1095a ACA question
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Level 2

1095a ACA question

Here is the situation of someone whose taxes I’m assisting with:

- parents used ACA (marketplace plan) for the full year

- 22 year old child that is NOT a dependent for the 2019 year was on the same marketplace policy where an advance credit was made

- 22 year old started a job in August where the employer offers affordable insurance but did not take the employers coverage.

 

what will be a beneficial allocation between the parents and the non dependent child? Would it be more beneficial to allocate 80% of the policy to parents and 20% to child or 95% to 5%. We want to avoid having the child pay back the premium as much as possible. Any thoughts are so welcome because we are spinning our wheels.

 

10 Replies
Employee Tax Expert

1095a ACA question

You can allocate the percentage of the shared policy in any manner chosen, even 100% / 0%, as long as the total between the parties on the policy does not exceed 100%. The advance premium tax credit is all based on income. We cannot determine what the best allocation would be for you. Try different allocation percentages to determine the result most favorable to the taxpayers.

 

Shared Policy

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Level 2

1095a ACA question

thank you so much for the response! Tried out multiple allocations in the system and it seems like somehow the 80-20 works the best for them (where it doesn’t hurt both the parents and child from a refund perspective)

 

follow up question though if you don’t mind- since the child was “ineligible” for marketplace credits  for 5 months of the year since he had an employer offering insurance but he still received advance credits under the joint policy.. let’s say if the irs comes back and says repay the advance credits for these 5 months to the child because you were ineligible.. would it matter in that case if we allocated 20% of the policy to him versus 0%? If we allocated 0% would he hypothetically have to pay back 0 of the credit he received?

 

I hope this doesn’t sound confusing and I so very much appreciate your help.

Employee Tax Expert

1095a ACA question

It depends. Did the taxpayer notify the marketplace that the dependent was no longer eligible as a result of employment? If so, the premium tax credit received would have been recalculated. 

 

The IRS FAQ in the link below may be helpful in determining your solution. It has information regarding change of status during the year.

 

Premium Tax Credit 

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Level 2

1095a ACA question

Thank you! They did not notify the marketplace, they didn’t even think to change anything and are thinking about it now with filing taxes!

Level 11

1095a ACA question

For the 5 months where the child was eligible for employer insurance, you need to look up the proper number to enter for column B of the 1095-A.   You can't use what is on the 1095-A for that because you did not notify the Marketplace.

 

https://www.healthcare.gov/tax-tool/#/premium-tax-credit

Level 2

1095a ACA question

@AmeliesUncle makes SO much sense thank you. This is one of the pieces of the puzzle I was looking for. And to confirm, I would have to update column B on BOTH the parents and the non-dependent (that is filing a seperate return) 8962’s correct? Is there anything else to state in the return to clarify why I used a different number for column B?

I’m assuming once I do this I should re-run an analysis of how much the policy should be distributed between the parents and child (80/20 or another threshold as well)?

Level 11

1095a ACA question

Yes, update it on both (assuming all people involved are covered on the same 1095-A).

 

No, there is nothing else to state.   Just use the correct/modified numbers for column B.

 

In most cases it is has the best overall outcome to allocate 100% to one tax return (and in most of those cases, 100% to the kid is best).   Look at Line 5 of  Form 8962 on both tax returns.  Whichever one is lowest, allocate 100% to that tax return.

 

Level 2

1095a ACA question

@AmeliesUncle Last question here for ya- got the updated numbers for column B and updated the SLCP on the parents plan. For the child’s plan will the SLCP be the same as the parents (because they were on the same policy) or 0 (because child was ineligible for  marketplace)?

 

From what I have heard also it is more advantageous to allocate 100% to the child however this situation is unique in that the child made more in 5 months than the parents did in the full year which is why intuitively for me it’s been more difficult to understand. The best allocation in the system (I’ve tried literally every allocation possible) still seems to 95-5 and I’m not sure why but I guess that’s what we’ll go with over here.

 

Again I so very much appreciate your help and am learning so much!

Level 11

1095a ACA question

If all were covered on the same 1095-A, it will be the same on both tax returns.  So the number on the child's return will be the same as the parents'.

 

It is not necessarily about who "made more", but it is based on the Poverty Percentage (Line 5 of Form 8962), which also factors in how many people are on the tax return.

Level 2

1095a ACA question

Awesome. Thank you so so much! 🙂 Yes by the federal poverty line, the parents have a lot lower number bc they had a household of 3 (excluding the non dependent) and made less than the child that only had a household of himself, therefore 1.

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