Form 8962, APTC, PTC and 0% Household Income

[Mactaxes]

Taxpayer has a negative MAGI because of an NOL carryforward.  His Household Income as a Percentage of Federal Poverty Line on Line 5 of Form 8962 is 0%.  Even without the NOL, his Line 5 is still below 100% because his only income in 2021 was $10K of capital gains.

Taxpayer's For, 1095-A reports APTC payments for 2021 of $2,080.  ProSeries is calculating/allowing the APTC and an additional $1,380 of Net PTC on the Form 8962 even though the program is calculating a negative MAGI and a 0% on Line 5. 

Our old software (TaxWise) had a Y/N check box on Form 8962 to indicate “If the percentage on Line 5 is less than 100%, did the taxpayer meet the requirements under “Estimated household income at least 100% of the Federal poverty line” in the 8962 instructions?” 

I do not see a similar check box in Proseries.  Is there anywhere in the program to indicate that the taxpayer did not meet the requirements for APTC and PTC?

This taxpayer does not seem to meet the Estimated household income requirements in the 8962 Instructions because that the taxpayer’s “insurance agent” did not provide accurate information about the taxpayer’s MAGI to the Marketplace when they signed the taxpayer up. 

I don't really want to override this Form, but not quite sure how else to proceed...

[TaxGuyBill]

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@Mactaxes wrote:

This taxpayer does not seem to meet the Estimated household income requirements in the 8962 Instructions because that the taxpayer’s “insurance agent” did not provide accurate information about the taxpayer’s MAGI to the Marketplace when they signed the taxpayer up.

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To me, it seems like they qualify.  The actual wording is "An Exchange estimates at the time of enrollment that the taxpayer's household income will be at least 100 percent but not more than 400 percent of the Federal poverty line for the taxable year".

The fact that the Marketplace gave Advance credit shows the Marketplace estimated their income between 100% and 400%.

Whether or not the taxpayer and/or insurance agent filed a fraudulent application with the Marketplace (with a penalty of up to $250,000) is a different question.

[Mactaxes]

Thank you TaxGuyBill.

Agreed that it does seem like the taxpayer qualifies, but he's had a large NOL for several years and does not work, so we just aren't seeing how in the world the Marketplace could have estimated his income at between 100% and 400% of poverty line  

Insurance Agent was the one to input his information into the Marketplace application, but she had copies of his 2019 & 2020 1040's showing the negative AGI and he is not currently employed.   

We explained to our client that the Agent could not have provided accurate information on his Marketplace application (whether or not it was an honest mistake, fraud or ignorance remains to be seen) and he does not want to "take any chances" and wants to pay back the APTC and does not want to claim the additional PTC.  

But Proseries doesn't seem to allow a taxpayer to not claim PTC in this situation...is that correct?  Is there any other way to correct this issue?  Our old software had a Y/N checkbox if the taxpayer fell below 100% and did not qualify, but I don't see anything like this in Proseries...

[TaxGuyBill]

The Tax Code doesn't really have a provision for "I don't want to do it".

If you think the taxpayer does not qualify, then the SLCSP is zero.

That will disqualify the credit.  However, the repayment limitation still applies.

[Mactaxes]

From what I've read, he doesn't qualify for any PTC because incorrect information was given to the Marketplace on his application.  The insurance agent has now admitted her "error" and is looking into how she can "fix it."  Short of him paying back the APTC and not taking anymore PTC, I don't know of anything else that can be done to fix her error retroactively. 

So it wasn't exactly an "I don't want to" situation...it was more of a 'how do we fix this issue" and file an accurate return?

Unfortunately, using an SLCSP of zero creates a "You Must Fix This" red error in Proseries that I assume will prevent e-Filing...  

[TaxGuyBill]

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@Mactaxes wrote:

So it wasn't exactly an "I don't want to" situation...it was more of a 'how do we fix this issue" and file an accurate return?

Unfortunately, using an SLCSP of zero creates a "You Must Fix This" red error in Proseries that I assume will prevent e-Filing...  

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An accurate return is to file as-is.  The tax return does not have a provision to undo an error on the application.

If you e-file from the Homebase, you can "disable error checking" and you can e-file it.

