bought a medical insurance policy. The Exchange determined her income was so low she was entitled to an advance of $371 per month or $4,452 for the year 2015.

She married Mr. Fisher Nov. 14, 2015. Now, different rules apply regarding the advance premium credit.

Her policy stayed in place all through 2015 (he did not have a medical insurance policy in 2015).

They filed a joint tax return for 2015 that reported their adjusted gross income (AGI) of $113,975. That was more than the “400 percent of federal poverty income” of $79,160 for a family of three. She had a child that was her dependent in 2014 and their dependent in 2015.

With that higher AGI, the return should have reported a tax for the “unearned” tax credit. The Internal Revenue Service did a quick audit and assessed the tax for the full benefit (premium tax credit) she got by only paying a small amount each month for her medical insurance.

The Fishers then represented themselves in tax court, protesting the IRS assessment.

There are some special tax rules for when an unmarried person gets the premium tax credit and gets married during the year. The “alternative marriage-year tax credit” did not apply in their case.

The tax court ruled in favor of IRS. It was marked a “memo” decision.

Unfortunately, the Fishers had to pay the IRS assessment, plus penalties and interest. And, they wasted their time and money to go to tax court. A certified public accountant could have explained the IRS assessment and why it was correct.

If you know of someone who gets the premium tax credit as an unmarried person who in the same year later gets married, you might alert them to the possibility of a surprise. No one enjoys that kind of surprise!

Did you hear, “Speak when you are angry and you will make the best speech you will ever regret.” Ambrose Bierce

John Bullis is a certified public accountant, personal financial specialist and certified senior adviser who has served Carson City for 45 years. He is founder emeritus of Bullis and Company CPAs.

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The income tax law still has some penalties for married folks. But a “new” one was illustrated in the tax court case of Timothy T. and Christina Fisher. This was about the advance premium assistance tax credit that Christina applied against her monthly health insurance premium.

She submitted an application to the Exchange (Health Insurance Marketplace) in December 2014. She bought a medical insurance policy. The Exchange determined her income was so low she was entitled to an advance of $371 per month or $4,452 for the year 2015.

She married Mr. Fisher Nov. 14, 2015. Now, different rules apply regarding the advance premium credit.

Her policy stayed in place all through 2015 (he did not have a medical insurance policy in 2015).

They filed a joint tax return for 2015 that reported their adjusted gross income (AGI) of $113,975. That was more than the “400 percent of federal poverty income” of $79,160 for a family of three. She had a child that was her dependent in 2014 and their dependent in 2015.

With that higher AGI, the return should have reported a tax for the “unearned” tax credit. The Internal Revenue Service did a quick audit and assessed the tax for the full benefit (premium tax credit) she got by only paying a small amount each month for her medical insurance.

The Fishers then represented themselves in tax court, protesting the IRS assessment.

There are some special tax rules for when an unmarried person gets the premium tax credit and gets married during the year. The “alternative marriage-year tax credit” did not apply in their case.

The tax court ruled in favor of IRS. It was marked a “memo” decision.

Unfortunately, the Fishers had to pay the IRS assessment, plus penalties and interest. And, they wasted their time and money to go to tax court. A certified public accountant could have explained the IRS assessment and why it was correct.

If you know of someone who gets the premium tax credit as an unmarried person who in the same year later gets married, you might alert them to the possibility of a surprise. No one enjoys that kind of surprise!

Did you hear, “Speak when you are angry and you will make the best speech you will ever regret.” Ambrose Bierce

John Bullis is a certified public accountant, personal financial specialist and certified senior adviser who has served Carson City for 45 years. He is founder emeritus of Bullis and Company CPAs.

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