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The American Rescue Plan Act was signed into law on March 11, 2021, and eliminated the 2020 excess advance premium tax credit repayment for certain filers. This provision applies only to tax year 2020.

To apply the changes in Lacerte:

1. Go to Screen 3, Miscellaneous Information.
2. Check the box labeled Apply the American Rescue Plan Act provisions.

This checkbox will apply the provisions on a client-by-client basis, and prevent changes from being applied to clients whose returns were already filed.

For clients who owe excess APTC repayment:

• Form 8962 won't be attached to the return.
• No repayment amount will be included on Schedule 2, line 2.
• The IRS won't correspond for a missing Form 8962 or ask for more information about the excess APTC.

For clients who can claim a net premium tax credit (PTC):

• Form 8962 will still be attached to the return.
• The calculated credit will still flow to Schedule 3, line 8.

For a return containing a Form 8962, Premium Tax Credit (PTC), under Part 1, if the total of line 2a and line 2b amounts are negative, a 0 dollar amount will appear in line 3, Household Income and the following e-file critical diagnostic will be triggered:

Form 8962: Household income on line 3 must equal the total of line 2a, Modified AGI, and 2b, dependents' modified AGI, for efile purposes. If the total of lines 2a and 2b are negative, zero will print on line 3 and this return will need to filed as a conventional paper return. (ref. #42135)

The e-file critical diagnostic is triggered to prevent the return from being filed because the return would be rejected by the IRS with the following electronic filing business rule rejection:

F8962-004-01 If Form 8962, Line 1 'TotalExemptionsCnt' has a non-zero value, then Line 3 'HouseholdIncomeAmt' must be equal to the sum of Line 2a 'ModifiedAGIAmt' and Line 2b 'TotalDependentsModifiedAGIAmt'.

Therefore, if the sum of lines 2a and 2b are negative, this condition can not be met because IRS form instructions for 8962 require the following:

Line 3
Add the amounts on lines 2a and 2b. Combine them even if one or both of them are negative. If the total is less than zero, enter -0- on line 3.

As a result, these returns must be paper filed.  This doesn't mean that a taxpayer with a negative modified AGI cannot claim a Premium Tax Credit - only that the return cannot be electronically filed.

If Form 8962 is generating with a Premium Tax Credit and you have a SE health insurance deduction on Schedule 1, line 16 your deduction and credit may be adjusted by the calculations described in Rev. Proc. 2014-41.

Avoid duplicate entries: If the amount of SE Health Insurance deduction entered on Screen 24, Adjustments to Income is the same amount entered on Screen 39.2, Form 1095-A, you will need to remove the amount from Screen 24, Adjustments to Income before completing the steps below. Only enter on Screen 24, Premiums not entered elsewhere.

To have Lacerte calculate the SE Health Insurance Premium in conjunction with the PTC:

1. Go to Screen 39 Health Insurnace Marketplace Statement
2. Choose the Form 1095-A - Health Insurance Marketplace Statement section.
3. From the left Sections box choose SE Health Insurance.
4. Select the applicable Form (Ctrl+T).
5. Select the applicable Activity name or number.
6. If applicable, enter the Related activity start month.
7. If applicable, enter the Related activity end month.

How is Lacerte coming up with the amounts for the SE Health Insurance Deduction and PTC?

There's not one correct answer for how much SE Health Insurance Deduction and PTC to take. The basic rules are to reduce the SE Health Insurance Deduction by the PTC amount so the return is not doubling the deduction and to reduce the premiums paid by any advanced payments. You may use any calculation method you want that satisfies the requirements of the tax law.

Per Rev. Proc. 2014-41 Section 3. Scope, "Using the calculations in this revenue procedure is optional."

On screen 39.1, Health Coverage, Exemptions, and Miscellaneous there are several input fields to adjust or override the 8962.

