If a senior’s modified adjusted gross income (MAGI) from two years ago is above a certain threshold, then they are forced to pay a higher premium for Medicare Part B and D. These plus-sized premiums are called an Income Related Monthly Adjustment Amount or IRMAA. While your MAGI from two years ago is already set in stone, you may still be able to reduce your Medicare premium.

The Social Security Administration is empowered to use more recent information than the two-year lookback when it’s available and has defined seven life-changing events that can change how an IRMAA is calculated. The four most common of those events are getting married, getting divorced, the death of a spouse, and reducing or stopping work hours.

If one of these events affects a Medicare enrollee, he or she can proactively notify the SSA by using a “Medicare Income-Related Monthly Adjustment Amount – Life-Changing Event“ form. This optional form is filled out once per person. Joint filers should each submit one.

Each individual reports the type and date of the life-changing event in Step 1 of the form, the MAGI from the year with the event in Step 2, the following year’s lower MAGI in Step 3, and evidence of the event.

Elsewhere, in their operations manual for employees, the Social Security Administration (SSA) provides examples of evidence for the various Life Events.

The SSA also notes in these Work Stoppage and Work Reduction guides that instead of estimating your MAGI, if you simply have a more recent tax return, meaning one from the current year or the year before, you can bring that with you to show a significant reduction in MAGI.

An Example

Consider how this situation would work. Imagine that you retire in July of 2022. Your 2022 IRMAA was already decided back in November of 2021 based on your 2020 actual MAGI, but you file an IRMAA Life Event Form. On the form, you tell the Social Security Administration that you are no longer earning income so your 2022 MAGI is estimated to be lower than your 2020 actual MAGI. You also project that your 2023 MAGI will be even lower still, as you don’t plan to work at all in the new year.

The form is accepted, and the Social Security Administration not only lowers your current 2022 IRMAA, but they also use your 2023 Projected MAGI for the next several years rather than looking at prior year tax returns. You can see why in the table below:

Current Year	Default Tax Return	Most Recent Information
2021	2019 Actual MAGI	2019 Actual MAGI
2022	2020 Actual MAGI	2020 Actual MAGI
2022 Retirement! You file a Work Stoppage Life Event Form Event with a Step 2 Projected 2022 MAGI and the optional Step 3 Projected 2023 MAGI
2022 Recalculated	2020 Actual MAGI	Projected 2023 MAGI
2023	2021 Actual MAGI	Projected 2023 MAGI
2024	2022 Actual MAGI	Projected 2023 MAGI
2025	2023 Actual MAGI	2023 Actual MAGI
2026	2024 Actual MAGI	2024 Actual MAGI

 

You can see that in this case, your 2020, 2021, and 2022 MAGI numbers end up not being used to calculate IRMAAs. In this way, if you have a scheduled life event in the future, you can use smart tax planning to move high AGI events into tax years when a life-event makes the MAGI obsolete.

Now, applicants must be faithful and accurate in MAGI estimates. If your estimates on a life-changing event form prove inaccurate, then the SSA can retroactively reissue an IRMAA. In the above example, if our 2023 projected MAGI was proved inaccurate by the actual MAGI, we might need to repay IRMAAs from 2022, 2023, and 2024 in 2025.

The most common life-changing event for an IRMAA comes from seniors who were working at age 63 but retired before age 65. In this scenario, being proactive and submitting a life-changing event form to the SSA helps to ensure a smooth and affordable enrollment into Medicare.

You can find a copy of the latest form and instructions for how to file it here: https://www.ssa.gov/medicare/lower-irmaa.

Photo by Toa Heftiba on Unsplash. Image has been cropped.