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shared policy allocation Form 1095-A

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Level 2

My first time doing shared policy allocation of Form 1095-A.  My client was a covered individual on her father's policy but she is not his dependent.  He got the 1095-A and is listed as the recipient.  It has four covered individuals.  So when I complete my client's 1095-A, do I list her or her father as the recipient in Part 1?  And do I enter her address or his.  Then in Part II, do I only list her or do I list everyone that was a covered individual on her father's form?  Then, how do I determine what percentage to us in the smart worksheet.  Do I just use 25% since there were four covered individuals?

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Level 12

Yes, if both father and daughter agree, that is allowable.  See Allocation Situation 4 in the Instructions.

https://www.irs.gov/pub/irs-pdf/i8962.pdf#page=18

 

 

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Level 12

@JDRM wrote:

My first time doing shared policy allocation of Form 1095-A.  My client was a covered individual on her father's policy but she is not his dependent.  He got the 1095-A and is listed as the recipient.  It has four covered individuals.  So when I complete my client's 1095-A, do I list her or her father as the recipient in Part 1?  And do I enter her address or his.  Then in Part II, do I only list her or do I list everyone that was a covered individual on her father's form?  Then, how do I determine what percentage to us in the smart worksheet.  Do I just use 25% since there were four covered individuals?


 

The probably will automatically put the taxpayer's name as the recipient, but it really doesn't matter.  The 1095-A worksheet is just a way to populate the 8962.

If there was Advance credit paid (column C of the 1095-A) and they are agreeable to it, it is usually best to allocate 100% of it to the tax return that has the lowest poverty percentage (which is usually the child's).  But your client and her father need to discuss it.  If they can not agree, then yes, 25% goes to the daughter.   But that is usually NOT the best overall tax result.

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Level 2

Thank you for your reply. Is it allowable to allocate 100% to my client? There were four covered individuals: the father and three children. The father is claiming two of the children as dependents but not my client. The father has exceeded the income limit and will have to repay all of the credit except what is allocated to my client.  I didn't know about the 1095-A existing and have already filed her return.  The IRS sent a letter and now they want a copy of the Form 8962 and the 1095-A.  So I'm wondering if they'll accept an allocation of more than 25%.

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Level 12

Yes, if both father and daughter agree, that is allowable.  See Allocation Situation 4 in the Instructions.

https://www.irs.gov/pub/irs-pdf/i8962.pdf#page=18

 

 

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Level 2
I'm getting push back from the CPA that is preparing the father's tax return. Here is what he wrote to me:

"While it stinks to have to pay back the premium credit, I’m not willing to sign a return I’m not comfortable with. The premium credit is an advance for people who can’t afford the premium. When the income exceeds these thresholds, it’s taxed (as was done on Ryan’s 2018 tax return)

Perhaps you can continue to send me information that will give me that comfort about changing the way we prepared this return, but my team has taken a long look at this. We all conclude that a father and a daughter can’t decide to allocate all of this credit to the daughter’s tax return. That’s not the intent of the “tax family” allocations which are normally between divorced couples, etc..

The Form 1095-A shows that all four (Ryan, Alexis, Andrew and Haley) were covered by health insurance and the 1095-A is in Ryan’s name and social security number. I know no other way to proceed on this without triggering an IRS notice about not properly reporting this under Ryan’s social security number.
We don’t think this example applies – they are not a two tax family. The example under that situation is based on divorced parents – each parent is its own tax family. In this case, Alexis is filing her own tax return but that does not make it a two tax family for purposes of the allocation."

Do you have any further thoughts?
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Level 12

@JDRM wrote:
We don’t think this example applies – they are not a two tax family. The example under that situation is based on divorced parents – each parent is its own tax family. In this case, Alexis is filing her own tax return but that does not make it a two tax family for purposes of the allocation."


It is clearly TWO "tax families".

The Instructions:

Tax family.

 For purposes of the PTC, your tax family consists of the following individuals.

