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Shared policy allocation for Premium Tax Credit

Donna1
Level 4

Can anyone provide some concrete guidance on how to allocate the percentage of the advanced payment of premium tax credit on a shared policy. Mom received the Form 1095-A. Her income created a complete repayment of the credit. The daughter turned 26 in 2019 and did not live with Mom (she lived part-time with a sister and a boyfriend) and also did not work so she does not have a tax return filing requirement. The way I read the instructions, I can allocate using any percentage that I want to. If this is true, then to avoid the repayment, I could allocate 0 to my client. That does not seem reasonable. If I do any allocating, what if anything needs to be filed for the daughter.

Thank you in advance for any assistance or guidance provided.

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TaxGuyBill
Level 15

@Donna1 wrote:

(1) I can allocate using any percentage that I want to. If this is true, then to avoid the repayment, I could allocate 0 to my client.

(2) That does not seem reasonable.

(3) If I do any allocating, what if anything needs to be filed for the daughter.

 


(1) Yes, *IF* both mom and daughter agree.  If they do not agree, it needs to be split.

(2) Yes, I agree, but that is how they wrote the Regulations.

(3) The daughter needs to file a tax return with Form 8962.   Because of her low income, the software will likely give her even more Premium Tax Credit.  Although it is slightly questionable if that is technically allowed, the IRS  has been accepting that since the Premium Tax Credit started in 2014.

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4 Comments 4
TaxGuyBill
Level 15

@Donna1 wrote:

 and also did not work so she does not have a tax return filing requirement.


Take a step back.  Can somebody claim her as a dependent?  Who paid for over 50% of her support?

Donna1
Level 4

No one claimed her as a dependent. No one paid over 50% of her support. She lives with her boyfriend and sister. The boyfriend and sister split the rent 50/50. Her Mom pays her cell phone and car insurance and occasionally gives her money. 

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Donna1
Level 4

I need to clarify the answer I just gave. No one can claim her as a dependent. And I have her age incorrect. She turned 23 in 2019.

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TaxGuyBill
Level 15

@Donna1 wrote:

(1) I can allocate using any percentage that I want to. If this is true, then to avoid the repayment, I could allocate 0 to my client.

(2) That does not seem reasonable.

(3) If I do any allocating, what if anything needs to be filed for the daughter.

 


(1) Yes, *IF* both mom and daughter agree.  If they do not agree, it needs to be split.

(2) Yes, I agree, but that is how they wrote the Regulations.

(3) The daughter needs to file a tax return with Form 8962.   Because of her low income, the software will likely give her even more Premium Tax Credit.  Although it is slightly questionable if that is technically allowed, the IRS  has been accepting that since the Premium Tax Credit started in 2014.