From reading CFR 418.1110. titled “What is the effective date of our initial determination about your income-related monthly adjustment amount?” it appears to me the likely answer is the SSA would have defaulted to using your tax information from three years ago until you file your return for two years prior to determine any IRMAA surcharges. If that is correct then that part of the Code of Federal Regulations states –
“b) When we (the SSA) have used modified adjusted gross income information from IRS for the tax year 3 years prior to the effective year to determine your income-related monthly adjustment amount and modified adjusted gross income information for the tax year 2 years prior later becomes available from IRS, we will review the new information to determine if we should revise our initial determination. If we revise our initial determination, the effective date of the new initial determination will be January 1 of the effective year, or the first month you were enrolled or re-enrolled in Medicare Part B if later than January.”
Like other Humble Dollar commenters I would encourage you to get current with your tax filings to resolve this issue for you or so your executor does not have this mess to deal with after you are gone if you owe any additional amount for IRMAA income based surcharges. My guess is that absent meeting a statutory reasonable cause for late filing your 1040 that the determination of late IRMAA premiums may be followed with a non-payment demand for payment in full with the serious potential consequences of loss of insurance coverage if timely payment in full is not paid.
Not filing may not be a big deal if you don’t have a balance due, and are not trying to game the system for some reason. But yes, if you have a balance due, or are attempting to use one of the many phoney arguments against filing, you can get yourself in a heap of trouble, boy!
Besides jail/fines, be aware, unlike private creditors (like credit card companies or medical providers) who must sue you and win a court judgment before they can touch your paycheck or bank account, the IRS does not need a court order to seize your property, freeze your bank accounts, or garnish your income.
Danbo, you’ve given me a great idea for a “can of worms” article. Someone attempting a scheme to avoid paying the IRMAA premiums, should arrange in advance, to have a friend or relative bake a cake with a file concealed; you know, just in case…. I never came across anyone trying this, so had to take a quick trip to AI for some direction; The Criminal Risk: Willful Failure to FileThis is the most critical line to cross. Under Internal Revenue Code Section 7203, willfully failing to file a tax return when you meet the gross income threshold to do so is a federal misdemeanor.
It carries a penalty of up to $25,000 in fines and up to one year in prison for each year you fail to file.
If the IRS can prove that the taxpayer consciously chose not to file specifically to conceal income or evade a federal assessment (such as the federally mandated IRMAA surcharge), a civil examiner can easily refer the case to the IRS Criminal Investigation Division.
No Statute of LimitationsWhen you file a tax return, it starts a three-year clock (the statute of limitations) after which the IRS can no longer audit or adjust that return. If you do not file a return, the statute of limitations never starts. The IRS has an infinite amount of time—whether it is 5, 10, or 20 years from now—to come back, audit your records, file an SFR, and assess back taxes, penalties, and interest. SummaryThe federal government’s data-sharing loop between the IRS and the Social Security Administration is highly automated. Attempting to dodge IRMAA by not filing will ultimately result in the IRS filing a highly unfavorable “Substitute for Return” on your behalf, which will subsequently trigger the very IRMAA premiums you were trying to avoid—all while exposing you to criminal “willful failure to file” charges. The only legal, viable way to reduce or eliminate an IRMAA premium is to proactively manage your MAGI (using strategies like Qualified Charitable Distributions from IRAs, tax-loss harvesting, or municipal bonds) or to file a formal appeal using Form SSA-44 if you have experienced a qualifying life-changing event.
Municipal bond interest is not excluded. Am not aware how municipal bonds help for this IRMMA MAGI, unless you meant don’t own them/cut back ownership. (Muni interest is also included in the MAGI for purposes of provisional income used for taxable social security benefits.)
