Form 8962 Premium Tax Credit (PTC) - questions

[StJ-StM-317]

Hello, in 2019 my wife and I were able to claim my two stepsons (wife's sons) as dependents because both were between 19 and 24, were eligible as full time students, and lived with us full time. They worked; however, we covered all of their support.

In 2020 we cannot claim either one as a dependent since neither one attended college classes, and both made over $4300 individually.

For 6 months in 2020, we had the marketplace type of medical insurance whereby the Federal government partially subsidized part of our medical insurance premium amount based on our whole household income. Since we live in CA, I was told by Covered CA (name given to the marketplace insurance source within CA) that I had to include the complete household income in their application, even if I did not think I was going to be able to claim my two stepsons as dependents. This is what I did, and included both of their income projections as well as mine. My wife had no income in 2020.

For our 2020 tax return, in form 8962, Premium Tax Credit (PTC), is it correct that I only enter my AGI and not to enter either stepson's total AGI since my wife and I could not claim either one as a dependent? This would seem fair. Is this correct?

As a 2nd question, it does not seem right that I was asked by Covered CA to include the whole household income to determine how much our medical insurance premiums would be subsidized in my application with them if we cannot claim my two stepsons as dependents. If this thought process is correct, this means we paid too much for medical insurance and should get part of this money back? Is this correct?

Thank you

[DawnC]

Yes, you should use the Adjusted Gross Income amount on your tax return which will not include your stepsons' incomes.  You got a reduction in premium cost but some of that discount was due to your household size.  I don't know anything about what you were told other than it does not sound right that you were told to use non-dependents when you applied.   

However, you can click on the option that says I shared this policy with another taxpayer not on my taxes.  You can allocate the premium tax credits between their tax returns and your tax return.   You can divide the amounts up however you all decide, but the amounts you report and the amount they report need to total to 100% of the 1095-A form.  

Please see this link which details some different scenarios for reporting a 1095-A policy that you share with people that are not on your tax return.   For detailed instructions, please take a look at "Table 3. Shared Policy Allocation - Line 9" on page 10 of Instructions for Form 8962 Premium Tax Credit (PTC).  Form 8962 is used to reconcile the premium tax credits reported on the 1095-A.    

[StJ-StM-317]

Hello, thanks for your response.

We will not be allocating any premium tax credits with my stepsons for their tax returns since my Wife and I completely financially support them, and my Wife and I need all the help we can get.

Just to clarify if the text was not clear in my original message, I was stating that CoveredCA 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. 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?

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

[MaryK4]

As far as the Covered California application, using their income on the application may or may not have hurt.  The Credit is based on the household income, and the members of your family so if you would have claimed them, your credit should have been spot on.  However, many people are in your exact situation- a year ago you intended to claim them as dependents but they are at the "between" stage so as long as you did not do it fraudulently.  The allocation allows you split off both the income and the credit so it would be "as if" the policies would have been separate to begin with.  

It may be to your advantage to look at allocating some of the amounts to the stepsons (you may find after entering the information you owe some of the subsidy back)- regardless because they are on your 1095-A they will each also have to report the 1095-A even if you choose not to allocate any of the amounts to them.  Read the article below and post again if you have more questions.

What is Form 1095-A: Health Insurance ... - TurboTax

@StJ-StM-317