Those who have purchased health insurance through the Health Insurance Marketplace and received an advance payment of the premium tax credit must file IRS Form 8962, often known as the Premium Tax Credit form. A premium tax credit is a form of financial assistance the federal government offers to help people with low or moderate incomes pay for health insurance policies purchased via the Health Insurance Marketplace. Payment, family size, and the cost of health insurance in the area are all considered when determining the amount of the credit.
If you got a premium tax credit advance payment but believe you are entitled to a different amount based on your income or household size, you must file Form 8962 to resolve the discrepancy. The form determines the individual's repayment obligation for any overpaid advance payment or the additional credit to which they are entitled. This form must be filled out correctly to prevent incurring penalties and interest on any overdue advance payments.
What is the Tax Credit for Premiums?
Low- and middle-income households can qualify for a tax credit called the Premium Tax Credit, which lowers the out-of-pocket cost of health insurance purchased through the Health Insurance Marketplace. The amount of the credit depends on the applicant's or their family's income, the number of people in their household, and the cost of health insurance in their region. You can use the credit to reduce your monthly health insurance costs or receive a tax refund.
Who can receive a Premium Tax Credit?
The Premium Tax Credit is only available to those who meet the following requirements:
- Need must have enrolled in a health plan through the Health Insurance Exchange.
- Income levels between 100% and 400% of the federal poverty line are required.
- You can't be someone else's tax deduction
- Needed to file tax returns for the tax year the credit is being claimed.
What is Form 8962 of the IRS?
An individual's premium tax credit advance payment and the credit they are entitled to receive based on their income and household size can be reconciled using IRS Form 8962. The form determines the individual's repayment obligation for any overpaid advance payment or the additional credit to which they are entitled.
Form 8962: How to Fill It Out
Some of the mandatory fill-ins for Form 8962 are as follows:
Reconciliation of Market-Granting of Coverage
In this part, you'll fill out the information on the premium tax credit advance payment you received and how it compares to your actual credit depending on your income and family size.
Reconciliation of a Tax Credit Claim for Premiums
This portion is where the premium tax credit is reconciled with the advance payment, taking into account the individual's income and household size. Payment plans and details on any available credits are included here as well.
Contribution during the year of marriage, alternative calculation
If the taxpayer is married but chooses to file separately from their spouse, they should fill out this area. The premium tax credit can also be calculated differently, with one method depending only on an individual's income.
Policy Funding Allocation
This component is filled out when several people in a household share a single health insurance plan. It explains how to divide the premium tax credit among those who qualify.
Alternative Calculation for Year of Marriage
If you got married during the tax year, you may use a different approach for calculating your premiums tax credit depending on your joint income and family size here.
What Happens If Form 8962 Still Needs To Be Filed?
A client may be subject to penalties or interest on any excess advance payment that must be repaid if they got an advance payment of the premium tax credit but failed to file Form 8962. In addition, if a person is qualified for a premium tax credit but does not file for it, they will not be refunded the amount they are entitled to.
Conclusion
In conclusion, those who have obtained an advance payment of the premium tax credit through the Health Insurance Marketplace and are now responsible for reporting their income on IRS Form 8962 must do so. It is utilized to equalize the premium tax credit advance payment with the individual's accurate premium tax credit eligibility determined by income and household size. The form must be filled out correctly to prevent fees and interest on any overdue repayments. Individuals can avoid audits and other tax-related hassles by filling out Form 8962 to get their premium tax credit.