  • You, if you file a tax return for the year and you can’t be claimed as a dependent on someone else’s 2019 tax return.

  • Your spouse if filing jointly and he or she can’t be claimed as a dependent on someone else’s 2019 tax return.

  • Your dependents whom you claim on your 2019 tax return. 

https://www.irs.gov/instructions/i8962#idm140224374411152

 

The Regulations:

(d) Family and family size. A taxpayer's family means the individuals for whom a taxpayer properly claims a deduction for a personal exemption under section 151 for the taxable year. Family size means the number of individuals in the family

https://www.law.cornell.edu/cfr/text/26/1.36B-1

 

 


@JDRM wrote:
 We all conclude that a father and a daughter can’t decide to allocate all of this credit to the daughter’s tax return. 

Regulation §1.36B-4:

Example 12.
Allocations for an emancipated child. Spouses L and M enroll in a qualified health plan with their child, N. L and M attest that they will claim N as a dependent and advance credit payments are made for the coverage of all three family members. However, N files his own return and claims a personal exemption deduction for himself for the taxable year. Under paragraph (a)(1)(ii)(B)(1) of this section, L and M are enrolling taxpayers, N is a claiming taxpayer, and all are subject to the allocation rules in paragraph (a)(1)(ii)(B) of this section.
 
 
In paragraph 2 of (a)(1)(ii)(B) [cited in Example 12], it says:  The enrolling taxpayer and claiming taxpayer may agree on any allocation percentage between zero and one hundred percent.
 
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Level 2

This is a follow up question related to this specific shared policy allocation.  My client is single and not a dependent of someone else with adjusted gross income of $7,159 resulting in taxable income of $0. She did have self-employment tax of $101 but had withholding of $35 so she was due to pay $66.

After I found out about the father having a 1095-A with my client as a covered individual, then I added the 1095-A to her return.  His form has total monthly enrollment premiums of $13,923, SLCSP of $15,586, and advance payment of PTC of $10,812.  There were four covered individuals on the form.  The CPA that prepared his return entered the allocation percentage on form 8962 as premium 0.00%, SLCSP 0.0%, and advance payment of the PTC 0.75%.

Now I'm using Proseries Basic to prepare my client's return and I entered all of the 1095-A from the father's form into Proseries for her.  In the shared policy allocation section, I entered 25% as the advance payment of the PTC and that's all.  It has calculated the net premium tax credit as $11,220 which now results in $11,154 as her overall tax refund.  This just doesn't seem right to me.  Can you help me understand if this is correct or not?

Thanks for any help given.

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Level 12

@JDRM wrote:

The CPA that prepared his return entered the allocation percentage on form 8962 as premium 0.00%, SLCSP 0.0%, and advance payment of the PTC 0.75%.


That is not allowed.  From the first link above about Allocation Situation 4:  "However, you must use the same allocation percentage for all policy amounts (enrollment premiums, applicable SLCSP premiums, and APTC) in a month."

 

 


@JDRM wrote:

It has calculated the net premium tax credit as $11,220 which now results in $11,154 as her overall tax refund.  This just doesn't seem right to me.  Can you help me understand if this is correct or not?


Although it doesn't seem right or fair, that is how they wrote the Regulations.  So it is common for this situation to give a large refund to the child.

But just be sure the father's return is corrected to 0/0/0, and the child's return is 1.00/1.00/1.00 (actually, if the child's return claims 100%, you don't need to fill out the allocation section).

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Level 2

Yeah, I read those instructions in Proseries.  However, I couldn't confirm that in the IRS instructions.  Unfortunately, the CPA firm doing the father's return won't consider making any changes because they think they are right.  So I'm stuck with making the best of it.  I tried my best to present the idea of allocating more to the daughter but they wouldn't budge.  Unfortunately, the father and his new wife think they have the best tax experts and don't believe me.  So this is a picture of the father's form 8962.  If I use 0, 0, 25% on the daughter's, then the refund is $11,255.  If I use 25, 25, 25, then the refund is 714.  I'm not sure which I should do.

