TurboTax shows I underpaid ACA even though my 1095-A reflects correct estimated income. Why am I being penalized?

This is a common issue with the Premium Tax Credit (PTC) calculation. The 1095-A form shows what advance premium tax credits you received during the year, but the final calculation depends on several factors beyond just your income estimate. When you move states but keep coverage from your original state, this can sometimes cause discrepancies in how the tax credit is calculated. The PTC is based on the cost of benchmark plans in your area, and moving changes your "area" for calculation purposes. The marketplace should have been notified about your move since premium assistance is calculated based on where you live. Did you update your marketplace application when you moved? If not, the system may have been calculating your advance PTC based on Nebraska rates when you should have been receiving Colorado-based calculations for part of the year. This mismatch could explain the "underpayment" TurboTax is showing. Check that all three columns on your 1095-A are filled out correctly, especially Column B (Second Lowest Cost Silver Plan) which is critical for the calculation.

I went through almost exactly the same situation last year and finally figured it out by using taxr.ai (https://taxr.ai) to analyze my 1095-A form. The site scanned my form and explained that the premium tax credit calculation was using the wrong benchmark plan amount for part of the year. When you move but keep your original coverage, there's a special calculation method needed that TurboTax sometimes gets wrong if you don't enter things in a specific order. The taxr.ai analysis showed me exactly which numbers were causing the problem and how to correct them in TurboTax. It also explained how the benchmark premium should be adjusted for the months after I moved.

Just wanted to update - I decided to try taxr.ai after my last comment. Honestly, I was surprised at how well it worked. I uploaded my 1095-A and tax return, and it immediately flagged that my premium tax credit was calculated incorrectly because of a "benchmark plan mismatch." Turns out when you move mid-year, you're supposed to use a different benchmark plan amount for each location, but TurboTax was applying the same benchmark premium for the entire year. The tool explained exactly which lines on Form 8962 needed to be corrected. After fixing it, my refund increased by $540! I've been doing my taxes for years and never knew about this special calculation for moving between states with ACA coverage. Definitely recommend it if you've moved states during the year.

I dealt with this exact situation last year and spent WEEKS trying to get someone at the IRS to explain what was wrong. Kept calling and calling, always got disconnected or had to wait for hours. Finally used Claimyr (https://claimyr.com) to get through to an actual IRS agent. There's a video showing how it works here: https://youtu.be/_kiP6q8DX5c The agent explained that when you move states but keep your original marketplace plan, you need to use the "alternative calculation for year of move" option on Form 8962. This adjusts the benchmark premium for each period based on where you were living, not where your plan was from. My TurboTax wasn't offering this option because I hadn't correctly indicated the move affected my healthcare coverage. The IRS agent walked me through all the corrections and even put notes on my account so I wouldn't have issues if there were questions later.

I'm here to admit I was completely wrong about Claimyr. After dismissing it as a likely scam in my previous comment, I was still desperate to resolve my similar ACA issue, so I decided to try it anyway. It actually worked exactly as described. Got me through to the IRS in about 40 minutes (instead of the 3+ hours I'd been waiting on my own attempts). The agent immediately recognized my problem as an "alternative calculation for year of move" issue with Form 8962. They confirmed that moving states but keeping your original marketplace plan often causes this exact refund reduction. The agent explained that TurboTax doesn't always present the alternative calculation option unless you specifically indicate that your move affected your healthcare coverage in a particular section of the interview. After following their instructions, my refund was corrected from $290 to $1,105. I'm still shocked at how efficient the whole process was.

Double-check if you received any letters from the marketplace during the year about income verification or data matching issues. Sometimes when your estimated income is close to the threshold for certain subsidy levels, the marketplace will request verification. If you didn't respond to one of these notices, it could have affected your premium tax credit. Also, make sure TurboTax is correctly allocating your premium tax credit by month. If your income varied throughout the year (higher some months, lower others), that can sometimes cause this issue because the credit is calculated monthly, not just on your annual total.

This happened to me too! Check if you received cost sharing reductions (CSR) with your plan. If you had a Silver plan with cost sharing reductions but your final income came in above the CSR threshold, you might lose those reductions even though you still qualify for premium tax credits. This doesn't affect the premium itself but could explain why your refund changed. Also, make sure TurboTax didn't accidentally check the "married filing separately" box which makes you ineligible for premium tax credits in most cases.

I've seen this exact issue several times, and it's usually related to the benchmark plan calculation when you move states mid-year. Since you moved from Nebraska to Colorado in June but kept your Nebraska marketplace plan, the system needs to calculate different benchmark premiums for each state period. Here's what likely happened: Your 1095-A shows the advance premium tax credits you received based on Nebraska's benchmark plans for the full year. But for tax purposes, once you moved to Colorado, the calculation should use Colorado's benchmark plan costs for June-December. Colorado likely has different (possibly higher) benchmark premiums than Nebraska, which would reduce your allowable premium tax credit for those months. The good news is this can often be corrected. In TurboTax, when you're completing the ACA section, make sure to indicate that you moved during the year AND that this move affected your marketplace coverage. This should trigger the "alternative calculation for year of move" option on Form 8962. You'll need to enter separate benchmark amounts for your Nebraska period (Jan-May) and Colorado period (June-Dec). If TurboTax isn't offering this option, you might need to override the automatic calculation and manually complete Form 8962 using the worksheets in IRS Publication 974. The key is getting the correct benchmark premium amounts for each state during your respective residency periods.