• Any amount on Schedule 2 Line 2 is determined by TaxSlayer based on input from Form 1095-A. This form is issued to taxpayers who purchased health coverage through the Marketplace (Exchange) – that is, those who answered (or should have answered) “Yes” to this question in the Intake Booklet, and who probably received an advance premium tax credit (APTC).
    • APTC (also known as “subsidy”) is paid by the federal government to the insurer, not the taxpayer. When the taxpayer files their tax return, part of completing the return is TaxSlayer determining whether the subsidy for the year was too high, too low, or just right.
    • The amount of APTC (subsidy) paid to the health insurer is based on what the taxpayer told the Marketplace about their expected income during the tax year.
      • Note: Taxpayers receiving APTC should always notify the exchange when they have a significant change to their income or family during the year. Otherwise they may owe a substantial amount (for excess subsidy) when they file their tax return. Or they may pay unnecessarily high premiums during the year, recovering the extra amounts only after filing their return.
  • If a taxpayer received a 1095-A, the taxpayer must file a tax return to reconcile the amount of premium tax credit they should have received, even if there is no other filing requirement.
  • CA process note: The terms “[State] Marketplace” or “exchange” refer to Covered California (coveredca.com) unless the taxpayer lived outside CA during the year.
    • If the taxpayer has a Form 1095-A from a state other than CA, then the state return is out-of-scope (because the taxpayer was not a full-time resident of CA during the tax-year). But the federal return is in scope if the policy for your site allows federal-only returns to be prepared. 
  • Detailed information on the premium tax credit can be found beginning on Pub 4012 page H-10. 

Health Insurance Section

  • On the Affordable Care Act Insurance Plans page, answering “No” will complete the section. 
    • If IRS records (obtained from Marketplaces) show that the taxpayer had coverage through a Marketplace, the IRS will reject the return with code F8962-070. In most cases, to successfully e-file, the taxpayer needs to provide their Form 1095-A to be entered in TaxSlayer.
      • New:  TaxSlayer now has an e-file warning if there was a 1095-A on the prior return but not the current return.
      • Note:  if, despite the reject code, the taxpayer insists they didn’t have Marketplace insurance, the return can be e-filed again without a Form 8962. Instead, on the Affordable Care Act Insurance Plans page, one of two options (variants of “No”) should be checked. TaxSlayer then automatically includes a required statement to the IRS as to why no 8962 is included in the return, and the return should be accepted.
  • On the Verify Your Household Members page, clicking “Add New Household Member” generally means that the return is out-of-scope because it would require answering questions related to Part IV, “Allocation of Policy Amounts”, of Form 8962. Part IV is out-of-scope.
    • All dependents should have been entered in the Basic Information > Dependents/Qualifying Person section. 
    • If the taxpayer had coverage through the Marketplace (so, has a Form 1095-A), and received APTC (which is the norm), and someone is listed on the 1095-A who is not listed on the tax return, that requires a “shared policy allocation,” which is out-of-scope because it requires completing Part IV of Form 8962.
      • One example might be a child whose parents divorced during the tax year. Another is a child under the age of 26 who is otherwise independent.
      • If done right, this problem should be caught before the return is started. Match names on the 1095-A against names on page 1 of the Intake Booklet. 
    • If the taxpayer married during the year and chooses to use the alternative calculation for the year of marriage (Part V of Form 8962), then the return is out-of-scope.

