The IRS has Spoken…..

…. or at least added more confusion to the mix.

I’m not going to be able to address this in one post, so I’ll start with a link:

IRS Revenue Procedure 2014-41 — PDF at

“26 CFR 601.105: Examination of returns and claims for refund, credit, or abatement;
determination of correct tax liability.”

This addresses the issue raised back in my post, “Figuring your Household Income (Part Two)“:   How to calculate AGI and premium tax credit when you are self-employed and also eligible for the self-employed health insurance deduction.   As I pointed out “This is one area where the present wording of the law seems to provide an extra benefit for the self-employed, if in fact you can use the full cost of the premiums reduce AGI for purposes of subsidy eligibility.”

I commented, “The double-benefit from being able to deduct 100% of health insurance premiums in order to reduce AGI, and then used the same deduction to qualify for a substantial tax credit seems to fly in the face of the way the tax law usually works. Generally the laws are written to prevent taxpayers from applying the same expense to benefit in multiple ways.”

And I gave some advice:   “The safest choice for self-employed individuals who are unsure of subsidy eligibility is to buy insurance through an exchange, opt to pay the full cost premium cost, with a plan of maximizing tax deductions with the possibility of a substantial tax refund down the line. That way you will not be caught with a huge tax bill in 2015 because your calculations were off the mark.”

And, more important:

Above all. Do not rely on this blog or any other for tax advice!!!  It’s possible that the very best investment you can make for your business in 2014 will be to hire a tax professional to help guide you through this maze.”

Now the IRS has added its explanation as to how you can do this calculation, maybe.  If you happen to be self-employed as an accountant or software programmer, you might be able to figure this out   The rest of us may feel very grateful that we do have health insurance under ACA, because we may need to see a doctor to treat the headache we are all going to get from trying to do the mathematical gymnastics IRS suggests.   More to come– in the meantime, you can read this yourself at the link above.

Two other new ACA related docs to peruse while you are at it:

Revenue Procedure 2014-46   (provides the 2014 monthly national average premium for qualified health plans that have a bronze level of coverage for taxpayers to use in determining their maximum individual shared responsibility)

Revenue Procedure 2014-37 (provides the methodology to determine the applicable percentage table in IRS § 36B(b)(3)(A) used to calculate an individual’s premium assistance credit amount.)