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StJ-StM-317
Level 1

Form 8962 dependent question

CoveredCA (medical insurance marketplace in CA) told me that whether or not our adult children cannot be claimed as our dependent(s), they wanted us to use their combined income with mine on the CoveredCA application to determine what we are eligible for as a household in 2020. This was in addition to of course counting them to be covered by the insurance.

Was it right for us to be asked to use my stepsons' income for their application even though we cannot claim them as dependents in 2020? Also, does this mean we may get more money back?

In the same vain, if we could have claimed my stepsons in 2020, would that have been correct to also use their income in CoveredCA's application, and then use their AGI in our 2020 return in the form 8962 section?

Please let me know with these questions. I appreciate your help.

Thank you

9 Replies
Cynthiad66
Expert Alumni

Form 8962 dependent question

The Family plans in the ACA requires proof of income for all persons on the plan.  This does not mean that you can claim them as dependents.  This is information for the computation of premiums for the insurance.

 

Health insurance in the Marketplace has specific rules and guidelines to determine who qualifies for insurance and how much they pay.  This is totally separate from IRS and tax law.  There is a totally separate criteria for determining dependency exemption.

 

Here is how to determine if you can claim your stepsons as dependents on your tax return:

 

You can claim a child, relative, friend, or fiancé (etc.) as a dependent on your 2020 taxes as long as they meet the following requirements:

Qualifying child

  • They're related to you.
  • They aren't claimed as a dependent by someone else.
  • They're a U.S. citizen, resident alien, national, or a Canadian or Mexican resident.
  • They aren’t filing a joint return with their spouse.
  • They're under the age of 19 (or 24 for full-time students).
    • No age limit for permanently and totally disabled children.
  • They lived with you for more than half the year (exceptions apply).
  • They didn't provide more than half of their own support for the year.

When you enter the dependent on the return TurboTax will

AmeliesUncle
Level 11

Form 8962 dependent question

If you told the Marketplace your children would NOT be your dependents, they SHOULD have sent the child his/her own separate 1095-A, and they would calculate their own credit on their own tax return.  If they did not do that, there is probably nothing you can do (and it might end up being a good thing).

 

If your child IS your dependent, then yes, their income is included in the calculation of the credit on your tax return *IF* their income was high enough that they were required to file a tax return due to having "taxable income".

StJ-StM-317
Level 1

Form 8962 dependent question

Hello, during 2020 when I needed to set up medical insurance with the 'marketplace', I had no idea whether or not I was going to able to claim my two stepsons as dependents. I had no idea in early 2020 that they were not going to attend any classes. Since they attended no classes, my Wife and I cannot claim them as dependents. Yet, the marketplace wanted to know in early 2020 if we were going to claim them as dependents. Since I thought they were going to attend classes, I said yes. They did not attend classes. The marketplace did not know this and included both of them on the 1095-A. If they were not going to be dependents, I still would have to give their approximate income, and the marketplace would have sent them their own 1095-A. This did not happen, and again, they both appear on my Wife's and my1095 A.

This is not fair since I had no idea in early 2020 things would transpire this way. Now, it appears my Wife and I are expected to put their AGI income on our tax return. We may be financially penalized for not knowing what their correct 2020 AGI would be when it comes to the marketplace determining what premium credit we may received.

Even if I don't enter the stepsons' AGI income on form 8962, won't the IRS will be looking for their W2 information to see how it matches with our 1095-A? How can I resolve this without paying some kind of financial penalty?

Since we cannot claim either stepson in 2020 as a dependent, do I still have to enter their AGI on form 8962? Again, if I don't, won't the IRS be looking for some kind of reconciliation with their income and the projected income I gave on the marketplace application?

How can this be resolved?

Thanks

StJ-StM-317
Level 1

Form 8962 dependent question

Hello, during 2020 when I needed to set up medical insurance with the 'marketplace', I had no idea whether or not I was going to able to claim my two stepsons as dependents. I had no idea in early 2020 that they were not going to attend any classes. Since they attended no classes, my Wife and I cannot claim them as dependents. Yet, the marketplace wanted to know in early 2020 if we were going to claim them as dependents. Since I thought they were going to attend classes, I said yes. They did not attend classes. The marketplace did not know this and included both of them on the 1095-A. If they were not going to be dependents, I still would have to give their approximate income, and the marketplace would have sent them their own 1095-A. This did not happen, and again, they both appear on my Wife's and my1095 A.

