Shared policy allocation form 1095-A

[hamida_surti]

How do I allocate shared policy on form 1095-A. My client enrolled herself, spouse and her three kids on her policy. As it turns out her oldest is no longer a dependent as she got a job. My client is over the 400% and would have to return all of her advance premium. If I am doing the returns for both my client as well as her non dependent daughter, can I claim 0 for my client and 100 for her non dependent daughter. How do I fill out section IV of the daughters return. should I list all my clients dependents on the form or just my client with a 1

Will I have to adjust the SLCSP on any of the returns?

[TaxGuyBill]

Yes, if the parents and the non-dependent child are agreeable it to, they can allocate it all to the child.

On the child's return, just list one of the parents in the allocation section.

No adjusted needed to the SLCSP in this case.

[hamida_surti]

This is incredible. The non dependent child only had income of ~6k but is getting a refund back of 18K due to assigning it all to her. Not only that, the parent since they were above the 400% poverty level would have had to return all the advance premium, now do not have to because the non dependent is claiming the 1095 A. It seems too good to be true. Am I missing something?

[TaxGuyBill]

No, you are not really missing anything (but see note below).  I agree, it is messed up.

However, the taxpayer is required to tell the Marketplace that the child is no longer a dependent, which hypothetically means the child will get their own 1095-A and they can't keep doing this every year.

The only "catch" is that it is debatable if the child can actually qualify for the credit or not.  The child's income is under 100% of the Federal Poverty level, which disqualifies the credit unless certain conditions are met.  One of the conditions is that the Marketplace had estimated the taxpayer's income to be over 100%.  Well, the Marketplace did estimate the PARENTS' income to be over 100%, but not the child.  But the way the splitting/allocation works, it seemingly does not matter.  At any rate, the IRS has been allowing it to be done this way for the last 6 years.

[hamida_surti]

Thanks for all your help. You did mention that the marketplace did not estimate the child's income to be over 100%. What does it mean in terms of how I enter it in Pro connect tax. Without me changing anything it is allowing the refund of 18K. 

[TaxGuyBill]

It probably means nothing, so don't change anything.  All the credit.

It might be a "gray area", but as I said before, the IRS has been allowing it.  You should probably tell the taxpayer's that it MIGHT be a "gray area" and it is POSSIBLE the IRS will change things, but as of now, I would take the full credit.