Money Back from Medicare: Discover If You Qualify for a Refund on Overpayments
Over five million Americans experience annual Medicare premium increases of hundreds or thousands of dollars for every dollar they earn in extra income; nevertheless, these fees are occasionally refundable.
Drew Tignanelli, a CPA and consultant who has won scores of client refunds, claims that many Medicare users are unaware of the following.
Understanding Medicare Income
Employers and employees together contribute 2.9% of wages to the Medicare trust fund while working, and self-employed taxpayers pay a tax of equal amount.
Higher earnings are also subject to an additional 0.9% surtax.
People normally have to pay Part B (for doctors) and Part D (for medication coverage) payments when they sign up for Medicare.
Typically, the Part B annual premium is larger than the Part D annual premium, which is around $1,980 for 2023.
Additionally, Congress mandated Parts B and D income-based surcharges, concluding that seniors with higher incomes should be responsible for a larger portion of their Medicare costs.
Irmaa, short for Income-Related Monthly Adjustment Amounts, is the name given to these fees.
They are determined by the Social Security Administration for many taxpayers based on income-tax data and subtracted from Social Security payments.
The amount collected has more than tripled, reaching $13.4 billion, while the number of recipients owing Part B Irmaa has doubled over the past ten years, to 5.2 million for 2023.
Many people who owe Irmaa surcharges are not in favor of it because they are frequently subtracted from Social Security income.
The Irmaa regulations may permit refunds if a Medicare recipient’s current income is lower than it was two years ago, which many fail to realize.
Therefore, claimants whose income has decreased due to a “work stoppage” like retirement are frequently eligible for refunds.
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Jeff Davidson’s Experience Sheds Light on Medicare Surcharge Refunds
During the pandemic, Jeff Davidson, a 67-year-old retired fintech consultant who lives in New York City, had a 2021 income spike from consulting work and a sizable one-time IRA withdrawal that increased his 2023 Irmaa payments.
He is qualified for an Irmaa rollback for another reason, a “work reduction.”
Refunding the money wasn’t simple, According to Davidson, the clearance process took seven months after the request in January.
He called with Social Security representatives numerous times, before the agency made its final decision.
Now Davidson was saving around $3,500 in 2023. It was a frustrating procedure, but it ended successfully, he claims.
Medicare normally kicks in at age 65, therefore Irmaa is initially calculated using income from tax returns from the recipient’s 63rd year.
Keep this in mind when making plans, such as when scheduling annual Roth IRA conversions that will increase your income.
Irmaa will not be increased by tax-free income from Roth IRA withdrawals or Health Savings Accounts under current law. Investment income, on the other hand, is included in adjusted gross income.
The surcharge will probably decrease if someone can’t avoid a gain that increases Irmaa for one year then their income drops the next year.
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Source: The Wall Street Journal via MSN
