PTC - Taxpayer Not Eligible?

[ttbtaxes]

If the client works at a small employer and will not get a 1095-B or C, then how do we determine whether employer offered affordable coverage?

[kathyc2]

"You are right, that the instructions don't specifically address what to do in this situation. To make my software correctly do things, I would enter "0" in column A."

Silly me, but I have a habit of using the actual numbers on a tax document rather than changing them to what I "think" they should be. On a more serious note, do you have any official information that any potential payback for employer coverage available SHOULD be handled on a tax return? I have not found any. Using a test client in Pro, I entered a 1095A and also a 1095C that coverage was offered, and the 1095C info did not show up anywhere on the return, which further leads me be believe that for this year that any potential payback is not handled through a tax return.

This is all new so it's confusion is natural. Of course we all can pass on preparing a return if we aren't comfortable with the information, but I don't think we have the authority to tell a client that they need to pay back 2015 APTC on the tax return absent any official information or instruction.

[JudyL]

Tested this in Drake

I looked at Drake Software's input screens on a practice return for how this situation might be handled. I checked the box to indicate the TP had full-year coverage. I then went to the 8962 inputs and filled in the information and monthly amounts from the 1095-A to populate the reconcilation and repayment sections, parts 2 and 3, of the Form 8962.

At the bottom of Drake's input, it also has check boxes for each month with the following notation (abbreviations are mine):
"Repay't for mos TP was not eligible for the credit. If affordable MEC was avail from another source for any mos during which the TP rec'd APTC, mark boxes below to have the software compute repayment of credit for those mos."

Drake completed Form 8962 with -0- in each month for cols A, B D & E. Col C was the TP's monthly contribution toward the HI costs from line 8B, and Col F was the APTC received. Interestingly, it did cap the repayment because the household income was within the 100-400% of FPL.

[TaxGuyBill]

Like many other things, it is our job to determine if a taxpayer qualifies for a credit or deduction, even if there are not lines on the tax return talking us through it. We are not just data-entry people. Retirement deductions, Saver's Credit, educational credits, HSAs, Itemized deductions, EIC, etc. We need to know if they qualify (including if their income is within range) in order to give them the credit or deduction on their tax return.

From my perspective, the same applies for the Premium Tax Credit. If the taxpayer does not qualify, why would we allow the credit on the tax return?


As for using the actual numbers on the 1095-A, rather than entering "0", yes, I understand that. However, there are specific situations mentioned in the instructions when we NEED to look up and enter a different SLCSP than what the 1095-A shows. It hypothetically might be an option to get a new 1095-A with the correct information, but the reality is that the Marketplaces are such a mess, I wouldn't do that. :-)


From my perspective, it doesn't matter if the IRS instructions don't specifically tell us how to do a specific procedure. We need to comply with tax law as best we can. Tax law (and the IRS instructions) clearly say the taxpayer does not qualify for the credit if they have affordable employer insurance.


You do make an interesting point about "any potential payback is not handled through a tax return". In other words, you are saying we should give them the credit, and let the IRS send them a bill, right?

That is an interesting point, but the IRS also has not given direction to do it that way either. I'm not comfortable signing a return that has a credit on it that I KNOW the taxpayer does not qualify for. Unless the IRS gives clear direction for us to do it that way, I would consider that knowingly signing a false tax return.


I guess the bottom line is that things are a mess. Hopefully, Congress and the IRS will get clear up most of these 'bugs' over the next few years. :-)

Thanks for the interesting discussion!

[kathyc2]

I looked at Drake Software's input screens on a practice return for how this situation might be handled. I checked the box to indicate the TP had full-year coverage. I then went to the 8962 inputs and filled in the information and monthly amounts from the 1095-A to populate the reconcilation and repayment sections, parts 2 and 3, of the Form 8962.

At the bottom of Drake's input, it also has check boxes for each month with the following notation (abbreviations are mine):
"Repay't for mos TP was not eligible for the credit. If affordable MEC was avail from another source for any mos during which the TP rec'd APTC, mark boxes below to have the software compute repayment of credit for those mos."

Drake completed Form 8962 with -0- in each month for cols A, B D & E. Col C was the TP's monthly contribution toward the HI costs from line 8B, and Col F was the APTC received. Interestingly, it did cap the repayment because the household income was within the 100-400% of FPL.

Interesting. Does Drake have something like a tax instruction cross reference to indicate where there are IRS instructions or equivalent for handling it that way?

[kathyc2]

I had a return last year where client obtained other coverage and cancelled marketplace insurance in Oct. The 1095-A showed amounts in Nov-Dec, which I did not enter on return. Leaving off the 2 months actually resulted in client less additional credit than if I would have entered it. The zeros in those 2 months caused a mismatch w/ 1095A info and the IRS put their return on hold and client finally received refund about 2 months later after client had multiple conversations w/ IRS. Proceed w/ caution!

[TaxGuyBill]

I agree, if we don't enter things exactly as the 1095-A shows, I'm sure that the client will be receiving an IRS notice. I didn't even think about a delayed refund, but that makes sense.

[kathyc2]

You do make an interesting point about "any potential payback is not handled through a tax return". In other words, you are saying we should give them the credit, and let the IRS send them a bill, right?

I would think it would be HHS/Marketplace rather than IRS.

Speaking of HSA, do you actually make them bring you a copy of plan to verify that it's HSA eligible?

[TaxGuyBill]

Speaking of HSA, do you actually make them bring you a copy of plan to verify that it's HSA eligible?

If it is on the W-2 with code W, I assume it qualifies and don't even ask.

If they contribute outside their employer (such as a private HSA plan, I do ask them what their deductible is. If they are not sure, I ask them to check and give me the exact amount. I TRY to ask 'does it cover prescriptions before the deductible is met', but I sometimes forget. I never ask for them to give me an actual copy of the plan (but maybe I should), I just take their word for it (and make them check if they are not sure).