8962 allocation

[kathyc2]

Dad has both himself and daughter covered on ACA plan.

Dad made 30K. Daughter, 19, was a full time student one semester, lived w/ Dad 1/2 year and with boyfriend 1/2 year. Daughter made 10K. We looked at expenses and daughter is definitely paying more than 1/2 of her own support.

Dad was paying $150/mo for ACA after PTC. If I allocate 100% to him, he has a payback of $750. If I allocate 0% to him he doesn't have payback, and the 100% to daughter results in a "refund" of close to total amount paid.

8962 instructions say allocations can be any that both agree to. I don't see in their examples where it pertains to parent/child. Can allocating all to the child actually be allowed? It doesn't seem logical, but if is actually allowed, I want to get them the most benefit.

[Burke]

Yes, it can be allocated to anyone insured on the plan for which PTC was paid and whom the primary TP is not claiming as a dependent. It is most often the children, and your scenario sounds about right.

[TaxGuyBill]

That is the way I would do it, and as far as I have heard, the IRS has been accepting that.

However, could be a bit of a "gray area".

Yes, they can allocate whichever way they want. The problem is that the daughter's income is below 100% of the FPL.

The 'normal' rule is that a taxpayer does not qualify for the credit if their income is under 100% of the FPL. However, if the Marketplace accepts the estimated income of the taxpayer to be over 100% and gives Advance credit to the taxpayer, the taxpayer still qualifies for the Premium Tax Credit.

The questionable part is that the Marketplace accepted the Dad's income, so if his income was under 100% he would still qualify. The Marketplace did allow the Advance credit based on the daughter's estimated income. That indicates to me that the daughter might not be allowed the credit because her income is under 100% of the FPL. However, nothing that I've seen give guidance on this rule combined with the allocation rules.

Because of the lack of guidance on this situation, personally, I would recommend you allocate it all to the daughter, but warn the taxpayers that it could be disallowed. In the event it is disallowed, you could amend the returns if that would give a better result.

[kathyc2]

For what it's worth... I allocated 0% to Dad and 100% to daughter. She received letter from IRS stating "We have not received information from the Marketplace indicating that you or anyone listed on your tax returns was enrolled..." Sigh.....

Planning on faxing a copy of the 1095A to them and see where it goes...