Received a letter 12C from IRS re: form 8962 Part II

[alsn]

I used TurboTax Deluxe Desktop to prepare and e-file both our (MFJ) and our non-dependent child's (single) returns. We entered shared marketplace policy allocations (Parents: 0%, non-dependent child 100%) in TurboTax referencing each other's SSN. TurboTax generated the form 8962 for both returns based on this information. Part II on our return has 0 amounts for all columns and our child's Part II has the entire amounts from 1095-A. Our child's return was processed, and refund was issued. However, we just received a letter from the IRS saying that "form 8962 Part II columns a, b, c don't match the information we have on file from the Health Insurance Marketplace".

My understanding is that IRS automatically reconciles the allocation based on the policy number and SSN's on both returns to make sure that percentages and amounts add up to 100%.

(Note: I noticed that child's form 8962 form IV shows the Percentage as 1.00 (instead of 100%), although Part II amounts are calculated correctly using 100%. Not sure if this is an issue or not.)

Any advice/input from experts would be appreciated. This will help me respond to the IRS.

[TeresaM]

First, look at the upper right hand corner and be sure the letter is from 2022, as sometimes they are for the previous year.

It sounds like you entered the Form 1095-A and generated a Form 8962 in both your return and your non-dependent child's return. 
Since your child's refund was processed and the letter came to you, they should have stated what they needed you to return to them for processing. 

If it is unclear, I would recommend to call the number in the letter, for that department, and ask them what they need.
If that is not an option, then send them the original Form-1095A and a copy of your child's Form 8962.

For the Part IV that has 1.0, is that in column's e, f, and g?  If I enter something other than 1.0, I get this pop up, so 1.0 sounds fine for that entry.

 

[alsn]

@TeresaM This is what they have asked for. The letter does not reference my non-dependent child's return at all. Do I need to still call them, or should I just send a letter explaining the situation and ask them to reconcile both returns? Thanks.

[TeresaM · Accepted solution]

If you do not wish to try and contact them by phone, it should be fine to give them the Form 1095-A that they have requested, and if you include your child's Form 8962 showing the allocation matches your allocation and adds up to 100% but not more, that should resolve their question. There were no changes to your Form 8962, so another should not be required. 
 

They send out a large number of Letters 12C every year and it is a very, very common thing for them to review the Premium Tax Credit. If they need anything else, they will respond back with specifics. Sometimes the Marketplace data shared with the IRS just needs to have an update.

I recommend to make a copy of the letter and send it back with your forms, so the person processing it can easily see what was requested and I always keep a copy of anything I send. 

[alsn]

@TeresaM I have sent the response to the IRS with instructions to reconcile PTC and supporting forms 8962. Do they respond when the issue has been resolved? Or is there a way to find the status of the issue? Thanks.

[DMarkM1]

Typically when a taxpayer sends data in to respond to a request, the IRS will send a letter back stating that the information was received and they are reviewing it. 

If after reviewing your response nothing changes from your original return, you will only know it is resolved when the refund is deposited.  

If the review results in changes to your refund/tax return you will likely get a letter explaining those changes and giving you an opportunity to agree or disagree and send in additional information.  

Your 12C letter should also have contact information you can use to call the IRS office handling the situation to get an update.  

[alsn]

@DMarkM1 In my case, there is no refund or tax due. Thanks.

[alsn]

@TeresaM Re: "For the Part IV that has 1.0, is that in column's e, f, and g?  If I enter something other than 1.0, I get this pop up, so 1.0 sounds fine for that entry."

Note that the screenshot you shared does not look familiar. I used TT Deluxe Desktop for Windows. It asks for % shared and populates the form 8962.

TurboTax populates the Part IV percentages as decimal rather than percentage. For example, 100% is populated as 1.00 rather than 100. The IRS form 8962 clearly asks for % and not fraction or decimal. Will this be an issue for the IRS?

[MonikaK1]

No, the format of the TurboTax Form 8962 (regarding how the percentages are displayed) will not be a problem for the IRS.

This tips article includes information about Form 8962.

See this IRS webpage for more information regarding Letter 12C.

[alsn]

@MonikaK1 Thanks. I hope so. Because I had to send a copy of the form 8962 of my non-dependent child in response to the 12C notice and the form shows 1.00 instead of 100. I would like to suggest that TT fix this issue in the future. Display it as a %. For example: 50% (not 0.50). It is confusing because the form clearly asks for percentage.