Form 8962 is a mandatory document for the taxpayers. The payers would have received advanced premium tax credits. It’s imperative to understand how these credits support cover the cost of health insurance through the Marketplace. Accurate income reporting is a key requirement to ensure the right amount of credit is received. Our experienced tax team is here to assist you in explaining the importance of Form 8962. How it accurately calculates any tax health care coverage to give you confidence in your tax write-offs.
What is Form 8962?
Form 8962 behaves as a justification for the monthly premium assistance. It is the premium you receive for your health insurance plan. People also know it as the Advanced Premium Tax Credit (APTC). This form compares the APTC you received with your actual income. It’s a necessary step because the health exchange calculates your health insurance plan cost. The cost depends on your estimated income for the year when it was renewed.
Eligibility and Purpose of Form 8962
A taxpayer needs to complete Form 8962 if he has secured health insurance through the Health Insurance Marketplace in the US. This form signifies that you are a low-income taxpayer. So, it may be eligible for the premium tax credit. The completed form, Eight thousand nine hundred sixty-two, will declare your gross premium for the advance credit you will receive.
Validity of Form 8962
Let’s look at an example here. There are a couple of components. You will need to complete form 8962 for your tax return. However, it starts with the 1095-A from the Marketplace. You will get this at the end of the year. It summarizes all the moving pieces here.
Importance of Form 8962
If you are a taxpayer who also has health insurance for 2024 through a health exchange like healthcare.gov or Covered California, you have a 1095-A form. This form is important because it shows who was in your household as a dependent. Form 8962 correlates with it to define coverage. Likewise, it tells how much help you have to pay for your health plan.
How to Complete Form 8962?
Before we do the walkthrough, let’s discuss how to complete Form 8962. Who needs to fill it out? Why do you need to fill it out? And what are some of the specific 2024 changes for the form?
Who the Form is for?
If you can estimate your income for December 2024 back up from November 2023, you might be a genius. However, if your income was lower or higher than you had estimated in November of that year, then you may be entitled to get more money back on your return. That is if it’s lower, or you have to pay back some of that money if your income was higher at the end of the year.
Why do you need to fill it out?
The 8962 form is the form that shows you how much you actually have to pay back or how much you get back. This form is only for people with health insurance through a health exchange and health care taxes. Taxpayers who secure health coverage through Medicare, the VA, your work, Medicaid, or Medi-Cal can use this form for tax write-offs. SG INC CPA can help you if you’re here in California, Texas, or even anywhere in the US, so if you had health insurance through an exchange in 2024 and received help paying for your health care taxes.
Let’s discuss how to fill out your Form 8962.
Getting Started Filling out the Form
We get to start with the first line, line number one.
- Line 1
Should be the easiest one to complete: put in your name. In this case, we have to have our fictitious person.
- Line 2
should be the second easiest question, and it is for your social security number. The taxpayer’s social security number should be 11111.
If you or a spouse are filing a joint return or receiving or approved to receive unemployment compensation for any week during 2024, check this box. You check the box and get the maximum allowed APTC as per IRS form 8962. However, for B, you can only take PTC if your filing status is married and filed separately if you qualify for exceptions.
- Line 3
Let’s get to the third line here, which is tax family size. A taxpayer’s modified adjusted gross income (AGI) is going to be thirty thousand dollars. The modified adjusted gross income is a little tricky. There is a little chart here that you can use to help you figure it out because it includes things that are not normally taxed as income for calculating PTC.
- Line 4
Number four, or line four, will define the region of the United States you live in because it will change the FPL calculation, the Federal Poverty Level that you live in. If you live in Alaska, you can click box A. If you live in Hawaii, you can click box B. And for most of us who live in the rest of the country, it’s going to be box C for 48 states and Washington, DC. Furthermore, when you go on to the instructions to find Tax Credit: there is a chart with the FPLs that you would need to include as a dollar amount for line four.
- Line 5
For line five, things get tricky because you need to figure out your actual FPL level. You can use those numbers from line four, line 12, and line 3 up from line 4 in line 3 to figure out the IRS form 8962.
- Line 6
This line is skipped because it has an optional summary.
- Line 7
Let’s go to line seven now. Line seven is going to be your applicable percentages. There’s a table in the instructions for the 8962 where you need to find my FPL, which are these numbers here. So, you look at 235 for how to get from 8962, which means to put this number .0340 into line seven.
- Line 8
Let’s see here: You need to multiply line number three by thirty thousand by line number seven, which is .0340. That is 30,000 times .0340, which gives me 1020, presumably the amount of APTC or PTC you should have received throughout the year. So, it asks you to divide 8A, that 1020, by 12 to give me a monthly amount of 85 dollars.
Which Forms Are to Get Premiums with 8962?
Let’s get to the notes for line 11. So, 11A asks for the annual premiums from line 33A on my 1095-A. Let’s go back to the 1095-A and line 33 right here. For the 1085-A, it is 5529. Line 11B will be for the second-lowest-cost silver plan premium, 4981.32 cents. So, that is for line 33B on my 1095-A. Then, the actual annual contribution amount, which we got from 8A here, is 1020. Now, 11D is the annual maximum premium assistance to:
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- Subtract C, one thousand twenty dollars, from B, four thousand nine hundred eighty-one dollars, and thirty-two cents.
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- Subtract C, so 4981.32 minus one thousand twenty gives you three thousand nine hundred sixty-one dollars and thirty-two cents.
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- Now, the annual premium tax credit is smaller than eight allowed.
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- So, A is 5529, D is 3961.32. So, we will put in three hundred sixty-one dollars and thirty-two cents.
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- Lastly, for eleven F, it’s asking for four thousand two hundred three dollars on the 1095-A, line 33C. You can see that over here: four thousand two hundred and three dollars and sixty cents.
Conclusion
SG INC CPA concludes that Form 8962 is prudent in accurately reconciling advanced premium tax credits. It is great to go with actual income for taxpayers who obtained health insurance through the Marketplace. The taxpayers can meet their tax payoffs by carefully completing this form. You must seek the help of a professional to complete form 8962 for health care tax write-offs with clarity and accuracy. Thanks to our remote CPA services, we are here to assist you in filling out the form in California, Texas, or elsewhere around the US.