This is not fair since I had no idea in early 2020 things would transpire this way. Now, it appears my Wife and I are expected to put their AGI income on our tax return. We may be financially penalized for not knowing what their correct 2020 AGI would be when it comes to the marketplace determining what premium credit we may received.

Even if I don't enter the stepsons' AGI income on form 8962, won't the IRS will be looking for their W2 information to see how it matches with our 1095-A? How can I resolve this without paying some kind of financial penalty?

Since we cannot claim either stepson in 2020 as a dependent, do I still have to enter their AGI on form 8962? Again, if I don't, won't the IRS be looking for some kind of reconciliation with their income and the projected income I gave on the marketplace application?

How can this be resolved?

Thanks

MaryK1101
Expert Alumni

Form 8962 dependent question

If you are not claiming them on your tax return, you do not have to include their income, but you will have to allocate the 1095-A amounts.  Your stepsons will also have to report the 1095-A information on their return.  The steps below are from the link I provided but they apply to the stepsons.  I edited the part you need to complete your return, and you will have to decide on the allocation and give them a copy of the 1095-A.

 

You'll be asked to enter percentages for Your Premium, Second lowest cost silver plan (SLCSP) and advanced payment.

 

You should see amounts on your 1095-A, column A, B, and C. You and your stepsons should agree on what percentage of those amounts you’ll claim on your return, and what percentage they’ll claim on theirs. You can use anything from 0-100%, as long it all adds up to 100%.

 

Example: Nate is working and not on his parents' tax return. He is on their Marketplace health plan and listed on their 1095-A. He didn't receive a 1095-A in his name.

He and his parents have to figure out how much of column A (monthly enrollment premiums), column B (monthly SLCSP), and column C (advanced payments) on their 1095-A will go on their return and Nate's return. They decided that Nate will enter 10% of those amounts on his return and his parents will enter 90% on their return. They could have decided to have 100% on the parents' return and 0% on Nate's return.

 

See I'm on my parents' health plan but not on their tax return, I didn't get a 1095-A and there are amou...

 

@StJ-StM-317

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JohnW152
Expert Alumni

Form 8962 dependent question

No, you don't need to include their Modified AGIs.

According to Household income on page 3 of the Instructions for Form 8962, you have to include 

the modified AGI of each individual whom you claim as a dependent and who is required to file an income tax return because his or her income meets the income tax return filing threshold.  Household income does not include the modified AGI of those individuals whom you claim as dependents and who are filing a 2020 return only to claim a refund of withheld income tax or estimated tax.

Since you're not claiming your stepsons as dependents, their AGIs do not need to be included in the computation.

StJ-StM-317
Level 1

Form 8962 dependent question

Hello. The marketplace medical insurance application does not care who in the household can be claimed as a dependent or not. They want to know the income of everyone living in the household. Your response does not really help me and does not go after the core of my question. When I first completed the marketplace insurance application, I included both stepsons since I thought I would be claiming them as dependents. Again, this doesn't matter with the marketplace since they want to know everyone's income who is living under the same roof, regardless if they are dependents or not. For what it is worth, I cannot claim my stepsons for 2020 because neither took any college classes.

This seems to be extremely unfair my wife and I should be penalized in our 2020 return if we cannot count their AGI. 

Can we still count their AGI in this part of the 2020 return even if we cannot claim them as dependents?

StJ-StM-317
Level 1

Form 8962 dependent question

Also, even though we cannot claim them as dependents for 2020, this would be unfair to my wife and I that if we don't count their AGI, then we have to pay more of the government insurance subsidy back.  Again, the marketplace doesn't care if a person living under the same roof is a dependent or not, they want their income included. This must have come up with other families and their should be a reasonable solution to this.

DaveF1006
Expert Alumni

Form 8962 dependent question

Keep in mind, if they are on you shared policy, their MAGI (modified adjusted Gross income) must be included in the income estimate. This is done regardless of whether or not you claim them as dependents. 

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