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CALIFORNIA RECONCILIATION ADVANCE PREMIUM TAX CREDIT FORM 8962

BE AWARE THAT THE PREMIUM TAX CREDIT FOR FED FORM 8962 RECONCILIATION USES THE FED RATE OF 400% OF POVERTY LEVEL FOR QUALIFYING FOR ADVANCE PREMIUM PAYMENTS. THE STATE OF CA ON THEIR FORM 3895 USES UP TO 600% OF POVERTY LEVEL. NET RESULT IS IF THE TAXPAYERS INCOME INCREASES SIGNIFICANTLY AND THEY DID NOT NOTIFY COVERED CALIFORNIA TO ADJUST THEIR PREMIUMS DURING THE YEAR THEY MAY HAVE TO REPAY ALL THE PREMIUM CREDITD REPORTED ON FOR 1095 A.  THE SOMEWHAT GOOD NEWS IS THE STATE OF CALIFORNIA MAY GIVE THE TAXPAYER A REFUNDABLE PREMIUM ASSISTANCE SUBSIDY TO COVER SOME OF THE FEDERAL LIABILLITY. JUST DID MY FIRST RECONCILATION OF A MARRIED COUPLE WHO HAD TO REPAY THE FEDS $8750 FOR HEALTH CARE PAYMENT REIMBURSEMENT AND RECEIVED  CREDIT UNDER THE PREMIUM ASSISTANCE PROGRAM OF $6867. VERIFIED ALL THE NUMBERS REPORED BY COVERED CALIFORNIA AND THEY ADMITTED THEY WERE AWARE OF THIS ISSUE BUT THEY DON'T GET INVOLVED IN TAX ISSUES!

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3 Replies 3
Level 15
Level 15

I cant read that block of capital letters very well, but I did have 1 return kicked back by CA due to the 3849 not being correct, it says a fix will be in an update on 2/18.


♪♫•*¨*•.¸¸♥Lisa♥¸¸.•*¨*•♫♪
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Level 1

Thank you for that information. Could you please tell me how you did your reconciliation? I have a client who needs to pay back $8750 to the fed because the poverty level was over 400% as per 1095-A. also I can't find form 3895 on proseries. Wondering if you can provide more information as to how I can process the refundable premium assistance for my client.

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Level 15
Level 15

Its very possible that you client has a payback if their income was higher in 2020 than what they told Covered California it would be.  Ive had clients that have saved this payback by putting money in an IRA, so that's the first thing you should look at, do they qualify for an IRA?

Last year I had a guy that was going to have have to payback over $8000, but by putting $825 into an IRA (I worked the program, trying different amounts,  until I found the lowest dollar amount that would get his income below the 400% poverty level), and reduced his payback to 1125 and only ended up owing $200 on the return, so it can be a huge savings tool if they qualify.  They have until 4/15/21 to get the money into the IRA for it to count on the 2020 return.

To find the 3895 in the CA return, hit CTRL+F and type in 3895


♪♫•*¨*•.¸¸♥Lisa♥¸¸.•*¨*•♫♪
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