How does Income work for Self Employed in Covered California?

During open enrollment one of the most difficult things about enrolling or renewing a Covered California plan is estimating your income for the coming year. This is doubly hard for people who are self employed, since their income can often fluctuate throughout the year. With less predictable income it puts self employed individuals in a difficult spot to either overestimate their income and pay too much monthly. or underestimate and have to potentially pay money back at the end of the year. So to help make this decision easier, let’s go over some of the specifics about how your income affects your Covered California enrollment.

What year income should you be using?

First it is important to understand which income Covered California is asking for on the application. This is not always clear, but for Covered California they are asking for income for the same year you are applying for. So for example, if you are applying for a plan that starts January 2021; then Covered California would like to know what your income will be for the full year from January 2021 – December 2021. Specifically, for self employed individuals or people who get paid on commission this can be very difficult. But for people who have a steady income year-round it is relatively easy.

What income should self employed people use?

At the end of the year, Covered California will generate a form 1095a. This form is used during tax time to justify how much somebody paid for their Covered California Plan during the year  and how much they “should” have been paying.  On this form it shows how much financial assistance you received through the year , based on the estimated income you used when you applied.  Come tax time,  the IRS will use your Modified Adjusted Gross Income (MAGI) to determine if the amount of fiscal help you received is too much or too little based on that final MAGI number. The MAGI is basically your Adjusted Gross income with some extra things like Social Security or Disability added back in. This means that some things that are not always fully taxed for the purposes of the IRS are counted as income for your Covered California Financial assistance. If you overestimate your income during the year and your MAGI is lower than what you had thought; with a Covered California plan you will get some of the excess money you paid back on your tax return. If you underestimate your income and actually made more money than you estimated on your Covered California application,then you will have to pay the extra subsidy back to the IRS. For self employed individuals an easy rule of  thumb is that Covered California is looking for an estimation of your income for the current year before taxes are taken out but after deductions have been accounted for.

We are the Covered California Enrollment Center, your place to get free assistance with your health insurance plan. We can assist you to sign up, enroll and update your private health Insurance, Covered California plan, Medi-Cal, Obamacare and Medicare insurances. Our California agency is certified by Covered California, to assist you in-person, over the phone or online in English and Spanish. 

We specialize in individual and family health insurance plans, Medicare, Medicare Advantage plans, Medicare Supplement (MediGap plans), Medicare Prescription Drug plans (Part D), as well as, Dental and Vision coverage. We can help you get enrolled into health insurance plans, compare healthcare options, provide required health coverage tax documents and review the plans that best fit your budget and healthcare needs.  

Call us today at 844-367-6555 for free assistance over the phone, visit our website at www.EnrollSocal.Com to make an appointment at our California Enrollment Centers Serving San Diego County, Los Angeles County and Imperial County.