Capture Form 8962.JPG

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Level 12

This is what I would do: 

  1. Print out the Allocation Situation 4 from the Instructions, and highlight the sections where it says (a) if they agree, it can be allocated in any way and (b) all three percentages must be the same.
  2. Print the copy of the father's 8962 showing the stupid CPA firm did not do all three percentages the same.
  3. Calculate the credit on BOTH returns, showing the results if it is allocated 0/0/0 and 100/100/100.
  4. Calculate the credit on BOTH returns, showing the results if it allocated 75/75/75 and 25/25/25.
  5. IF they are willing, have BOTH the father and daughter sign a statement that they agree to 0/0/0 and 100/100/100.  If they don't sign that, your only option is to claim 25/25/25 on the daughters return.
  6. Give your business card to the father, as he may be leaving his CPA when he realizes his CPA doesn't know what he is talking about and/or he receives an IRS notice because he tried to claim 0/0/75.
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Level 2

I have been looking at how to take advantage of the agreed upon allocation of a child who was thought to be a dependent upon application for coverage but was determined to have provided more than half his support. What I found causes me to step back from the more beneficial allocation. Firstly there was no advance premium tax credit for the plan which means I then needed to look at 26 CFR § 1.36B-3(h)(1). When I took a closer look at this guidance I then looked at 26 CFR § 1.36B-4(a)(1)(ii) which states, "This paragraph (a)(1)(ii)(B) does not apply to amounts allocated under § 1.36B-3(h) (qualified health plan covering more than one family) or if the shifting enrollee or enrollees are the only individuals enrolled in the qualified health plan." In other words the allocation allowed by (a)(1)(ii)(B)(2) is not allowed if the covered individual is subject to guidance listed on 26 CFR § 1.36B-3(h)(1) which gives guidance that the premium allocation should be based on tax household according to the SLCSP for that household and some examples are provided under the relevant section. I would be glad to be proven wrong on this as it is not in the best interest of my client.

https://www.law.cornell.edu/cfr/text/26/1.36B-4

https://www.law.cornell.edu/cfr/text/26/1.36B-3#h(1)

In general. If a qualified health plan covers more than one family under a single policy, each applicable taxpayer covered by the plan may claim a premium tax credit, if otherwise allowable. Each taxpayer computes the credit using that taxpayer's applicable percentage, household income, and the benchmark plan that applies to the taxpayer under paragraph (f) of this section. In determining whether the amount computed under paragraph (d)(1)(i) of this section (the premiums for the qualified health plan in which the taxpayer enrolls) is less than the amount computed under paragraph (d)(1)(ii) of this section (the benchmark plan premium minus the product of household income and the applicable percentage), the premiums paid are allocated to each taxpayer in proportion to the premiums for each taxpayer's applicable benchmark plan.

(2) Example. The following example illustrates the rules of this paragraph (h):

Example.
(i) Taxpayers A and B enroll in a single policy under a qualified health plan. B is A's 25-year old child who is not A's dependent. B has no dependents. The plan covers A, B, and A's two additional children who are A's dependents. The premium for the plan in which A and B enroll is $15,000. The premium for the second lowest cost silver family plan covering only A and A's dependents is $12,000 and the premium for the second lowest cost silver plan providing self-only coverage to B is $6,000. A and B are applicable taxpayers and otherwise eligible to claim the premium tax credit.
(ii) Under paragraph (h)(1) of this section, both A and B may claim premium tax credits. A computes her credit using her household income, a family size of three, and a benchmark plan premium of $12,000. B computes his credit using his household income, a family size of one, and a benchmark plan premium of $6,000.

