8962 Shared Policy Allocation Mess

[Burke]

I am tearing my hair out with this one. Married TP has spouse & two children ages 22 & 25 on a health policy for which he receives APTC. He can claim neither child as a dependent this year as they are not students and both make too much money. The children are both filing their own tax returns and claiming themselves. ALL parties are between 100% and 400% of the fed poverty level. It is my understanding that the two children whose income is over the filing threshold can claim 0% of the credit, and the TP can claim 100% by showing these amounts on Part IV of 8962. There is room for 4 persons in Part IV. Do each of the filing taxpayers have to complete 3 of the 4 sections?

Complication: one child apparently became eligible for group insurance with his employer in Nov and Dec and has their own 1095A with Code 1E under Offer of Coverage and Code 2G under Applicable Section 4980(H) Safe Harbor. ALL parties are showing no coverage for Jan/Feb but are filing 8965, Code B.

[TaxGuyBill]

ALL parties are between 100% and 400% of the fed poverty level.

Are you allocating 100% to the one that has the lowest poverty percentage? That is the ideal way to go.

There is room for 4 persons in Part IV. Do each of the filing taxpayers have to complete 3 of the 4 sections?

I think so, but I think I would combine the taxpayer and spouse (just use the taxpayer's SSN) if they are filing a Joint tax return (resulting in 2 of the 4 sections).

ALL parties are showing no coverage for Jan/Feb but are filing 8965, Code B.

I just want to confirm that they had health insurance in December 2014, right? If not, they owe the penalty.

[TaxGuyBill]

Sorry, I missed a few thoughts.

Complication: one child apparently became eligible for group insurance with his employer in Nov and Dec and has their own 1095A with Code 1E under Offer of Coverage and Code 2G under Applicable Section 4980(H) Safe Harbor.

I assume you mean a 1095-C. Assuming the taxpayers did not report that to the Marketplace, that means you need to adjust the SLCSP in column B of the 1095-A to reflect that the one kid was eligible for other insurance. Look it up here:

https://www.healthcare.gov/tax-tool/

Let the taxpayer know that if the kids are still covered but not expected to be dependents, that should be reported to the Marketplace so the kids get their own 1095-As. If the kid is eligible for other insurance, that also needs to be reported to the Marketplace because he no longer qualifies for the Premium Tax Credit (it may be best if the kid actually enrolled in the employer plan and is dropped from Marketplace insurance).

[Burke]

Allocating 100% to the child with the lowest poverty percentage would not affect the other child's refund, but it surely would cause the parents to lose the APTC altogether would it not? And they already had to pay several thousand dollars plus penalties and interest since they did not file until 10/15 and cannot claim either child this year, which also eliminates the EIC. (On the Part IV for the kids' returns, I was thinking of combining the parents on one line using the primary SSN, so I would have to use 1 more line (one for each of the other "tax families" for a total of 2.)

And yes, I meant 1095-C on the employer-provided form for the one child. For whom he no longer works, as I understand it, and therefore does not have this coverage any longer. Arrgggh!

And yes, they all had coverage in December 2014. Apparently there was some problem with the paperwork that fell through the cracks and the 2015 marketplace coverage did not start until March, 2015. They have qualified for the APTC since it first began, but the kids were dependents/students then.

[Burke]

Sorry, I missed a few thoughts.

I assume you mean a 1095-C. Assuming the taxpayers did not report that to the Marketplace, that means you need to adjust the SLCSP in column B of the 1095-A to reflect that the one kid was eligible for other insurance. Look it up here:
https://www.healthcare.gov/tax-tool/

When you say "adjust the SLCSP in column B of the 1095-A to reflect that the one kid was eligible for other insurance" do you mean just for the last two months of the year when he was actually covered? The figure on his 1095-C is $37.69 for those two months. Would I subtract that from the parents' 8962?

[TaxGuyBill]

Allocating 100% to the child with the lowest poverty percentage would not affect the other child's refund, but it surely would cause the parents to lose the APTC altogether would it not?

Not really. Allocating 0% on the parents' return would put a bunch of zeros on the parents' 8962, and there wouldn't be ANY Premium Tax Credit, Advance Credit, repayment, or additional credit on the parents' return. It would all be zeros. Everything would end up on the kid that gets 100%. So the APTC wouldn't be "lost", it would just be shifted to the kid's tax return, with 'extra' PTC to the kid.

The Premium Tax Credit will be largest if 100% goes on the lowest poverty level tax return, so the OVERALL refund of all three tax returns combined will be larger. If you are doing the kids' returns, try it and see. :-)

When you say "adjust the SLCSP in column B of the 1095-A to reflect that the one kid was eligible for other insurance" do you mean just for the last two months of the year when he was actually covered? The figure on his 1095-C is $37.69 for those two months. Would I subtract that from the parents' 8962?

Yes, just for the last two months of the year. No, ignore the 1095-C for this purpose. You need to look up the proper "benchmark plan" (SLCSP in column B of the 1095-A) for those two months at Healthcare.gov with this link:

https://www.healthcare.gov/tax-tool/

[Burke]

Not really. Allocating 0% on the parents' return would put a bunch of zeros on the parents' 8962, and there wouldn't be ANY Premium Tax Credit, Advance Credit, repayment, or additional credit on the parents' return. It would all be zeros. :-)

Does your software do this automatically? Mine doesn't. If I show allocation percentage (on the parents' return) as 100% in Part IV to the child with the lesser income, nothing happens in Part II.

[TaxGuyBill]

Yes, my software (ProSeries) does it automatically. The place that I enter the shared allocation is actually on my entry page for the 1095-A, which all flows to the 8962.

What software do you use? How do you enter your information? Do you enter the 1095-A, and it populates the 8962? Or do you enter the information directly on 8962? If you enter it directly on 8962, I would make sense to me that you would manually multiply the shared allocation numbers (0%) by the 1095-A numbers to enter the numbers on the 8962. Don't forget to enter the "Start" and "Stop" months for the Shared Allocations (columns "c" and "d" in the Shared Allocation section).