Have a client who a divorced custodial parent who claims the child as a dependent. Spouse is responsible for providing health insurance. Unbeknownst to my client spouse purchased insurance through the marketplace and utilized the APTC to reduce premiums. Filed the tax return and it generated a notice stating that child was provided the benefit of advance premium tax credits.
Since my client wasn't aware that insurance was purchased in this manner we didn't include Form 8962. There are two other children, both over 21 for which insurance was also purchased. I assume this is fairly common.
My questions are:
Since my client claimed the dependency exemption we should file a form 8962, correct?
How does it work when the other spouse clearly received the benefit of the APTC? Is this something they will have to work out between them?
Assuming that we now have to file 8962, how should it be filled out? Since the APTC on the 1095-A was for three children plus the spouse, does the credit need to be allocated and attributed to my client.
If their income varies signficantly there could be an additional tax due on my client if they shouldn't have qualified for the credit in the first place.