How does turbotax handle the fix of the "family glitch" for ACA premium tax credits

[Xander_Xanderson]

All,

My family has a fairly simple tax filing -- just one W2, and then 1099-Div, G, and Inv.  We also obtain insurance through the healthcare marketplace, and in past years, we have qualified for a small amount of subsides to purchase this insurance (we do have our 2023 forms 1095-A and 1095-C, as well).  However, for 2023, my employer offered me health coverage that qualifies as "affordable," minimum essential coverage, providing minimum value.  Further, while my employer also offers "family" coverage, it is so expensive that is does not meet the definition of "affordable" under any of the IRS safe harbors.  Accordingly, my understanding is that, while I am not eligible for any premium tax credits, my wife and daughter should still be eligible.  Nevertheless, in using a competitor product (taxact), I didn't find anyway that I could get their software to issue a credit to my wife/daughter, but not myself.  It seemed like the system was only set up to either give us all the tax credits, or none of us the tax credit.  Accordingly, if I could obtain partial tax credits using the turbotax system, I would be inclined to use turbotax this year, rather than the competitive product.  Thank you for any assistance you can provide.

[DawnC]

Unfortunately, the Premium Tax Credit does not work like that.   When you enroll in coverage and request financial assistance, the Health Insurance Marketplace will estimate the amount of the premium tax credit you will be allowed for the year of coverage. To make this estimate, the Marketplace uses information you provide about:

• Your family composition - credits are not determined individually, but rather, as a family
• Your household income
• Whether those you are enrolling are eligible for other non-Marketplace coverage

Based on the estimate from the Marketplace, you can choose to have all, some, or none of your estimated credit paid in advance directly to your insurance company on your behalf. These payments – which are called advance payments of the premium tax credit or advance credit payments – lower what you pay out-of-pocket for your monthly premiums.

If the premium tax credit computed on your return is more than the advance credit payments made on your behalf during the year, the difference will increase your refund or lower the amount of tax you owe. This will be reported on Form 1040, Schedule 3.

If the advance credit payments are more than the amount of the premium tax credit you are allowed, called excess APTC, you will add all – or a portion of – the excess APTC to your tax liability on Form 1040, Schedule 2. This will result in either a smaller refund or a larger balance due.     

About the Premium Tax Credit

[Xander_Xanderson]

Thanks for the reply -- that said, I think we are still missing each other here.  I believe the issue is that, at least with the taxact system, it is only asking me whether anyone in the tax filing household had access to "affordable" health insurance, and once I enter, "yes," it is removing all tax credits.  Keep in mind that, at the point I am answering this question, I have already entered all of my income information, and my 1095-A information and at that point, the system is saying I get over $6,600 in refund, including over $2,000 in subsidies.  However, as soon as I indicate that, per my 1095-C, that I had access to affordable employer coverage, it removes all of the tax credits.  (If I answer, "no" to this questions, all of the tax credits remain.)  Accordingly, as far as I can tell, the only thing affecting the tax credits is not my income, but the fact that I had access to employer-provided health insurance.  My understanding of the "family glitch" fix is that, beginning in 2023, the tax software needs to know both (1) whether I had access to affordable health insurance; as well as (2) whether my family also had access.  If the tax software is not asking the latter question, then I can't see how it is accommodating the "family glitch" fix?

[Mike9241]

Neither will Turbotax.   Form 8962. the PTC is based on family size, household income (line 3), the federal poverty line for the family size (line 4). then a ratio is computed - line 3 divided by line 4 = 5

a line 7 % is determined based on table 2 in the instructions. then in the monthly section, there is a calculation of the premium tax credit you should have gotten (column e) and what you got is in column f. if you got more than allowed you pay some or all of it back.  Notice that the fact you had your own insurance is irrelevant to the calculations. 

in other words, the more the family makes the smaller the PTC allowed. the fact that certain members have private insurance never enters into the calculations.

The way the government looks at the situation is the more you make the smaller the amount the marketplace insurance premium it will pay.

The glitch, if any, is in the law. 

[Xander_Xanderson]

Thanks, I think we are getting closer to the correct answer, but your response suggests to me that you are still unfamiliar with the "family glitch" fix.

That said, it is helpful to look at your explanation of Form 8962 -- although keep in mind that, my ineligibility for the tax credits is not premised on other members of the family having 'private insurance,' rather the "quirk" under the ACA is that, the mere fact that I am offered "statutorily affordable" health insurance, even though I don't sign up for it, is enough to disqualify me from tax credits, even though, based on income level, I would otherwise qualify for the credits.  

That said, in reading a helpful article from the Kaiser Family Foundation, it seems that, if I wanted to have my wife and daughter get the tax credits, they would have needed to be on their own marketplace plan, and then I would have either been on my own marketplace plan or just used the employer insurance.  In that case, then your advice kicks in, and my dependents get a 1095-A for just their coverage.   I assumed that, once the "family glitch" fix was implemented, we could still be on the same "family" marketplace policy, but that we would only qualify for tax credits for my dependents.  But as you state, Form 8962 is not set up to handle that situation (it seems like it should, because why have a government policy that results in family members being on multiple insurance plans; however, I think the kinks are still being worked out).  

I appreciate your response, but I think I'm not the only American who is going to have similar questions this year, as apparently there are close to 5 million of us who are affected by this now-somewhat-fixed "family glitch".

[ashishkumartwr]

Hey, were you able to resolve this? I am on the same boat.

[DawnC]

Can you clarify your issue, @ashishkumartwr  Only Form 1095-A gets entered.    You do not need to enter 1095-B or 1095-C forms.  

[thoefflin]

This is an extension of the glitch... on the form 8962 one does not count your 1095 B's and C's... but you should be able to... The form computed my family contribution to insurance premiums using all 4 of our incomes which is a larger number than just my daughter's income... who is the only one on market place coverage... so I just computed my whole family's premium contribution as if we were all on marketplace coverage but only her form 1095 A is counted so the form just computed that my entire family's health insurance payments can go only to my one daughter on marketplace insurance and therefore I have to repay all of her APTC because our contribution is computed to be 4 times only her contribution... I claim her as a dependent so we have to reconcile for our whole family and that number invalidates her premium assistance... because we can't deduct the rest of our premiums from the total family expected contribution...

[MarilynG1]

That is correct.  If you daughter is a dependent on your return, and even though only she is on the Marketplace insurance, you still need to enter her 1095-A in your return, if it is in your name. The family annual income is then used to do the calculations on Form 8962 for the PTC.

When she first enrolled, the Marketplace needed to know how many members in the family, and the estimated family annual income.  If they didn't have this info, you are correct that the APTC may have been calculated incorrectly, and they gave her too much credit each month. 

There is a limit on how much of the APTC needs to be repaid, however. Here's more info on How is the Premium Tax Credit Calculated.

Possibly not claiming her as a dependent on your return would be more beneficial, and she could file the 1095-A on her own return.  If the 1095-A is in your name, you can indicate that you shared the policy 'with someone not on your return' and allocate 100% of the premiums to her. Here's some info on Complex 1095-A Situation. 

@thoefflin