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Common questions for Form 8962 Premium Tax Credit in ProConnect Tax

by ProConnect Tax Online Updated 5 months ago

This article will help you with frequently asked questions about the Premium Tax Credit, including how to resolve diagnostic ref. 42135, how to complete Form 8962 when your client can claim the self-employed health insurance deduction, and how to generate less common sections of the form in Intuit ProConnect.

For tax years 2023-2025:

Taxpayers with a household income that exceeds 400% of the federal poverty line for their family size may be allowed a PTC. For more information, click here.

For more information, refer to the IRS Questions and Answers on the Premium Tax Credit.

American Rescue Plan impact

The American Rescue Plan Act was signed into law on March 11, 2021, and eliminates the 2020 excess advance premium tax credit repayment for certain filers.

To apply the changes in ProConnect Tax:

  1. Go to the Input Return tab.
  2. From the left of the screen, select General and choose Misc. Info./Direct Deposit.
  3. From the top of the screen, select Miscellaneous.
  4. Only for TY2020: Mark the checkbox labeled Apply the American Rescue Plan Act provisions.
    • This checkbox will apply the provisions on a client-by-client basis, and prevent changes from being applied to clients whose returns were already filed.

For clients who owe excess APTC repayment:

  • Form 8962 won't be attached to the return.
  • No repayment amount will be included on Schedule 2, line 2.
  • The IRS won't correspond for a missing Form 8962 or ask for more information about the excess APTC.

For clients who can claim a net premium tax credit (PTC):

  • Form 8962 will still be attached to the return.
  • The calculated credit will still flow to Schedule 3, line 8.

Clients who previously submitted 2020 returns with excess APTC repayment should not file amended returns just to get a refund of this amount. For the latest information and guidance from the IRS, click here.

Does the 8962 still apply for tax years after 2018?

Yes. Under the Tax Cuts and Jobs Act, the individual shared responsibility payment was reduced to $0 for months beginning after December 31, 2018. Beginning in tax year 2019, Form 1040 no longer has a "Full-year health care coverage or exempt" box, and Form 8965 for Health Coverage Exemptions is no longer in use. Due to these changes, Forms 1095-B and 1095-C are no longer required to be entered into the tax return and should be kept by the taxpayer for their records.

However, if your client received Form 1095-A, Health Insurance Marketplace Statement, you'll need to enter that information on their tax return. The 1095-A is used to generate Form 8962 to reconcile any advance payments of the premium tax credit or claim the premium tax credit. Click here for more information.

Why is the tax year 2021 Form 8962, line 5 showing 133%?

If your client (or their spouse, if married filing jointly) received unemployment compensation for any week of 2021, their household income for purposes of this form is capped at 133%. See the Form 8962 instructions for more information.

For a return containing a Form 8962, Premium Tax Credit (PTC), under Part 1, if the total of line 2a and line 2b amounts are negative, a 0 dollar amount will appear in line 3, Household Income and the following e-file critical diagnostic will be triggered:

"Form 8962: Household income on line 3 must equal the total of line 2a, Modified AGI, and 2b, dependents' modified AGI, for efile purposes. If the total of lines 2a and 2b are negative, zero will print on line 3 and this return will need to filed as a conventional paper return. (ref. #42135)"

The e-file critical diagnostic is triggered to prevent the return from being filed because the return would be rejected by the IRS with the following electronic filing business rule rejection:

"F8962-004-01 If Form 8962, Line 1 'TotalExemptionsCnt' has a non-zero value, then Line 3 'HouseholdIncomeAmt' must be equal to the sum of Line 2a 'ModifiedAGIAmt' and Line 2b 'TotalDependentsModifiedAGIAmt'."

Therefore, if the sum of lines 2a and 2b are negative, this condition can not be met because the IRS Instructions for Form 8962 require the following:

"Line 3

Add the amounts on lines 2a and 2b. Combine them even if one or both of them are negative. If the total is less than zero, enter -0- on line 3."

As a result, these returns must be paper filed.  This doesn't mean that a taxpayer with a negative modified AGI can't claim a Premium Tax Credit—only that the return can't be electronically filed.

The following error message may occur when attempting to e-file:

The e-File database indicates that Form 8962 or a binary attachment with description containing "ACA Explanation" must be present in the return. 

If you receive this error message, you are missing information regarding the Advance Premium Tax Credit. The IRS rejects the filing due to a missing Form 1095-A in the return, which should be received by the taxpayer. Make sure to attach the form to complete Form 8962.

If Form 8962 is generating with a Premium Tax Credit and you have a SE health insurance deduction on Schedule 1, line 16 your deduction and credit may be adjusted by the calculations described in Rev. Proc. 2014-41.

Avoid duplicate entries: If the amount of SE Health Insurance deduction entered on the Deductions > Adjustments to Income screen is the same amount entered on the Credits > Premium Tax Credit (1095-A, 8962) > Form 1095-A - Health Insurance Marketplace Statement screen, you'll need to remove the amount from the Adjustments to Income screen before completing the steps below. Only enter on Premiums not entered elsewhere.

To have ProConnect Tax calculate the SE Health Insurance Premium in conjunction with the PTC:

  1. From the left of the screen, select Credits and choose Premium Tax Credit (1095-A, 8962).
  2. Select Form 1095-A - Health Insurance Marketplace Statement.
  3. Scroll down to the SE Health Insurance section.
  4. Select the applicable Form (Click on arrow to select from list).
  5. Select the applicable Activity name or number.
  6. If applicable, enter the Related activity start month.
  7. If applicable, enter the Related activity end month.

How is ProConnect Tax coming up with the amounts for the SE Health Insurance Deduction and PTC?

