Reconciling APTC/PTC when non-filing, non-dependent, adult child on parents' health care policy/1095-A

[tibbons2]

Would like some clarification re TurboTax advice regarding reconciling APTC/PTC (Advanced Premium Tax Credit/Premium Tax Credit) at https://ttlc.intuit.com/turbotax-support/en-us/help-article/taxation/parents-1095-form-return/L2phDG.... This is coming up for me a context where 1) parents list their adult child as a dependent on their ACA marketplace application for the coming year; 2) coverage and APTC is provided accordingly; 3) parents receive a 1095-A filled out accordingly (with numbers in all columns A-C); but 4) parents later discover their adult child did not qualify as their dependent for that tax year after all.

My confusion relates to the fact that all of the instructions/examples given on the TurboTax page cited above assume the dependent would otherwise be filing themselves. But what about situations where they wouldn’t otherwise be required to file? Looking at Example 4 from 26 CFR § 1.36B-4(a)(4) (and pp 12-13 of the Form 8962 instructions), it seems if the parents' adult child is not otherwise required to file for that tax year themselves (e.g., adult child didn't make enough) and does not in fact file themselves, and no other taxpayer can claim that adult child as a dependent for that tax year, the instructions given on the cited TurboTax page, regarding allocation by percentage (agreed upon or otherwise), are inapplicable. In those cases, in accordance with Example 4 from 26 CFR § 1.36B-4(a)(4) (and pp 12-13 of the Form 8962 instructions), the parent can (and I'm thinking must) alter/reduce their SLCSP and PTC #s (which they would have otherwise have put directly, as-is from their form 1095-A onto their Form 8952) to match what those numbers *would* have been (determined by using "applicable SLCSP premium tools," discussed on p 27 of Pub 974) if they had *not* included their non-dependent adult child as their dependent on their marketplace application.  

Can someone with experience chime in on whether or not they see this the same way, and why or why not?

[Bsch4477]

See if this helps. 
https://ttlc.intuit.com/community/taxes/discussion/how-does-my-son-non-dependent-deal-with-healthcar...

[tibbons2]

Hi @Bsch4477,

Thanks so much for your reply. 🙂

I read through the page you linked. The trouble is, I'm not seeing anyone there is talking about situations where the non-dependent adult child wouldn't otherwise be required to file and doesn't want to file. I get that when they either want to file or are required to file, Allocation Situation # 4 applies, i.e., parents and child can agree to any allocation % they desire of the 1095-A #s as is (assuming no other errors on 1095-A #s).

However, when the non-dependent adult child isn't required to file and doesn't want to voluntarily file (and no other taxpayer can claim them as a dependent for that tax year) it would seem the parents can (and I’m thinking must) alter/reduce their SLCSP and PTC #s (which they would have otherwise have put directly, as-is from their form 1095-A onto their Form 8952) to match what those numbers *would* have been (determined by using "applicable SLCSP premium tools," discussed on p 27 of Pub 974) if they had *not* included their non-dependent adult child as their dependent on their marketplace application, in keeping with  Example 4 from 26 CFR § 1.36B-4(a)(4) (and  pp 12-13 of the Form 8962 instructions). After all, if Example 4 from 26 CFR § 1.36B-4(a)(4) doesn't apply in such a way in such situations, when/how would it ever apply?

Look forward to hearing any thoughts you (or anyone else) has on this. 

Thanks. 🙂

[Bsch4477]

This discussion includes your situation. Although he does not have to file, he can file anyway, giving himself a dollar of interest to allow efiling and selecting zero percent of shared allocation. 

[tibbons2]

Hi again @Bsch4477,

Thanks so much for your additional reply. I really appreciate it. 😊

To clarify, what I’m curious about are situations in which the non-dependent adult child in questions is neither required to file nor *chooses* to file (and no other taxpayer can claim them as a dependent for that tax year). In those cases, in order to make sense of Example 4 from 26 CFR § 1.36B-4(a)(4) (and  pp 12-13 of the Form 8962 instructions) it would seem the parents can (and I’m thinking must) alter/reduce their SLCSP and PTC #s (which they would have otherwise have put directly, as-is from their form 1095-A onto their Form 8952) to match what those numbers would have been (determined by using "applicable SLCSP premium tools," discussed on p 27 of Pub 974) if they had not included their non-dependent adult child as their dependent on their marketplace application. Have you had a chance to check out Example 4 from 26 CFR § 1.36B-4(a)(4) by chance? It’s just hard for me to understand if/how/where/when Example 4 would apply if not for the kind of situation I’m talking about. Your thoughts on that? 

(BTW, I won't be available for any more replying tonight, but will check in with this thread again tomorrow AM, Pacific Time). In any event, thanks again so much for your input. 🙂  

[Critter-3]

OK ... from what I read the ungrateful child will not help their parents get a better PTC result  by filing a tax return even if they are not required to file one.  I think they  need to have a "come to Jesus" talk with the ungrateful child (whom they covered with insurance) to make them "see the light".

If they steadfastly refuse to file a return then there is nothing the parents can do ... they simply report the 1095-A on their return. 

[tibbons2]

Hi @Critter-3,

Thanks so much for your reply. Yes, ungrateful child perhaps. 😅 

In any event though, I'm thinking in such "ungrateful child" cases, in order to make sense of Example 4 from 26 CFR § 1.36B-4(a)(4) (and  pp 12-13 of the Form 8962 instructions), it would seem the parents can (and I’m thinking must) alter/reduce their SLCSP and PTC #s (which they would have otherwise have put directly, as-is from their form 1095-A onto their Form 8952) to match what those numbers would have been (determined by using "applicable SLCSP premium tools," discussed on p 27 of Pub 974) if they had not included their non-dependent adult child as their dependent on their marketplace application. Have you had a chance to check out Example 4 from 26 CFR § 1.36B-4(a)(4) by chance? It’s just hard for me to understand if/how/where/when Example 4 would apply if not for the kind of situation I’m talking about. Your thoughts on that?

Thanks again @Critter-3. 🙂

[Critter-3]

You will enter the 1095-A as reported ... do not make any adjustments other than not entering in the child you will not claim.  Then you will allocate 100% to yourselves if the child will not file a return.  OR  you could allocate 0% to yourselves, refer the child's SS# and then the IRS will send a letter to that child requiring them to file a return to reconcile the 1095-A and claim 100% of the PTC.  If the child had no income at all this is not a bad thing for them in fact they could get a refund if they file.  

[tibbons2]

Thanks so much @Critter-3. 🙂 My only hesitation in handling it the way you suggest is Example 4 from 26 CFR § 1.36B-4(a)(4). Have you had a chance to take a look at that by chance? It’s just hard for me to understand if/how/where/when Example 4 would apply if not for this kind of situation. Your thoughts on that?