[Mactaxes]

HI TaxGuyBill - 

Just wanted to clarify...an accurate return is to file as-is, even though I know that incorrect information was provided on the Marketplace application?  In talking with the insurance agent, it seems that very little effort was put into making sure accurate information was provided to the Marketplace on the application which Pub 974 deems a reckless disregard.  A co-worker has suggested that ignoring all of this and filing as-is could be seen as a 230 violation.  I assume you disagree?  Thanks for all your help on this. 

[TaxGuyBill]

If you feel it rises to the level of "reckless disregard", then the SLCSP is $0, but in my opinion the repayment limits still apply.

However, in my opinion it does not rise to the level of "reckless disregard".  Here is how the Regulation defines it:

A reckless disregard of the fact occurs if the taxpayer makes little or no effort to determine whether the information provided to the Exchange is accurate under circumstances that demonstrate a substantial deviation from the standard of conduct a reasonable person would observe

In my opinion, because you client submitted their income to their insurance agent, they would have assumed everything was "accurate".

[Mactaxes]

Hi TaxGuyBill - The insurance agent actually said that her goal when filling out the client’s application was to “make sure he received tax credits,” which does seem to start us down the slippery slope of a reckless disregard.  But I completely agree with your important point that the taxpayer 100% believed the agent was providing accurate information on the application and so we should let that be the determining factor here.  Thanks again for your advice on this.

[Pickle Hill]

I have a slightly different situation. My client is single, with an AGI of $0. When he enrolled in the exchange, the assumption was his earnings would be just over 100% lower limit. He lost his job early and had no money all year. His dad loaned him $ to pay his monthly premiums. Now he's not eligible for PTC due to earning less than 100% Poverty Limit ($14,580)

However, IRS says if his enrollment was based on projection of income between 100% and 400% (his was), then he can still receive the PTC, even though he fell below 100% by the end of the year.

How do I override 8962 to give him is PTC? 

I've had several with income over the limit, but this is my first with income below the limit, but with exceptions.

So How can I override 8962 to give him is PTC, even with and income below 100%?

Thank you guys...

[TaxGuyBill]

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@Pickle Hill wrote:

IRS says if his enrollment was based on projection of income between 100% and 400% (his was), then he can still receive the PTC, even though he fell below 100% by the end of the year.

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No, that is only PART of the requirement.  Another part is that he received some Advance credit.  Did he receive any Advance credit?

[Pickle Hill]

Based on his projected income, he was entitled to $589 monthly assistance ($7073 for the year).

However, he paid the entire $763 monthly premium himself with his dad's help, and figured he'd get the $7073 PTC when he filed.

How do I let ProSeries know that when he was enrolled by NY, they based his enrollment on his projected income, which would allow him to fall below the poverty line and still qualify for PTC? I don't see any flags to check.

Please help. Thank you

[abctax55]

"....Did he receive any Advance credit?"

You need to answer Bill's question.

[TaxGuyBill]

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@Pickle Hill wrote:

they based his enrollment on his projected income, which would allow him to fall below the poverty line and still qualify for PTC?

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I think you need to review the rules for that.  I told you the answer in my last comment, but maybe it will sink in after you re-read the rules yourself.

[Pickle Hill]

No. He was eligible to receive monthly premium help, but he paid the full premium each month (with his dads help). He now feels intitled to the full amount of the help, just like as if he had accepted it during the year.

Assuming he can, how can I tell pro-series? I can't get pro-series to award him the PTC. help! thank you!

[TaxGuyBill]

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@Pickle Hill wrote:

He now feels intitled to the full amount of the help,

Assuming he can

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Are you intentionally ignoring what I said in my first comment to you, and intentionally not reviewing the rules to see who qualifies for the under 100% rule?

[abctax55]

"..intitled"

Could you show me where that word is in the IRC?

[Pickle Hill]

TaxGuyBill, thank you for your replies. How can I get ProSeries to ignore his income below poverty level and award him the PTC? He was accepted into the program based on an assumption his income would be above poverty...but in the end it wasn't. I can't get ProSeries passed this to award him his PTC. Thank you!

[TaxGuyBill]

Please re-read my prior responses.  He does NOT qualify for the credit.