HCTC Reporting - Federal Return Rejected

[jawykes]

Federal return continues to be rejected even after the recent TurboTax software update with the following message, "IND-302 - If Form 8885 is present in the return, then 'OtherTaxAmtCd' in 'OtherTaxAmtGrp' in the return must have the value "HCTC" or Schedule 3 (Form 1040), 'HealthCoverageTaxCreditAmt' must have a non-zero value".  All eligible HCTC amounts were fully reimbursed in 2020 and the payments are accurately reflected in the 1099-H that was received.  Therefore, the Health Coverage Tax Credit correctly has a zero value on line 5 of Form 8885, which may be causing the problem.  Even though the HCTC credit is zero, it doesn't appear that TurboTax generated a Schedule 3, which could also be the problem.  Any help to resolve this problem would be appreciated.

[ReneeM7122]

You can delete schedule 3 to clear the issue.  

How do I view and delete forms in TurboTax Online?

• Open or continue your return in TurboTax.
• In the left menu, select Tax Tools and then Tools.
• In the pop-up window Tool Center, choose Delete a form.
• Select Delete next to the form/schedule/worksheet in the list and follow the instructions.

Here is an IRS Q&A about Advance Monthly Payments of the Health Coverage Tax Credit and a TurboTax article about form 8885.

[jawykes]

Hi Renee,

Thanks for your timely response to my HCTC question and sorry it has taken me so long to get back to you.  I had an elderly family member pass away recently, so life has been a little hectic.  As I stated in my original question I didn't believe Schedule 3 was present in the return, but I went back and verified that it wasn't.  As a test I made sure the software was updated to the latest release level and resubmitted the return only to have it rejected again with the same error message.

I have to believe this is some quirk between TurboTax and the IRS brought on by the fact that the HCTC being claimed is zero because it has already been fully reimbursed.  The only two possible solutions I can come up with are as follows:

1.)  Schedule 3 does need to be included with the return.  This is unlikely because the error message states that Line 12c Health coverage tax credit from Form 8885 must have a non-zero value.

2.)  On Form 1040, Line 16 Box 3 is currently blank and based on the error message it could be something as simple as checking this box and entering "HCTC" as the value.

The numbers on the return are correct and TurboTax has already properly generated the Forms 8453 and 8885 that are required to be mailed in, so now all I need is to get the return accepted.  Any assistance you can provide will be greatly appreciated.