(iii) In determining whether the amount in paragraph (d)(1)(i) of this section (the premiums for the qualified health plan A and B purchase) is less than the amount in paragraph (d)(1)(ii) of this section (the benchmark plan premium minus the product of household income and the applicable percentage), the $15,000 premiums paid are allocated to A and B in proportion to the premiums for their applicable benchmark plans. Thus, the portion of the premium allocated to A is $10,000 ($15,000 × $12,000/$18,000) and the portion allocated to B is $5,000 ($15,000 × $6,000/$18,000).

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Level 12

I'm not sure exactly what your question is, but yes, if no Advance credit was taken the allocation works differently and you need to do some math.  It is under Allocation Situation #3 in the Instructions.

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Level 2

I guess I am questioning if we can actually allocate 100% of the premium and credits to a non dependent child using 1.36B-4(a)(1)(ii)(B)(2) as our basis or the 8962 instructions in light of my reading of 1.36B-4(a)(1)(ii)(B)(1). This seems to say that if you have a person who falls under 1.36B-3(h) guidance where the non dependent taxpayer child is included in the family policy that is not claiming any of the taxpayer depends other than himself then you need to use the allocations under 1.36B-3(h) and completely disregard all guidance under 1.36B-4(a)(1)(ii)(B) which means the information allowing for choosing the allocation would not be permissible. since items (1) & (2) providing for any allocation agreed upon by both taxpayers is under 1.36B-4(a)(1)(ii)(B). Again please explain why I am wrong because I do really prefer to be wrong as I may need to suggest some amended returns if I am not wrong.

"This paragraph (a)(1)(ii)(B) does not apply to amounts allocated under § 1.36B-3(h) (qualified health plan covering more than one family) or if the shifting enrollee or enrollees are the only individuals enrolled in the qualified health plan."

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Level 12

@PA-EA wrote:

I guess I am questioning if we can actually allocate 100% of the premium and credits to a non dependent child


No, if Advance credit was not paid, you can't do that, you need to do the math for the allocation.  The ability to choose your percentage only applies if Advance credit was paid.

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Level 2

Thank you.

 

I was further saying that I am wondering about the feasibility even when advanced credits have been paid. I highlighted where the advanced credits regs point pack to the allocation for individuals from different tax families sharing a plan if the non dependent child was the only individual of the separate tax family. 

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Level 12

@PA-EA wrote:

if the non dependent child was the only individual of the separate tax family. 


Where do you see that?

 

While it is odd verbiage to point to 1.36B-3(h), in order to allocate the Advance credit you NEED to follow all of 1.36B-4.  So 1.36B(h) essentially only applies if no Advance credit was paid.

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Level 2

I think what I am reading from you is starting to vseem logical.  This statement is in 1.36-4(a)(1)(ii)(1) "This paragraph(a)(1)(ii)(B)does not apply to amounts allocated under § 1.36B-3(h) (qualified health plan covering more than one family) or if the shifting enrollee or enrollees are the only individuals enrolled in the qualified health plan."

  • Since 1.36B-4 is pointing back to 3(h) it would seem as if the regs are stating that the premiums and the SLCSP need to be allocated according to guidance under 3(h) which would mean the credit would need to follow there same allocation percentage. 
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Level 12

@PA-EA wrote:

I think what I am reading from you is starting to vseem logical.  This statement is in 1.36-4(a)(1)(ii)(1) "This paragraph(a)(1)(ii)(B)does not apply to amounts allocated under § 1.36B-3(h) (qualified health plan covering more than one family) or if the shifting enrollee or enrollees are the only individuals enrolled in the qualified health plan."

 

Only one in the HEALTH PLAN.  I read that as saying they are the only "covered" person on the 1095-A.   You can't allocate to different tax returns if there is only one "covered" person in the health plan.  I don't read that as saying the only one on the health plan on the other tax return.

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Level 2

I can understand ands agree to that statement but what about the statement of qualified health plan covering more than one family. The example in (h) defines the non dependent child as more than one family. This is really what I keep getting hung up on when I want to allocate the advance premium tax credit for a client but am concerned of preparer penalties. 