• Domestic abuse victim/spousal abandonment relief
  
  • Checking this box will allow your married filing separate taxpayer to take the Premium Tax Credit under the Married Taxpayers: Situation 2 from Form 8962 instructions
• Other taxpayer will reconcile all APTC paid and this taxpayer is not taking the PTC (tax family size =0)
• Qualifies for PTC even if household income is less than 100% of the federal poverty line
  • Checking this box will force the Form 8962 Line 6 to Yes even if the household income is less than 100%.
• Dependents' modified AGI
  • Enter in this field any amount that is needed for the 8962 line 2b. See the Form 8962 instructions for a worksheet to figure the amount to enter.
• Poverty table [O] (Ctrl+T)
  • This will override the entry from Screen 1, Client Information for Resident State as of 12/31/19 and will check the box on Form 8962 line 4.
• Excess advance premium tax credit repayment [O]
• Net premium tax credit [O]

1. Go to Screen 39.1, Health Coverage, Exemptions, and Miscellaneous.
2. Click on Form 1095-A Health Insurance Marketplace  from the left navigation panel to open screen 39.2
3. Enter the information from Form 1095-A.
4. From the left Sections box choose Shared Policy Allocation (Part IV).
5. Complete the Allocations table:
   1. In the SSN of Taxpayer Allocation enter the SSN of the other taxpayer. This will flow to Form 8962, Part 4, lines 30-33 column b.
      • Enter the SSN of the taxpayer with whom you are allocating policy amounts. The SSN may or may not be report on your Form 1095-A, depending on your relationship to the other taxpayer.
   2. Enter the Allocation - Start Month that will flow to the Form 8962, Part 4, lines 30-33 column c.
      • Enter the first month you are allocating policy amounts.
   3. Enter the Allocation - End Month that will flow to Form 8962, Part 4, lines 30-33 column d.
      • Enter the last month you are allocating policy amounts.
   4. If applicable enter the Allocation % Applied to Monthly - Premium % this will flow to Form 8962, Part 4, lines 30-33 column e.
      • If your allocation situation requires you to allocate the enrollment premium on Form 1095-A, lines 21 through 32, column A, enter the allocation percentage for the amount that applies to this return in column e. Enter your allocation percentage as a decimal rounded to two places (for example, for 40%, enter 0.40). Otherwise, leave column e blank.
   5. Enter the Allocation % Applied to Monthly - SLCSP % this will flow to Form 8962, Part 4, lines 30-33 column f.
      • If your allocation situation requires you to allocate the premium for the applicable SLCSP on Form 1095-A, lines 21 through 32, column B, enter the allocation percentage for the amount that applies to this return in column f. Enter your allocation percentage as a decimal rounded to two places (for example, for 67%, enter 0.67). You will enter an allocation percentage in column f, in the following two circumstances.
        • You allocated the policy amounts under Taxpayers divorced or legally separated in 2020 (Table 3, Step 1).
        • You allocated the policy amounts under Policy shared with an individual for whom another taxpayer claims a personal exemption (Table 3, Steps 3, 4, or 5), and APTC was paid for an individual covered by the policy who was not in your tax family.
      • Leave column f blank in all other allocation situations... (See the 8962 instructions for more information.)
   6. Enter the Allocation % Applied to Monthly - Adv. Payment of the PTC % this will flow to Form 8962, Part 4, lines 30-33 column g.
      • If your allocation situation requires you to allocate the APTC on Form 1095-A, lines 21 through 32, column C, enter the allocation percentage for the amount that applies to this return in column g. Enter your allocation percentage as a decimal rounded to two places (for example, for 80%, enter 0.80). Otherwise, leave column g blank

See Form 8962 instructions for more information and specific allocation situations.

1. Go to Screen 39.1, Health Coverage, Exemptions, & More
2. From the left Sections box choose Part V - Alternative Calculation For Year of Marriage (8962).
3. Enter the Date married (if in current year)
4. Enter the Taxpayer alternative family size as the family size that existed before the marriage.
5. Enter the Spouse alternative family size as the family size that existed before the marriage.

Form 8962, Part V will not generate unless the follwoing two conditions have already been met:

• Form 8962 is already generating.
• You have excess APTC that must be repaid.
• Meet the IRS exception requirement below.

Electing the alternative calculation is optional, but may reduce the amount of excess APTC the taxpayer must repay. To be eligible to make this election, the taxpayer must meet either of the following conditions:

1. Checked the "No" box on Form 8962, line 6. The taxpayer and spouse must have been married on December 31, 2020 and be filing a joint return for the current year. The taxpayer and spouse must each have been unmarried on January 1, 2020. A member of the tax household must have been enrolled in a qualified health plan before the first full month of marriage. Advanced Premium Tax Credit must also have been paid for someone in the family during the current year.
2. Checked the "Yes" box on Form 8962, line 6. Excess Advanced Premium Tax Credit must have been paid to the taxpayers in 2020.