Ptc premium tax credit 8962

[unzuetay]

Family of three ages 51, 18, 54 and got a 1095A AGI is 54,309. Insurance paid 6,510 and I'm getting a penalty of 950 because I'm taking into account the income of the dependent son (w-2 & Social security) do these numbers sound right?

[Kram BergGold]

Ss

First, if the SS is not taxable you don't incldue it. Second if the 18 year old owes no tax and is just filing to get back the withholding his income does not get added in, TTB p 11-13.

[unzuetay]

Instructions on irs.gov for 8962 page 2 under subheading modified gross income it mentions that we should include social security that is not taxable in the modified household income unless i misunderstood the instructions.

[unzuetay]

First, if the SS is not taxable you don't incldue it. Second if the 18 year old owes no tax and is just filing to get back the withholding his income does not get added in, TTB p 11-13.

Modified AGI. For purposes of the PTC, modified AGI is the
AGI on your tax return plus certain income that is not subject to
tax (foreign earned income, tax-exempt interest, and the portion
of social security benefits that is not taxable). Use Worksheet
1-1 and Worksheet 1-2, later, to determine your modified AGI.
Taxpayer’s tax return including income of a dependent
child. A taxpayer who includes the gross income of a
dependent child on the taxpayer’s tax return must include in
modified AGI the child’s tax-exempt interest and the portion of
social security benefits that is not taxable.

This is from the instructions from IRS for 8962 page 2

[TaxGuyBill]

Is the son over his 'filing threshold' ($6150 of W-2 income if he didn't have any "unearned" income")?

If not, you don't include his income.

If he is, you DO include his Social Security income (even if it's not taxable) for Purposes of the Premium Tax Credit.


Also, you are not getting a "penalty", you are getting a "repayment" of the Excess Advance Premium Tax Credit.

[unzuetay]

Thank You!

Is the son over his 'filing threshold' ($6150 of W-2 income if he didn't have any "unearned" income")?

If not, you don't include his income.

If he is, you DO include his Social Security income (even if it's not taxable) for Purposes of the Premium Tax Credit.


Also, you are not getting a "penalty", you are getting a "repayment" of the Excess Advance Premium Tax Credit.

I didn't take into account that the son wasn't over his filing threshold! Thank you for helping set me straight once again

[unzuetay]

So close but so far

I didn't take into account that the son wasn't over his filing threshold! Thank you for helping set me straight once again

I forgot that the dependent DOES have to file since he received 1099-misc and has to pay self employment tax (which he is having paid through what was withheld from his social security) Thank you for your help

[TaxGuyBill]

I forgot that the dependent DOES have to file since he received 1099-misc and has to pay self employment tax (which he is having paid through what was withheld from his social security) Thank you for your help

You still don't add the dependent's income. That's why I said "filing threshold", not "required to file a tax return".

The legal gibberish says to include the dependent's income if they "were required to file a return of tax imposed by section 1 for the taxable year". Section 1 only sets the limit for income tax (both for earned income and unearned income/Kiddie tax), but not for Self Employment tax.

http://www.law.cornell.edu/uscode/text/26/36B#d_2

So if there isn't any "unearned" income, you don't include the dependent's income unless it's over $6150, even if they need to file for SE tax.

http://www.irs.gov/publications/p501/ar02.html#en_US_2014_publink1000220702

[Kram BergGold]

Thanks

Thanks for correcting me on the SS issue.

[unzuetay]

You still don't add the dependent's income. That's why I said "filing threshold", not "required to file a tax return".

The legal gibberish says to include the dependent's income if they "were required to file a return of tax imposed by section 1 for the taxable year". Section 1 only sets the limit for income tax (both for earned income and unearned income/Kiddie tax), but not for Self Employment tax.

http://www.law.cornell.edu/uscode/text/26/36B#d_2

So if there isn't any "unearned" income, you don't include the dependent's income unless it's over $6150, even if they need to file for SE tax.

http://www.irs.gov/publications/p501...link1000220702

Dear TaxGuyBill:

Dependent received $8064 Social Security ($420 withheld), $2008 w-2, $1670 on 1099-Misc

Still count? I appreciate you sharing your expertise!

[TaxGuyBill]

Don't include the dependent's income.


After re-reading that portion of the Code, a better way to describe it is to say that you only include the dependent's income if they have "taxable income" on Line 43 of the 1040.

The EXCEPTION to that description is if the "Kiddie Tax" applies and the parent is claiming the child's interest and dividends on the parent's return using Form 8814. If that happens, you would still need to include the dependent's full MAGI (including non-taxable Social Security) because the dependent DOES have "taxable income" (but it is being reported on the parent's return instead of the dependent's return).

[unzuetay]

Thank you again.

Don't include the dependent's income.


After re-reading that portion of the Code, a better way to describe it is to say that you only include the dependent's income if they have "taxable income" on Line 43 of the 1040.

The EXCEPTION to that description is if the "Kiddie Tax" applies and the parent is claiming the child's interest and dividends on the parent's return using Form 8814. If that happens, you would still need to include the dependent's full MAGI (including non-taxable Social Security) because the dependent DOES have "taxable income" (but it is being reported on the parent's return instead of the dependent's return).

I really am grateful for your help. It gives me a lot to learn, so that I can explain it clearly to my coworkers