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Form 8962 & PTC Payback

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    Form 8962 & PTC Payback

    Take #2. Going to try this one again. TP has 2 children. Went on Marketplace and got PTC for Mar - Dec. Now calculations are showing he has to pay $2,500 of it back because I have to use household income (including the kids' W-2's) and it makes it too high. He is claiming kids. The worksheet for Dependent MAGI says "if only reason deps are filing is to get refund, don't count their income." Well, if they claim themselves, that is true. They have no tax liability. If TP claims them, then they have a tax liability because they don't get the $3,950 exemption. Question is: if they claim themselves, then I don't need to count their income on 8962? (Over $20K combined). TP cannot claim dependents ($3,950 X 2) if they claim themselves, but he gets another $550 in PTC and doesn't have to pay anything back. So it is a net $1,800 to him. Does this sound legitimate?
    Last edited by Burke; 03-27-2015, 04:02 PM.

    #2
    If the taxpayer is ABLE to claim them as dependent, they can not claim their own exemptions.

    However, the taxpayer can still choose to not claim them as dependents. That will allow him to not claim their income for purposes of the Premium Tax Credit. However, the 'family size' will be smaller and therefore they will have a higher Federal Poverty Level. That will reduce the Premium Tax Credit.

    Another option is for the children to contribute to Traditional IRAs. The legal gibberish seems to say you only need to include their income if they have 'taxable income'. Unless the children only have unearned income, they can contribute to an IRA to get their taxable income down to $0.

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      #3
      Has to meet filing threshold

      It's only added if the dependent is required to file a tax return because his or her income meets the income tax return filing threshold.

      Comment


        #4
        Yes, but the filing threshold consists gross income less the standard deduction and the personal exemption amount. If gross income is used, the IRA thing would not work since that would be using AGI, not GI.
        Last edited by Burke; 03-28-2015, 10:44 AM.

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          #5
          Originally posted by TaxGuyBill View Post
          If the taxpayer is ABLE to claim them as dependent, they can not claim their own exemptions.

          However, the taxpayer can still choose to not claim them as dependents. That will allow him to not claim their income for purposes of the Premium Tax Credit. However, the 'family size' will be smaller and therefore they will have a higher Federal Poverty Level. That will reduce the Premium Tax Credit.

          Another option is for the children to contribute to Traditional IRAs. The legal gibberish seems to say you only need to include their income if they have 'taxable income'. Unless the children only have unearned income, they can contribute to an IRA to get their taxable income down to $0.
          Thanks for the input. In that case, then neither would be able to claim. BUT, why would the family size used be smaller, since they are all members of the household and all covered under the same plan?. All four names and SSN's are on the 1095-A. If that is truly the case, then -- yes -- it bumps his income over the 400% and he has to pay it all back. About 9K! So, best bet is for him to claim dependents, use their income, and pay back the $2,500 cap. (He is lucky, as figuring it that way his income is 395% of the fed poverty level, so he just makes it.)

          Comment


            #6
            Originally posted by Burke View Post
            why would the family size used be smaller, since they are all members of the household and all covered under the same plan?. All four names and SSN's are on the 1095-A.
            Instructions for Form 8962, p. 7- Shared Policy Allocation

            Comment


              #7
              Originally posted by Burke View Post
              Yes, but the filing threshold consists gross income less the standard deduction and the personal exemption amount. If gross income is used, the IRA thing would not work since that would be using AGI, not GI.
              "Filing threshold" is easiest to say, but the legal gibberish says "were required to file a return of tax imposed by section 1 for the taxable year". Section 1 imposes income tax on "taxable income". If there is no "taxable income" (after IRA contributions), then there is no requirement to "to file a return of tax imposed by to file a return of tax imposed by section 1 for the taxable year".

              It's Section 6012 that requires a tax return if your GROSS income is over the "filing threshold", NOT Section 1.


              Originally posted by Burke View Post
              Thanks for the input. In that case, then neither would be able to claim. BUT, why would the family size used be smaller, since they are all members of the household and all covered under the same plan?. All four names and SSN's are on the 1095-A. If that is truly the case, then -- yes -- it bumps his income over the 400% and he has to pay it all back. About 9K! So, best bet is for him to claim dependents, use their income, and pay back the $2,500 cap. (He is lucky, as figuring it that way his income is 395% of the fed poverty level, so he just makes it.)
              The Premium Tax Credit is based on the number of exemptions on the tax return, so even if other people are covered, they are not part of the Household 'size' for the credit (see BP's comment).


              Originally posted by BP. View Post
              Instructions for Form 8962, p. 7- Shared Policy Allocation
              A dependent can't claim the Premium Tax Credit, so they would want to "allocate" 100% to the parents.

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                #8
                Thanks for all you knowledgable guys. The only clients I have that are affected by these regs have just come in in the last 2 weeks, so it has been a learning curve -- in spite of trying to read everything that has come down the pike.....

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