Ask Rusty – About the Dreaded “IRMAA” Provision

Dear Rusty: About a month or two ago I was notified that my Social Security was being reduced from $1,583 a month to about $1,283 a month – a $300 deduction! They said it was because my income was over the limit on my last return. I filed my taxes “married – filing separately” because my wife has her own income. If we had filed jointly, I would not have had the reduction. My question is why wasn’t this told to us when we filed our Income Tax last year instead of a last-minute thing? I am a 77-year old and a 100% disabled veteran, which probably has no effect on this, but wanted to add that information. Any light you can shed on the matter will be very much appreciated. Signed: Irritated Senior

Dear Irritated Senior: First, I want to thank you for your service to our country. Allow me to explain what I believe happened. Your net (not gross) Social Security benefit payment was probably reduced as a result of a rule known as “IRMAA” – the “Income Related Medicare Adjustment Amount.” This is a supplement added to your Medicare Part B premium as a result of higher income, and a higher Medicare premium would mean a lower net Social Security payment.

Although filing your taxes separate from your wife does mean a lower income reported to the IRS for you, it also reduces the clip levels at which the IRMAA rule kicks in. For those who file income tax as an individual, IRMAA applies if your “provisional” income from all sources, including IRA or 401(K) withdrawals and half of your SS benefits for the tax year, exceeds $87,000. For those who file taxes jointly as a married couple, IRMAA applies if your combined income is more than $174,000. Incomes above those clip levels result in corresponding higher IRMAA premiums, up to a maximum of $491.60 (for 2020). So apparently your income for your filing status exceeded one of the higher IRMAA clip levels, which resulted in your monthly Medicare Part B premium going from the standard $144.60 to an IRMAA premium about $300 higher. Note that if your income in a subsequent year falls below the IRMAA clip levels, your Medicare premium will also go down to the level appropriate for your more recent income level.

As far as why you weren’t told this in advance, neither Medicare nor the IRS (nor any other Government agency) will advise you in advance on such matters; the onus is upon you (and your tax preparer or financial advisor) to understand the implications of your income on your Medicare premium as well as your income tax obligation. You may want to speak to your tax advisor to see if there is a tax-filing option for eliminating the IRMAA. Once again, thank you for your service to our country, and I hope the above clarifies what happened to your Social Security benefit.

This article is intended for information purposes only and does not represent legal or financial guidance. It presents the opinions and interpretations of the AMAC Foundation’s staff, trained and accredited by the National Social Security Association (NSSA). To submit a question, visit our website (amacfoundation.org/programs/social-security-advisory) or email us at [email protected].

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By Russell Gloor