Form 8962 PTC

[arlo]

I have taken the examples #1 page 13 of the 8962 inst. on shared policy allocations an put the examples on the form. I am doing this on all the examples. In this case JOE had to repay PTC of $1151.00. His wife was allocated
20% of the PTC payment. I put in an assumed wage(245% poverty Level) for her and ran it through and she had to repay all of the $1287 that was passed on to her by her exhusband. .
The child was covered all year and no one received the PTC for her. This just not seem to me as being correct
Anyone else putting these examples on the forms???

[TaxGuyBill]

Unfortunately, that's what happens when only PART of the household is covered by the Healthcare Marketplace.


The Premium Tax Credit reduces the cost of insurance to a certain percentage of income, based on the Federal Poverty Level (FPL). That is on line 8 of form 8962. The FPL is based on the entire household, even if only one person is covered. So more people in the household equals higher FPL which equals higher 'expected' total insurance premiums. In other words, the credit is based on the cost of the entire FAMILY (but non-Marketplace coverage is not taken into consideration for the credit). Because the cost of ONE person is less than a FAMILY policy, the credit is significantly reduced or eliminated.


For simplicity, let's assume everybody's cost of insurance is for the Second Lowest Cost Silver Plan (which in real life is doubtful).

At 245% of the FPL ($38,000 for a family of 2), that percentage is 7.88% (see page 6 of the instructions). That calculates to a annual cost of $2994. Because Jane's (the daughter) insurance is cheaper than that ($2400), so there is no Premium Tax Credit.

Take that same scenario, but the Alice (the mother) also as insurance through the Exchange, and her cost is $3600. Now the household pays $6000. However, the credit threshold of $2994 remains the same. Now they receive a credit of $3006.

[arlo]

Form 8962 PTC

TaxGuyBill, thank for the reply. You have explained it very well. I am not crazy after all. I know this mommy would have thrown a lamp at me if I told her she owed $1287 to uncle sam. Just as you say NEVER insure anyone through the marketplace that
you are not going to claim on your tax return and NEVER let anyone insure through the market place someone that you are going to claim on your tax return.

You have also answered a question I had as what number should be used on line 1.
(The FPL is based on the entire household, even if only one person is covered)

My problem is I try and figure out things in a logical way. There is nothing logical
about this law.

Again I really appreciated your reply.

[David1980]

So let's say the tax benefits are less than $1,287 for Alice to claim Jane and Alice's tax preparer suggests not claiming Jane and thus not having to include the $1,287 repayment. Alice could sign the exemption over to Joe which does great things for Joe. What if she doesn't? If Alice doesn't even tell Joe that she decided not to claim Jane I'd expect Joe will receive a letter down the road for the unreported APTC. Without the release from Alice it would seem Joe can't (legitimately) claim Jane but has to include the APTC anyway. So will have another $1,287 APTC to repay since his family size is still 2.

I imagine there's going to be some "fun" results from this. I also imagine they'll be relatively rare given the number of people who purchased insurance on the exchange. Most people who purchased on the exchange probably won't have surprises, so we're dealing with some percentage of some percentage of tax returns that will deal with these issues. Probably would have been better to not mingle this Obamacare with tax returns quite so much, but congress likely couldn't have passed anything that didn't.

[arlo]

Form 8962 PTC

I think Joe and Alice would be stupid not to work this out between them so that there would be no return of the PTC
for either one of them.