Form 8962: Premium Tax Credit

IRS Form 8962: Premium Tax Credit

IRS Form 8962, also known as the Premium Tax Credit (PTC), is an essential form for taxpayers who have purchased health insurance through the Health Insurance Marketplace (also known as the Exchange). The form allows individuals and families to reconcile the amount of premium tax credits they have received during the year with their actual income and family size. The Premium Tax Credit is designed to help make health insurance more affordable for those who qualify based on their income and household size.

In this guide, we’ll explore the purpose of Form 8962, who is eligible to claim it, and how to complete it accurately to ensure you get the full benefit of your tax credit.

What is IRS Form 8962?

IRS Form 8962 is used by taxpayers who have purchased health insurance through the Affordable Care Act (ACA) Marketplace to determine the amount of Premium Tax Credit (PTC) they are eligible for. The PTC is a subsidy designed to reduce the monthly cost of health insurance premiums for individuals and families with incomes between 100% and 400% of the Federal Poverty Level (FPL).

If you received an advance payment of the Premium Tax Credit (APTC) throughout the year, Form 8962 will help you reconcile that advance payment with your actual income. If the APTC was more than what you were eligible for based on your final income, you may need to repay some or all of the difference. Conversely, if the APTC was less than what you were entitled to, you may be able to receive the additional amount as a refundable tax credit.

Who Must File Form 8962?

Form 8962 is typically filed by individuals and families who meet the following criteria:

1. You purchased health insurance through the Marketplace:
   If you obtained your health insurance through the ACA Marketplace, you’ll need to file Form 8962. Even if you didn’t receive any advance premium tax credits, you still must file this form if you wish to claim the Premium Tax Credit when filing your taxes.

2. You received advance premium tax credits (APTC):
   If you received APTC during the year to help pay for your health insurance premiums, Form 8962 is used to reconcile those payments with your actual income and eligibility for the credit.

3. You want to claim the Premium Tax Credit:
   Even if you didn’t receive advance payments but are eligible for the credit based on your income and household size, you can use Form 8962 to claim it when filing your taxes.

4. You are reconciling your APTC:
   If you received an APTC during the year, you will need to reconcile the amount received with the amount you are actually eligible for based on your final income for the year. This may result in additional tax liability or a refund.

Key Information Required for IRS Form 8962

To complete Form 8962, you will need specific information about your health insurance coverage, household, and income. Here’s a breakdown of the key details required:

1. Form 1095-A:
   The IRS will send you Form 1095-A if you received coverage through the Marketplace. This form reports the amount of APTC you received during the year and provides information about your health insurance plan, including:
   • The name of your insurance company
   • The amount of premiums you paid
   • The amount of APTC you received
   • The start and end dates of your coverage

You’ll need this form to accurately complete Form 8962.

2. Income and Household Information:
   You’ll need to report your income for the year, including wages, self-employment income, and any other sources of income. This information determines your eligibility for the Premium Tax Credit.

3. Family Size:
   The size of your household impacts the amount of Premium Tax Credit you are eligible for. Be sure to include all members of your household who are required to file taxes and who are enrolled in the Marketplace plan.

4. Calculation of Premium Tax Credit:
   Form 8962 will guide you through the calculation of your Premium Tax Credit based on your income, family size, and the cost of health insurance in your area.

Steps to Complete IRS Form 8962

Form 8962 can be broken down into several parts. Follow these steps to fill it out:

1. Start with Part I – Premium Tax Credit (PTC) Overview:
   This section requires you to enter the information from Form 1095-A, including the Marketplace coverage details, the amount of premiums you paid, and the amount of APTC you received. You’ll also need to enter information about your household size and income, which will be used to determine your eligibility for the Premium Tax Credit.

2. Part II – Premium Tax Credit Calculation:
   In this section, you’ll calculate the amount of Premium Tax Credit you are eligible for. You’ll compare the amount of your household income to the Federal Poverty Level (FPL) to determine your eligibility and the amount of the credit.

   You’ll also need to fill out a worksheet in this section to calculate your applicable figure for the Premium Tax Credit, based on your income and family size.

3. Part III – Reconciliation of Advance Payments:
   If you received advance premium tax credits throughout the year, you must reconcile the amount you received with the actual amount you were eligible for. This section helps determine whether you owe money back or are entitled to additional credits. If you received more APTC than you were eligible for, you may need to repay the difference. If you received less, you may be entitled to additional credits.

4. Part IV – Shared Responsibility Payment:
   If you did not have health coverage during any part of the year, you may be subject to a Shared Responsibility Payment, depending on your situation. This section helps you determine if this applies.

5. Signature and Filing:
   After completing the form, sign and date it. Then, file it along with your Form 1040 when submitting your tax return.

Common Mistakes to Avoid When Filing Form 8962

1. Incorrect Information on Form 1095-A:
   Double-check the information from Form 1095-A to ensure it matches your records. If there are any errors, contact the Marketplace for a corrected form.

2. Not Including All Household Members:
   Be sure to include all household members who are required to file taxes. Missing members can affect your Premium Tax Credit amount.

3. Failure to Reconcile APTC:
   If you received advance premium tax credits, failing to reconcile the APTC with your actual income can result in an incorrect tax return and potential delays in receiving your refund.

Benefits of the Premium Tax Credit

1. Reduced Health Insurance Costs:
   The Premium Tax Credit helps make health insurance affordable for families and individuals with moderate incomes. It reduces the amount you have to pay for your monthly health insurance premiums.

2. Additional Credit Potential:
   If you were eligible for a larger credit than what was paid in advance, you may receive the additional amount as a refund when filing your taxes.

3. Helps with Health Coverage Compliance:
   By filing Form 8962, you ensure that your health coverage is properly accounted for, avoiding potential penalties or fines associated with not having insurance under the Affordable Care Act.

Conclusion

Filing Form 8962 is an important step for anyone who purchased health insurance through the Health Insurance Marketplace. It allows you to reconcile any advance premium tax credits you received, claim the Premium Tax Credit, and ensure that your tax liability is correct. By completing this form accurately, you can maximize your health insurance benefits and avoid penalties when filing your tax return.

If you’re unsure about how to fill out Form 8962 or need help with calculations, it’s advisable to consult a tax professional who can guide you through the process and ensure compliance with IRS requirements.