Is money I never see counted as income?

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RuralCentralMontana
RuralCentralMontana Member Posts: 5 Newcomer

Does money paid directly from social security to medicare count as income? How about a state program that pays for Rx Part D?

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  • rachels
    rachels FreeTaxUSA Agent Posts: 51
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    Hello RuralCentralMontana,

    You can enter a Form SSA-1099 in your FreeTaxUSA account by going to Income > Common Income > Social Security Benefits (SSA-1099). Our software will use your entries there to correctly fill out your tax return.

    That being said, your SSA-1099 will often show Medicare premiums paid from your Social Security income. The amount paid for Medicare premiums is still included in your income (SSA-1099, box 3). However, if you choose to itemize your deductions for the year, the Medicare premiums you paid, including those paid directly from your Social Security income, can be claimed as an itemized deduction (which reduces your taxable income). Our software will automatically carry over any "Medicare Premiums Deducted" entered on the SSA-1099 screen to the itemized deduction section of your account.

    You would go to Deductions/Credits > Itemized Deductions > Medical Expenses to view that carry over, as well as enter any additional medical expenses. Make sure to enter any additional insurance premiums you paid during the year in that section of your account.

    IRS publication 502 states that Medicare Part D premiums can be included with your other medical expenses as an itemized deduction: "Medicare Part D is a voluntary prescription drug insurance program for persons with Medicare Part A or B. You can include as a medical expense premiums you pay for Medicare Part D."

    https://www.irs.gov/publications/p502#en_US_2022_publink1000178958

    You can also learn more about deductible medical expenses here:

    https://www.irs.gov/taxtopics/tc502

  • rachels
    rachels FreeTaxUSA Agent Posts: 51
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    Great questions, RuralCentralMontana!

    -You are correct. The money paid directly from Social Security to Medicare does get included as income on your tax return, with the option of claiming those expenses as an itemized deduction.

    -You generally do not need to include discounts you received as income on your tax return.

    -For the program that pays a medical insurance premium on your behalf, you would typically just have a smaller premium amount that you would be able to claim as an itemized deduction (if you were itemizing). For example, if your total insurance premiums were $10,000 for the year, but you only paid $3,000 because the program paid $7,000 for you, you would generally only be able to claim the $3,000 you actually paid as an itemized deduction.

    Please note, though, that many taxpayers receive health insurance assistance from the Advance Premium Tax Credit. If this applies to you, it does need to be reconciled on your tax return. If you purchased health insurance through the Marketplace or a state-based exchange, you should get a 1095-A form showing that information. You would then report that in your FreeTaxUSA account by going to Deductions/Credits > Health Insurance > Marketplace Health Insurance (Form 1095-A). That will allow you to reconcile the premium assistance you received on your tax return.

    If you have not received your 1095-A or are not sure whether you should be getting that form, please visit the following website and scroll down to the "How to find your 1095-A online" heading.

    https://www.healthcare.gov/tax-form-1095/

    -The deadline to send out 1099 forms depends on the specific type of 1099. However, most 1099's need to be sent to the recipient by January 31st, which means that you should receive most of your forms by mid-February.

  • RuralCentralMontana
    RuralCentralMontana Member Posts: 5 Newcomer
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    Nice clear answers, rachels! Thank you so much.

  • CoryF
    CoryF FreeTaxUSA Agent Posts: 65
    edited October 2023 Answer ✓
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    Thank you for these continuing questions, Rural.

    Anytime a business decides to charge a different price for services to low income or senior citizens, it is not income to the recipient, you. It is just an adjustment on their end in the bookkeeping. You do not need to worry about the discounts and price differences to report them as income. If your Medicare Part D premiums are paid for, then you are not able to claim the premiums as an itemized deduction for medical spending. It may not matter at all if you are claiming the Standard Deduction. Property Tax reduction has the same answer as the low income and senior citizen discounts. Meaning, you will not be able to take an itemized deduction for property taxes that were paid by a State program, and it is not income to you reported on your taxes. You should wait for all timely filed 1099s by filing your tax return in the latter part of February. If you receive a 1099 after filing, an amendment is always possible to add income.

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  • RuralCentralMontana
    RuralCentralMontana Member Posts: 5 Newcomer
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    Thanks, rachels. Yes, I remember entering social security benefits from the 1099 last year. It has been a long time since itemization was an issue for me; the standard deduction usually covers most of my earnings. (It's self-employment taxes that I end up paying.) What about Medicare Part D premiums paid on my behalf by a state program for low income seniors? What about "sliding scale" discounts the clinic gives me for being low income? (They never even tell me how much those are or what the full price of the service is. Do I need to ask?) When my bank waives a fee because I'm a senior, is that discount considered income?

  • RuralCentralMontana
    RuralCentralMontana Member Posts: 5 Newcomer
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    I think you are telling me that money paid directly from social security to medicare DOES count as income, but is also itemized-deductible as a medical expense IF I choose to itemize deductions from income. I do get a SSA-1099 form. That still leaves the issue of senior/low-income discounts, and the program that pays a medical insurance premium on my behalf. I think I even got a property tax reduction for some cause last year. Do those count as income? I don't recall ever getting a 1099 type form for those. …I note that in past years, some 1099 forms arrived after I have filed my taxes, and others that I expected never showed up. How long should I wait for 1099s?

  • RuralCentralMontana
    RuralCentralMontana Member Posts: 5 Newcomer
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    Thank you CoryF. Sometimes I need a filed tax return early in the year, to keep accounts current. If a 1099 arrives after I file, but I did include the income listed on the 1099 in my taxable income, am I required to officially submit the 1099 form as an amendment? It wouldn't change the numbers I filed. I always figured the IRS has a copy of the 1099 and doesn't need me to send my copy, if one arrives after I file my tax forms (1065 and 1040).

  • CoryF
    CoryF FreeTaxUSA Agent Posts: 65
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    Thank you for the observation. That is perfectly okay. As long as your business or other 1099 income on the tax return is equal to or more than the 1099 itself, you are okay with the IRS. Meaning if you have already claimed the income from the 1099 on your originally filed tax return, there is no need to file an amendment. Besides there is no place to submit the 1099 form on your income tax return if you file electronically.

    The IRS has a system that checks all income from the tax return with the multiple income documents filed by sources to your Social Security Number. So, since you claimed the right amount of income corresponding to the late received 1099, you don't need to worry further.