There's not one correct answer for how much SE Health Insurance Deduction and PTC to take. The basic rules are to reduce the SE Health Insurance Deduction by the PTC amount so the return isn't doubling the deduction and to reduce the premiums paid by any advanced payments. You may use any calculation method you want that satisfies the requirements of the tax law.

Per Rev. Proc. 2014-41 Section 3. Scope, "Using the calculations in this revenue procedure is optional."

On the Premium Tax Credit screen, there are several input fields to adjust or override Form 8962.

  • Domestic abuse victim/spousal abandonment relief
    • Checking this box will allow your married filing separate taxpayer to take the Premium Tax Credit under the Married Taxpayers: Situation 2 from the IRS Instructions for Form 8962.
  • Other taxpayer will reconcile all APTC paid and this taxpayer is not taking the PTC (tax family size =0)
  • Qualifies for PTC even if household income is less than 100% of the federal poverty line
    • Checking this box will force the Form 8962 Line 6 to Yes even if the household income is less than 100%.
  • Dependents' modified AGI
    • Enter in this field any amount that is needed for the 8962 line 2b. See the IRS Instructions for Form 8962 for a worksheet to figure the amount to enter.
  • Poverty table [Override] (Click on arrow to select from list)
    • This will override the entry from the Client Information screen for the Resident State as of 12/31 field, and it'll check the box on Form 8962 line 4.
  • Excess advance premium tax credit repayment [Override]
  • Net premium tax credit [Override]
  1. From the left of the screen, select Credits and choose Premium Tax Credit (1095-A, 8962).
  2. Select Form 1095-A - Health Insurance Marketplace Statement.
  3. Enter the information from Form 1095-A.
  4. Scroll down to the Shared Policy Allocation (Form 8962, Part IV) section.
  5. Locate the Allocations table.
  6. In the SSN of Taxpayer Allocation, enter the Social Security number of the other taxpayer.
    • This will flow to Form 8962, Part 4, lines 30-33, column b.
    • Enter the Social Security number of the taxpayer with whom you are allocating policy amounts. The Social Security number may or may not be reported on your Form 1095-A, depending on your relationship to the other taxpayer.
  7. Enter the Allocation - Start Month.
    • This will flow to the Form 8962, Part 4, lines 30-33, column c.
    • Enter the first month you are allocating policy amounts.
  8. Enter the Allocation - End Month.
    • This will flow to Form 8962, Part 4, lines 30-33 column d.
    • Enter the last month you are allocating policy amounts.
  9. If applicable, enter the Allocation % Applied to Monthly - Premium %.
    • This will flow to Form 8962, Part 4, lines 30-33 column e.
    • If your allocation situation requires you to allocate the enrollment premium on Form 1095-A, lines 21 through 32, column A, enter the allocation percentage for the amount that applies to this return in column e. Enter your allocation percentage as a decimal rounded to two places (for example, for 40%, enter 0.40). Otherwise, leave column e blank.
  10. Enter the Allocation % Applied to Monthly - SLCSP %.
    • This will flow to Form 8962, Part 4, lines 30-33, column f.
    • If your allocation situation requires you to allocate the premium for the applicable SLCSP on Form 1095-A, lines 21 through 32, column B, enter the allocation percentage for the amount that applies to this return in column f. Enter your allocation percentage as a decimal rounded to two places (for example, for 67%, enter 0.67). You'll enter an allocation percentage in column f, in the following two circumstances:
      • You allocated the policy amounts under Taxpayers divorced or legally separated in 2020 (Table 3, Step 1).
      • You allocated the policy amounts under Policy shared with an individual for whom another taxpayer claims a personal exemption (Table 3, Steps 3, 4, or 5), and APTC was paid for an individual covered by the policy who was not in your tax family.
    • Leave column f blank in all other allocation situations. Refer to the IRS Instructions for Form 8962 for more information.
  11. Enter the Allocation % Applied to Monthly - Adv. Payment of the PTC %.
    • This will flow to Form 8962, Part 4, lines 30-33 column g.
    • If your allocation situation requires you to allocate the APTC on Form 1095-A, lines 21 through 32, column C, enter the allocation percentage for the amount that applies to this return in column g. Enter your allocation percentage as a decimal rounded to two places (for example, for 80%, enter 0.80). Otherwise, leave column g blank

See the IRS Instructions for Form 8962 for more information and specific allocation situations.

  1. From the left of the screen, select Credits and choose Premium Tax Credit (1095-A, 8962).
  2. Select Premium Tax Credit.
  3. Scroll down to the Part V - Alternative Calculation For Year of Marriage (8962) section.
  4. Enter the Date married (if in current year)
  5. Enter the Taxpayer alternative family size as the family size that existed before the marriage.
  6. Enter the Spouse alternative family size as the family size that existed before the marriage.

Form 8962, Part V won't generate unless the following two conditions have already been met:

  • Form 8962 is already generating.
  • You have excess APTC that must be repaid.
  • Meet the IRS exception requirement below.

Electing the alternative calculation is optional, but may reduce the amount of excess APTC the taxpayer must repay. To be eligible to make this election, the taxpayer must meet either of the following conditions:

  1. Checked the "No" box on Form 8962, line 6. The taxpayer and spouse must have been married on December 31, 2020 and be filing a joint return for the current year. The taxpayer and spouse must each have been unmarried on January 1, 2020. A member of the tax household must have been enrolled in a qualified health plan before the first full month of marriage. Advanced Premium Tax Credit must also have been paid for someone in the family during the current year.
  2. Checked the "Yes" box on Form 8962, line 6. Excess Advanced Premium Tax Credit must have been paid to the taxpayers in 2020.
ProConnect Tax

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