I had assumed, apparently too optimistically, that the major tax prep software programs would be able to easily handle the problem of reconciling the self-employed health insurance deduction (line 29 on form 1040) with the premium tax credit calculation (form 8962). After all, as complex as the IRS instructions may be, the actual calculation is simple math. IRS regulations have now given clear guidance, with two methods for calculation, and this should be a fairly easy task to integrate into the program software.
Unfortunately, this does not appear to be the case. I personally use H&R Block tax prep software and buy the “Premium” version which is advertised as best for self-employed. But when I experimented with the program, I found it didn’t seem to be making any reconciliation at all. Instead, the program was erroneously calculating the tax credit based on the MAGI with whatever value had been previously entered as the total self-employment premium, without making any adjustments as required by IRS.
I called H&R Block customer support and the representative seemed to immediately understand my concern, and said that this problem will be addressed in the next software update, which appears to be scheduled for January 22nd — so I will wait and see.
Meanwhile — Jay, a contributor at https://obamacareguide.wordpress.com/post-questions-here/ – has found TaxAct software to fall short, in that it does appear to be able to handle the situation of a taxpayer who opts for a higher cost plan that the benchmark, second lowest cost silver plan. He has taken the initiative to correspond with their support department, and share the information they provide — but so far has not received a satisfactory response from them.
Any users of TurboTax out there? Please share – I hope I can get enough information to be able to post a report next month as to which, if any, software programs can be relied on to accurately perform the iterative reconciliation which will maximize the benefit to any self-employed tax-payer who qualifies for a credit.