Posted by Abundant Wealth Planning LLC

Understanding Premium Tax Credit Form 8962

Understanding Premium Tax Credit Form 8962

People that do not have health insurance in 2020 will not be subjected to a penalty. Taxpayers need not report their health insurance on their return except either you or a member of the family has a health insurance enrollment. 

This article seeks to shed light on Form 8962 used for PTC – Premium Tax Credit. This tax credit can be refunded in which only eligible persons and families with low income can claim. The aim is to assist such individuals to get access to health insurance that comes from the Health Insurance Marketplace, which is available at HealthCare.gov. 


Estimate for Premium Tax Credits 

Information that you made available about you, the family, and household income are used to deduce the credit amount that taxpayers can claim. This estimate also helps decide if you will prefer that some, none, or all of your credit to go directly in advance to your insurance company, which allows the application of the credit for monthly premiums. 

For people that prefer to have some or all of their credit available in advance, they need to report the difference between what the government sent and the PTC you claimed due to the size of their family and household income. For people that do not prefer to have an advance credit payment, there is the provision to claim the full credit on the tax return. This might bring down your tax debt or boost your refund. 


The Amount for Premium Tax Credit 

The Affordable Care Act uses an income scale to base the credit. As expected, people and households with a low-income bracket get a huge credit while people with a huge income get a small credit.

The PTC is refundable, making taxpayers eligible for what is left after removing your tax liability from the credit amount for people with a credit amount higher than the tax liability. People without any tax debt qualify to receive the entire credit amount. However, people who got the credit in advance need to check the payment with the real PTC estimated on their tax return. 

If you have the credit on your return lower than the advance payment of  credit that you have, the difference will be handled in any of these two ways:

  1. Addition to your balance that is due

  2. Subtraction from what you have as a refund

However, if your credit is above your advance payment of credit, the difference will either be included in your refund or removed from your balance. 


How to Report Premium Tax Credit

There are two ways to claim this credit: 

  1. The credit will be sent in advance to your insurance company. This can help bring down the premium payment paid monthly.

  2. Claim the entire credit using the tax return 


Claiming the Entire Credit on the Return 

The taxpayer will get Form 1095-A from the Marketplace, which will reveal your advance payment for credit and the premium amounts by the end of Jan of the year after the coverage year. This means that people concerned will get the 2020 coverage statement by the 31st of Jan, 2021. 

This information can help you calculate your PTC (Premium Tax Credit) for the 2020 tax return. It will also calculate the advance payment of credit you got, tallied with the entire PTC amount. 


Cases of Changes in Family Situations 

Ensure that the Marketplace is aware of any changes in your family as it will ensure you are paid the correct value. The Marketplace needs to be mindful of changes like:

  • Divorce and marriage

  • Changes in income – household or individual

  • Adoption or birth

  • Physical address change

  • Imprisonment or release from jail

  • Whatever changes that affect the size and income of the family 

Taxpayers need to be aware that these changes qualify them to make insurance applications with the Marketplace within the particular enrollment period, making it possible to have changes to health care plans after the deadline for the original enrolment.


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