During the initial open-enrollment window, one of the trickiest factors was helping the self-employed estimate their income.
Self-employment is quite different from w2, payroll in terms of how much, when, and with what deductions.
Let's look closer at what to consider understanding that each person's situation is different and you really should go through your particulars with a certified agents (hint hint...we are one).
We don't say this to be self-serving but we have seen so many incorrect Covered California income estimates for people who attempted to complete it themselves.
There can be serious financial repercussions to some of these mistakes so we advise to contact us.
Let's sketch out the rough strokes for self-employment income.
First, we need to understand that Covered California really wants an estimate for the current calendar year.
For example, if we are looking at coverage for year 2017, we want to estimate to best of our ability what our income for 2017 will be.
This would be the amount submitted in April of 2018.
That's tough to do for many self-employed people where income can fluctuate significantly from year to year or even within an year.
Some of the self-employed that we helped make all of their income in December (think retail).
Regardless, that's the period we should focus on. If your income is pretty stable from year to year, you can use the last year as a reference and ultimately, Covered Ca (via the IRS) will do the same.
So what number exactly do they want us to estimate?
This is a big deal.
Essentially, we're trying to get to the Modified Adjusted Gross Income.
There some untaxed incomes that are added back in such as Social Security or Disability income.
Most sources of income
outside of child support will figure into this.
For the self employed, we're looking then at your net business income.
This would be your gross business income for the calendar year minus your eligible business expenses.
Many people we came across had entered their gross business income which grossly exaggerated their income and potentially prevented them for receiving $1000's of dollars in tax credit towards their health insurance.
They would likely recoup this at tax time but some did not even enroll because they couldn't pay the unsubsidized (and very large) health insurance premiums.
We guided and fixed the accounts for everyone who contacted us but it's safe to say that 10's if not 100's of 1000s of Californians are in that same boat.
If you're still unsure, look at the amount listed on page 1 of your 1040 resulting from your business income.
In addition to your net business income, there are some deductions that we can look at if you are self-employed (S Corp owners may also be able to take these; check with your tax professional).
These are the common deductions we can reduce from our expected net business income:
We addressed both situations in these articles: income changes and estimation is wrong.
Again, call us at 800-320-6269 and we can save you hours of time in the calculation and enrollment process at no cost to you. As Certified Covered California Agents, our services are free.
It can be confusing to compare health plans on your own. Call us at 800-320-6269 and we'll go through the pro's and con's the plans with you based on your situation.
You can quickly delegate us as the agent and we can then go through find out where the issues are in your entered information.
In five minutes, we can save you hours of frustration and potentially a great deal of money.
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We are licensed Covered Ca agents with in-depth knowledge of their plans, process, and tax credits.
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