Common questions about individual Form 8965 in ProConnect

Coverage is considered unaffordable - Was the amount you would have paid for employer-sponsored coverage or a bronze level health plan (depending on your circumstances) more than eight percent (8.05%) of your actual household income for the year as computed on your tax return?

Lacerte can calculate if healthcare is affordable based upon a few additional inputs. To use the in-program calculator, follow the steps listed below.

Step 1. Enter tax information as you normally would in ProConnect. For example, wages in the Wages, Salaries, Tips (W-2) screen and other information provided by the client. Enter the total of all nontaxable social security benefits received by you, spouse and each claimed dependent who must file a tax return.

Step 2. If your client indicates that they didn't purchase insurance because it was unaffordable and they had no access to employer-based insurance, you'll need to determine what the 2015 Bronze Plan and Second Lowest Cost Silver Plan premiums for the client were. If they don't have that information, you can obtain this from the Healthcare.gov website using the Claim an Affordability Exemption link.

Step 3. Enter the requested information in the Healthcare Coverage Tax Tool link above and this will provide you with the Bronze Plan and SLCSP premiums for the household.

Step 4. In ProConnect, go to the Credits > Health Coverage, Exemptions, & Miscellaneous screen. In the Coverage Considered Unaffordable (Exemption Code A) section, enter the January field under the Bronze Plan Premiums and Second Lowest Cost Silver Plan columns. The screenshot below shows an example of healthcare plan input.

Step 5.  If the Healthcare tool provided the same plan premium amount for all 12 months, you only need to enter the January amounts, and then mark the checkbox labeled Premium entered for January applies to entire year.

Step 6. You can click the Check Return tab to view the Marketplace Coverage Affordability results in the Worksheets section. The program calculates the 8.05% household income amount at the bottom of the worksheet. Compare the line 13 amount to the threshold value.

Follow these steps to enter a Marketplace-Granted Coverage Exemption and generate From 8965, Part I:

1. Go to the Input Return tab.
2. From the left of the screen, select Credits and choose Health Coverage, Exemptions, and Miscellaneous.
3. Scroll down to the Market Place-Granted Coverage Exemptions (Form 8965, Part I)  section.
4. Locate the Individuals table.
5. Enter the First Name.
6. Enter the Last Name.
7. Enter the SSN.
8. Enter the Exemption Certificate Number.
   • The ECN should be at least 6 or 7 digits.

ProConnect will automatically generate Form 8965, Part II, lines 7a and 7b automatically based on the taxpayer/spouse income.

Follow these steps to enter a Coverage Exemption and generate Form 8965, Part III:

1. Go to the Input Return tab.
2. From the left of the screen, select Credits and choose Health Coverage, Exemptions, and Miscellaneous.
3. Scroll down to the Coverage Exemptions For Individuals Claimed on Returns (Form 8965, Part III) section.
4. Locate the Individuals table.
5. Enter the First Name.
6. Enter the Last Name.
7. Enter the SSN.
8. Select the Exemption Type (Click on arrow to select) from the dropdown menu.
   • Code B, Short coverage gap, is no longer listed on the dropdown menu. Instead ProConnect will generate the exemption code B automatically based on the months indicated for coverage (if the taxpayer went without coverage for less than 3 consecutive months during the year).
9. Enter a 1 in 1=full year, or enter a 1 for each month that the exemption was good for.

Per the IRS Instructions for Form 8965:

"For purposes of Form 8965, your household income is your modified adjusted gross income (MAGI) plus the MAGI of each individual in your tax household whom you claim as a dependent if that individual is required to file a tax return because his or her income meets the income tax return filing threshold. Use the Filing Requirements for Children and Other Dependents chart to determine whether your dependent is required to file his or her own tax return."

Follow these steps enter the dependent's AGI for Form 8965:

1. Go to the Input Return tab.
2. From the left of the screen, select Credits and choose Health Coverage, Exemptions, and Miscellaneous.
3. Scroll down to the Share Responsibility Payment Worksheet (Form 8965) section.
4. Enter the Dependents' modified AGI.

Additional information - Dependents' modified AGI:

The household income used in determining the exemption on Form 8965, line 7a, and in calculations on the Shared Payment Responsibility Worksheet is the taxpayer's modified adjusted gross income (MAGI) plus the MAGI from the separately prepared tax return of each individual in the tax household claimed as a dependent by the taxpayer and who is required to file his or her own tax return.

• Dependent filing Form 1040: If the dependent filed Form 1040, calculate the MAGI by adding the amounts reported on Form 1040, lines 8b and 37.  If the foreign earned income exclusion, housing exclusion, or housing deduction are claimed, add the amount from Form 2555, line 45 and 50, or Form 2555-EZ, line 18.
• Dependent filing Form 1040A: If the dependent filed Form 1040A, calculate the MAGI by adding the amounts on Form 1040A, lines 8b and 21.
• Dependent filing Form 1040EZ: If the dependent filed Form 1040EZ, calculate the MAGI by adding Form 1040EZ, line 4 and any tax-exempt interest reported in the space to the left of line 2.

If no entry is present in this field, but an entry is present in Dependents' modified AGI in the Premium Tax Credit (8962) section of this screen, the entry in that field will be included in the household income calculations.