Form 1095-A Information

  • On the Affordable Care Act Insurance Plans page, answering “Yes” means that the taxpayer should have gotten a Form 1095-A and thus has a federal filing requirement.
    • Even if a taxpayer who purchased health insurance through the Marketplace did not receive any APTC (subsidy), the taxpayer should have received Form 1095-A, and the taxpayer might be entitled to a net premium tax credit (Schedule 3 Line 9). If so, information related to that form should be entered in TaxSlayer, which means the taxpayer should contact the marketplace to get that form.
    • If the taxpayer does not have a Form 1095-A, or a Form 1095-A is incomplete, or incorrect, the return cannot be completed. The taxpayer must contact the Marketplace (see above) to get a Form 1095-A, or a corrected one, or the information which should be on the Form 1095-A. The taxpayer can usually get this information over the phone; help them call Covered CA if necessary.
    • If the taxpayer has one or more Form 1095-A’s which are correct, and none are missing [usually a taxpayer has just one Form 1095-A], then proceed:
      • TaxSlayer uses information entered in this and the following page (about dependent income) to prepare Form 8962, Premium Tax Credit (PTC); this form is one of ten for which a PDF can be created from a page within the return. (This form is printable from the first page in the Health Insurance section – look for the small printer icon and “Print” to the left of the “Continue” button.)
        • Pub 4012 pages H-15 and H-16 show what should appear on Form 8962. 
      • The Advanced Premium Tax Credit (1095-A) page will expand to allow entering information from the Form 1095-A in TaxSlayer, after the first question is answered “Yes”.
      • Note:  Pub 4012 page H-17 discusses Form 1095-A in detail, how to handle multiple 1095-As, particularly for column B entries.
    • If the taxpayer stopped paying premiums, and Form 1095-A shows, for any month, a zero in column A but dollar figures in columns B and C, see bottom of Pub 4012 page H-18 for the taxpayer’s options.
    • If the taxpayer had Marketplace coverage during the year and was covered by Medicare or employer insurance during a month when the taxpayer was also receiving APTC, the taxpayer is not entitled to APTC for that month. For such a month, change the SLCSP shown in column B of the 1095-A to $0.
    • If the taxpayer had both Marketplace coverage and was covered by Medicaid during a month when the taxpayer was also receiving APTC, that doesn’t affect the calculations for possible APTC repayment nor what is entered in TaxSlayer.

Dependents’ Modified AGI (if filing requirement)

  • This TaxSlayer page is visible only if the taxpayer has dependents on the return. It requires information to be entered only for dependents who were required to file their own tax returns due to their gross income.
    • Do not enter information for dependents who are filing a tax return only to claim a refund of tax withheld or estimated tax paid or filing only because they owe self-employment tax (Schedule C).
    • Pub 4012 page A-4 has information on when dependents are required to file a tax return.

Repayments of APTC 

  • After completing the Health Insurance section, look at Schedule 2 Line 2 (via the Summary/Print option; go to page 5), or look at Form 8962 (part of the PDF for the return), to see whether TaxSlayer has calculated that the taxpayer must repay some or all the APTC received during the tax year.
    • For tax years 2021 through 2025 there is no cutoff at 400% of the federal poverty line (FPL), which reduces the amount of APTC that might have to be repaid.
    • Note: The repayment calculation is based on the taxpayer’s MAGI (AGI + any excluded foreign earned income + any exempt interest income + any nontaxable SS income + any included dependent income). So it’s important to have entered all income in TaxSlayer before analyzing the repayment situation.
  • If the taxpayer is repaying a significant amount of APTC, look at Form 8962 Line 5 to determine if s/he is just above a repayment cap level (400% or 300% or 200% of FPL). If so, getting the taxpayer’s MAGI below that level threshold, using one of the options discussed above, could save the taxpayer a lot of money. [Warning: “401” is almost always a bogus percentage, because Form 8962 instructions say to put that number on line 5 whenever actual percentage exceeds 400. So if you see “401”, you must do the calculation yourself.]
    • Repayment caps are listed at the bottom of page H-21 of  Pub 4012. For example, for 2024, a HoH or MFJ household with MAGI at 201% of FPL has their APTC repayment capped at $1,900. But if that household lowered their MAGI to 199%, they would be required to repay no more than $750, saving $1,150.
    • The most common way to reduce MAGI is for the taxpayer to contribute to a traditional IRA by the April filing deadline. Other options are listed on Pub 4012 page H-21.
    • Normally, filing HoH is more advantageous than filing Single. However, if the taxpayer is required to repay a large amount of excess Advanced PTC (but not all), a filing status of Single may be advantageous, since the repayment is capped at $1,575 for Single filers, but at $3,150 for HoH filers, for tax year 2024.
  • Note: MFS filers are not eligible for APTC unless a victim of domestic abuse or spousal abandonment, but there still may be an advantage in filing as MFS because of a repayment cap.
      • CA policy: Filing MFS to reduce APTC repayments, rather than filing MFJ, is out-of-scope.
  • If the taxpayer is repaying all or a significant amount of APTC, discuss with them whether they have Market-place coverage for the coming year, and, if so, whether the Marketplace has a good estimate for the taxpayer’s income going forward. (If not, they should call.) A good estimate is important for avoiding a large repayment when taxes are filed next tax year.
  • APTC repayment on Schedule 2 Line 2 is an allowable medical expense on Schedule A, as are insurance premiums listed on Form 1095-A. The amount on Schedule 2 Line 2 should be treated as if the taxpayer had paid the premiums during the tax year of the return. (This is an exception to the normal “calendar year” determination.)

Created with the Personal Edition of HelpNDoc: Streamline Your Documentation Process with HelpNDoc's Project Analyzer