Avoiding Generation of Form 8962 with 1095-A When Not Eligible for PTC?

[Doug_B]

Doing a Federal return for my son (filing Single) who had Marketplace coverage through his state site (New Jersey) for entire year 2024 and has received his 1095-A. We knew when my son applied for coverage in late 2023 that he wouldn't be eligible for the Premium Tax Credit (PTC) because his employer offers minimum essential coverage. He indicated as such on the state's Marketplace site when signing up for Marketplace health insurance, and as a consequence he did not receive any Advance PTC (APTC) nor any NJ subsidy for any months in 2024.

As a consequence, my understanding via reading Form 8962 instructions and Pub 974 is that my son does not need to file Form 8962. However, when I entered the data from his 1095-A into TurboTax (Deluxe desktop Windows version), TurboTax created a Form 8962 with an associated PTC for him. I could not find a way to input into TurboTax information asserting his ineligibility for a PTC.

If there is no such mechanism to assert such ineligibility into TurboTax, then it seems the only way to avoid generating Form 8962 and thus avoiding taking an improper PTC is to not enter his 1095-A data. However, I have seen assertions in this community and in TurboTax proper that failure to include his 1095-A data will result in rejection by the IRS when attempting to efile his return.

Is there an appropriate solution to this apparent catch-22? I hope I simply missed where in TurboTax I can indicate that my son is ineligible for any PTC.

Thanks.

Doug

[AmeliesUncle]

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@Doug_B wrote:

However, I have seen assertions in this community and in TurboTax proper that failure to include his 1095-A data will result in rejection by the IRS when attempting to efile his return.

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Because there is no Advance credit (column C of the 1095-A), it hypothetically shouldn't reject.  Hypothetically.

The other option is to enter 0.01 for each month for the SLCSP (column B of the 1095-A).  It technically should be zero, but I think the program gives an error for zero so 0.01 is the work-around.

[Doug_B]

Thank you @AmeliesUncle for your feedback.

With respect to the potential that the lack of APTC on my 1095-A could lead to my Fed return not rejecting if I avoid entering my son's 1095-A info where indicated in TTax, I have a low confidence level. TTax is assertive in their help areas that e-filing a return before receiving one's 1095-A (and thus subsequently entering them into TTax) will result in a rejection by the IRS. Verbiage I have found elsewhere on the Internet is consistent with this, including identification of a specific error code (which I didn't retain but could be found again). I believe everything in this area is thought out by the IRS and actively supported by TTax / Intuit (as well as by other efile software companies). I believe they want to force 1095-A entries for all Marketplace subscribers in order to ensure APTC reconciliation for the subset to which ATPC applies, even to the extent that some small(?) subset of the Marketplace subscribers get a PTC that they don't deserve (for those who know little to nothing of the tax laws associated with this area and just follow the Step-by-Step questionnaires that their tax prep software presents to them). I cannot otherwise understand why TTax would not have any screening questions in this area that could result in disqualifying a user from the PTC prior to entering their 1095-A data; it's uncharacteristic of TTax otherwise, and I don't believe it was an oversight.

With respect to the second suggestion of replacing the 1095-A SLCSP data with low values, I did go down that path to see what happens in TTax (using $1 per month instead of your suggested $0.01 per month, but any value below the calculated "Monthly Contribution Amount" on Form 8962 would apparently suffice). As a result, the PTC calculated on Form 8962 did end up being zero, which would be the goal for my son's case, given his ineligibility for PTC due to his employer offering a health insurance plan that is minimum essential coverage.

Note that due to the PTC being calculated as zero for this experiment, Form 8962 does not appear to be a form that will be included in the official return, as 8962 is not included in the group of material that TTax lists when printing out "All official forms required for filing." In fact, 8962 is not included in any of the predefined groups of forms that can be printed. It would have to be specified by number to get it printed (and probably only when viewing it while in TTax "Form" mode). However, the 1095-A information I entered is part of the "key calculations" and "all calculations" groupings that TTax allows you to select for printing.

Which leads to my last, critical question if one goes down this path of generating a zero PTC. If the Form 8962 is not included in the information filed with the IRS due to the PTC being zero (and no APTC to reconcile), how does the IRS know that the user entered their 1095-A info to get to that point? Does TTax include any such indication as part of the info it sends to the IRS when e-filing one's return, if there is no inclusion of a Form 8962 with the return proper? I obviously don't want my son's e-file to be rejected in this case; I'm not sure there would be another recourse other than going with paper filing - and I do have a fuzzy recollection regarding reading or hearing about one or more cases in the distant past where a rejected e-file that was followed up by paper filing had "problems" being processed. I don't recall specifics, so I cannot assert with any reasonable confidence that such a scenario would be problematict.

Thanks again.

Doug

[AmeliesUncle · Accepted solution]

I would go ahead and e-file it and see what happens.

If it is accepted, great.  

If it is rejected, check if TurboTax has an option for an "ACA Explanation" that would go with the e-filed tax return, which would avoid the rejection.  If it doesn't have that, then file by mail.

[Doug_B]

Thank you @AmeliesUncle for your suggestions. I did go ahead and e-file per your initial suggestion, with no Form 8962 included (after altering the 1095-A SLCSP data so that zero PTC would apply), and the return was accepted by the IRS within an hour. So your "hypothetical" was in fact a reality. I did find verbiage on the IRS web site regarding the reject error prior to e-filing this return, and it did assert that they do look at the 1095-A APTC data as part of the process.

Given that the IRS does include a check of the APTC data, I am more miffed at TTax that their online help topic about this reject situation makes no mention of this aspect of the IRS's checking process. Even the video that TTax includes with this help topic makes no such mention.

As I stated before, TTax should also provide screening questions regarding PTC eligibility. There are multiple situations for which one who has Marketplace medical coverage is not eligible for PTC, my son's regarding his employer offering minimal essential coverage being one of them. TTax properly leads a person who has such coverage to enter their 1095-A data but does not lead them away from PTC when a person is ineligible. Without appropriate handholding from the software, one must understand this area of the tax law and then alter the data to avoid erroneously including a PTC on their return.

Thanks again.

Doug