For the purposes of IRMAA, the government generally calculates MAGI as the sum of your adjusted gross income (AGI) plus tax-exempt interest reported in your tax return two years ago. This is recalculated annually. Source: article at schwab.com
From reading CFR 418.1110. titled “What is the effective date of our initial determination about your income-related monthly adjustment amount?” it appears to me the likely answer is the SSA would have defaulted to using your tax information from three years ago until you file your return for two years prior to determine any IRMAA surcharges.
If that is correct then that part of the Code of Federal Regulations states –
“b) When we (the SSA) have used modified adjusted gross income information from IRS for the tax year 3 years prior to the effective year to determine your income-related monthly adjustment amount and modified adjusted gross income information for the tax year 2 years prior later becomes available from IRS, we will review the new information to determine if we should revise our initial determination. If we revise our initial determination, the effective date of the new initial determination will be January 1 of the effective year, or the first month you were enrolled or re-enrolled in Medicare Part B if later than January.”
Like other Humble Dollar commenters I would encourage you to get current with your tax filings to resolve this issue for you or so your executor does not have this mess to deal with after you are gone if you owe any additional amount for IRMAA income based surcharges.
My guess is that absent meeting a statutory reasonable cause for late filing your 1040 that the determination of late IRMAA premiums may be followed with a non-payment demand for payment in full with the serious potential consequences of loss of insurance coverage if timely payment in full is not paid.
William, your analysis is helpful.
How could failing to file a tax return more than 2 years late possibly end well? The IRS will get their money with penalties and interest.
I have known people who did not file tax returns for many years. When the IRS finally discovered this omission, it was not a good experience.
Not filing may not be a big deal if you don’t have a balance due, and are not trying to game the system for some reason. But yes, if you have a balance due, or are attempting to use one of the many phoney arguments against filing, you can get yourself in a heap of trouble, boy!
Besides jail/fines, be aware, unlike private creditors (like credit card companies or medical providers) who must sue you and win a court judgment before they can touch your paycheck or bank account, the IRS does not need a court order to seize your property, freeze your bank accounts, or garnish your income.
Danbo, you’ve given me a great idea for a “can of worms” article. Someone attempting a scheme to avoid paying the IRMAA premiums, should arrange in advance, to have a friend or relative bake a cake with a file concealed; you know, just in case….
I never came across anyone trying this, so had to take a quick trip to AI for some direction;
The Criminal Risk: Willful Failure to FileThis is the most critical line to cross. Under Internal Revenue Code Section 7203, willfully failing to file a tax return when you meet the gross income threshold to do so is a federal misdemeanor.
No Statute of LimitationsWhen you file a tax return, it starts a three-year clock (the statute of limitations) after which the IRS can no longer audit or adjust that return. If you do not file a return, the statute of limitations never starts. The IRS has an infinite amount of time—whether it is 5, 10, or 20 years from now—to come back, audit your records, file an SFR, and assess back taxes, penalties, and interest.
SummaryThe federal government’s data-sharing loop between the IRS and the Social Security Administration is highly automated. Attempting to dodge IRMAA by not filing will ultimately result in the IRS filing a highly unfavorable “Substitute for Return” on your behalf, which will subsequently trigger the very IRMAA premiums you were trying to avoid—all while exposing you to criminal “willful failure to file” charges.
The only legal, viable way to reduce or eliminate an IRMAA premium is to proactively manage your MAGI (using strategies like Qualified Charitable Distributions from IRAs, tax-loss harvesting, or municipal bonds) or to file a formal appeal using Form SSA-44 if you have experienced a qualifying life-changing event.
Municipal bond interest is not excluded. Am not aware how municipal bonds help for this IRMMA MAGI, unless you meant don’t own them/cut back ownership. (Muni interest is also included in the MAGI for purposes of provisional income used for taxable social security benefits.)
For the purposes of IRMAA, the government generally calculates MAGI as the sum of your adjusted gross income (AGI) plus tax-exempt interest reported in your tax return two years ago. This is recalculated annually.
Source: article at schwab.com
you are correct, Luigi.