Peter J Reilly , CONTRIBUTOR

Judge Ronald Lee Buch of the Tax Court seemed to think that Steven and Robin McGuire were getting a raw deal from the IRS on an excess tax credit under the Affordable Care Act. Unfortunately, Judge Buch could not do much about it. Reilly's First Law of Tax Planning - It is what it is. Deal with it. Here is the story.

The Plan

In 2013, the McGuires had consulted with their state ACA exchange, Covered California which determined that based on the $800 per week that Mr. McGuire was drawing from his parts and service business they were entitled to an advance premium assistance credit of $591 per month. Based on that they went for the Blue Shield Silver 70 PPO plan. The monthly premium was $1,181.97. The McGuires paid half of that and the balance was covered by the advance premium credit.

A Change And A Tale Of Woe

Later in 2013 Mrs. McGuire started working at a job that paid her $600 per week. She promptly notified Covered California. The income change was very significant because it meant the McGuires had income of more than 400% of the Federal poverty line. That meant they would not qualify for any credit at all.

Several months later, well into the 2014 tax year in the controversy, Covered California sent a letter to the McGuires letting them know that they no longer qualified for the Enhanced Silver Plan because their income was too high warning them that "If you take the full premium assistance to pay the premium, and your income is higher, you may have to pay some back at tax time."

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