Common questions for Form 8962 Premium Tax Credit in ProConnect Tax

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.

Starting in tax year 2023, if the taxpayer, spouse, or dependents enrolled in the marketplace, even if they never activated their policy, the marketplace may have issued them a 1095-A. If the return is e-filed without the 1095-A the IRS will reject the return with error F8962-070, which reads as:

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

To solve this reject, you'll want to attach a PDF - explaining why the 1095-A wasn't reported with the return, and on the e-file PDF/Miscellaneous screen, for the Link to form (defaults to main form) field, select ACA Explanation from the picklist. ACA explanation is located in the Main Form section.

If the taxpayer is unsure, have them contact HealthCare.gov to search for all the SSN's on the tax return.

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.