 

"This paragraph(a)(1)(ii)(B)does not apply to amounts allocated under § 1.36B-3(h) (qualified health plan covering more than one family)

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Level 12

@PA-EA wrote:

I can understand ands agree to that statement but what about the statement of qualified health plan covering more than one family. The example in (h) defines the non dependent child as more than one family. This is really what I keep getting hung up on when I want to allocate the advance premium tax credit for a client but am concerned of preparer penalties. 

 

"This paragraph(a)(1)(ii)(B)does not apply to amounts allocated under § 1.36B-3(h) (qualified health plan covering more than one family)


I understand that sentence is weird and doesn't make much sense, but think of it this way:  If this paragraph does not apply because the amounts are allocated under 1.36B-3(h) ... then what?

How do you allocate the Advance credit?  1.36B-3(h) does not address the Advance credit, therefore the amounts are NOT allocated under 1.36B-3(h).

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Level 2

I guess my hang up has been on why they would embed 3(h) information in 4 if it doesn't mean that if you are allocating premiums as required for other family premiums then you are not eligible to allocate the advance premiums using 4(a)(1)(ii)(B)(1) or (2)

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Level 12

@PA-EA wrote:

I guess my hang up has been on why they would embed 3(h) information in 4 if it doesn't mean that if you are allocating premiums as required for other family premiums then you are not eligible to allocate the advance premiums using 4(a)(1)(ii)(B)(1) or (2)


If things needed to be allocated by 3(h), why does 4(a)(1)(B) exist?  

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Level 2

I can't agree more am just not sure why they do the things they do many times. Thank you for the dialogue. Thankfully this is rare that my clients run into this type of situation. I believe this is a case where I would give the client full disclosure on this so they know there is a chance an agent could be difficult. 

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Level 12

To me, the Instructions for Form 8962 are pretty clear that it can be allocated any way that they agree if there is Advance credit (Allocation Situation 4).  So the IRS's interpretation is that it can be done that way.

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Just 2 quick questions.

1. When Shared Policy Allocation apply like above case but the child is a dependent (instead of a tax filer) of other tax family. Like 2 siblings enrolled and shared a covered health plan. the Older file tax by himself, the younger is a dependent of his parents' tax return (the parents does not have insurance).  Does situation 4 still apply ?

2. Does both tax family must file form 8962 or just the one take 100% allocation ?

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Level 1

I have a similar situation but slightly different, and the IRS is holding up our refunds. For 2019 my husband and I filed jointly and had one dependent child R and two non-dependent children M & C. They all filed separate tax returns and were all on our insurance for parts of the year. I put the entirety of the 1095-A allocation on our taxes which resulted in an excess advance premium tax credit repayment of $1000. Because of additional credits, we wound up not paying any tax on this. None of the children submitted 8962 forms. The IRS is asking for 1095-A and 8962 forms. If I had to actually break down the allocation, my husband and I with AGI of $78,006 made up 46%, R with AGI of $10,274 made up 14%, M with AGI of $18,771 was 23% and C with AGI of $26,542 was 17%. What do I do now? R already paid the $6 she owed to the IRS. Do M & C submit forms to the IRS with all our SS#s (or just my husband's) and 0% allocation? Is this the easiest thing to do? Are we collectively losing out by not having R or M declare 100% as they had the lowest income? I am so confused.

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Level 12


This website is for tax professionals.  If you are using TurboTax, please visit the TurboTax Help site for support or schedule an appointment with a tax professional in your area.

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Hey TaxGuyBill, 

I want to allocate 25% to the son of my clients who is no longer a dependent. I'm confused by line 34 that says to "enter the combined total for each month on lines 12-23, columns (a), (b) and (f)." 

Do I enter what the 1095-A reported or their portion of the allocation (which is what it sounds like)? I'm just confused as to when the allocated portion gets applied. 

And when I list the parents in Part IV, do I write in .75 to each or .365 to each? 

Thanks in advance! 

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