A taxpayer who has received Form 1095-A, Health Insurance Marketplace Statement must file Form 8962, Net Premium Tax Credit with their tax return, reconciling the amount of premium tax credit they received in advance with the amount they are allowed.
When is shared policy allocation needed?
The amounts reported on Form 8962 will be affected if the underlying health care policy was shared by more than one taxpayer. In such a case, the amounts reported on Form 1095-A will need to be allocated between the individual taxpayers on the policy and reported by each taxpayer on their respective tax returns.
A shared policy occurs when a qualified health plan has been purchased from the Marketplace or from a state health care exchange and it covers at least one individual on the tax return and at least one individual not on the tax return. Here are several common scenarios where this occurs:
- One individual on the return was a party to a divorce during the year, and they had a policy for some period with their ex-spouse. See here for more information about allocating in this scenario.
- The taxpayer is married but filing a separate return from the spouse;
- One of the individuals on the tax return (taxpayer, spouse or a dependent) was enrolled in a qualified health plan by someone who is not part of their tax family (for example, the ex-spouse enrolled a child whom the taxpayer is claiming as a dependent);
- One of the individuals on the tax return (taxpayer, spouse or a dependent) enrolled someone not on the tax return in a qualified health plan. Two common examples:
- the taxpayer enrolled a child whom the ex-spouse is claiming as a dependent;
- the taxpayer enrolled their child who is filing their own return.
A shared policy allocation isn't needed if everyone covered under the marketplace policy is included on one tax return, whether as the primary taxpayer, the spouse, or a dependent.
Thus, if the primary taxpayer is a dependent on someone else's tax return and is covered under marketplace insurance, they won't complete Form 8962. Rather, the taxpayer who is claiming them as a dependent will include them on their Form 8962.
When more than one taxpayer shares a policy, the enrollment premiums, SLCSP premiums, and Advance PTC reported on Form 1095-A need to be allocated between their tax returns. This is known as a Shared Policy Allocation. A policy can be shared among any number of taxpayers.
How many allocations are needed?
Form 8962 includes space for entering up to four allocations. More than one allocation is needed if the taxpayer was covered under more than one policy during the year also with one or more other taxpayers, or if the taxpayer's allocation percentage changed during the year.
Thus, if there is only one marketplace policy, one period of months being allocated, and the taxpayer's allocation didn't change during the months they shared the policy with someone else, only one allocation is needed.
How are the allocation percentages determined?
The policy doesn't have to be allocated evenly between the taxpayers. For example, a policy that consists of a taxpayer, spouse, and their child who is filing his or her own tax return might be allocated 100% to the parents and 0% to the child. Or, three individuals sharing a policy might agree to divide it 50% to one and 25% to the other two. It's up to the taxpayers to decide amongst themselves how they wish to allocate.
If the taxpayers sharing the policy cannot agree on an allocation percentage, per the Form 8962 instructions "each taxpayer’s allocation percentage is equal to the number of individuals enrolled by one taxpayer who are included in the tax family of the other taxpayer for the tax year divided by the total number of individuals enrolled in the same policy as the individual(s)."
See here for several examples of how shared policy allocations will look in TaxSlayer Pro.
Entering Form 1095-A that's being allocated
To enter a Shared Policy Allocation in Form 8962 in TaxSlayer Pro, from the Main Menu of the tax return (Form 1040) select:
- Payments, Estimates & EIC
- Premium Tax Credit (PTC)
- Allocating Policy Amounts with Another Taxpayer - Check Allocation of Policy Amounts, then click OK.
- Allocation of Policy Amounts (Form 8962 - Part 4)
-
Allocation #1 - Note that every line in this menu relates to this taxpayer and this tax return except for the SSN, which is the other taxpayer who the policy is being shared with.
- Policy Number - Enter the policy number as shown on Form 1095-A line 2. (Note: If the policy number is more than 15 characters, enter the last 15 characters.)
- SSN of Taxpayer Sharing Policy - Enter the SSN of the taxpayer with whom the policy is being shared. (Note: If the policy is being shared with more than one taxpayer, any one of the others' SSN's can be entered.)
- Allocation Start Month - Enter two digits for the first month the policy was shared (January = 01, December = 12).
- Allocation Stop Month - Enter two digits for the last month the policy was shared.
-
Premium Percentage
SLCSP Percentage
PTC Advance Payment Percentage - Enter this taxpayer's allocation percentage from 0 to 100 that the taxpayers have agreed upon between themselves. Enter the same allocation percentage in each of the three percentage fields.
Once the percentages and other information contained on this menu have been entered, exit this menu to return to the Allocation of Policy Amounts Menu. - If a second shared policy allocation needs to be entered, repeat the above steps in Allocation #2. Form 8962 allows for up to four allocations. (An additional allocation is needed if the allocation percentages change during the year or the taxpayer is sharing more than one marketplace policy with one or more other taxpayers.)
- When all allocations have been entered, select Completed All Policy Amount Allocations and answer YES, then select Exit. (If the return includes more than four allocations, answer NO and prepare a statement to attach to the return detailing the same information as entered above for the remaining allocations. If the return is being e-filed, attach this statement in PDF form under Personal Information > Other Categories.)
- Select Enter Form 1095-A Amounts (Form 8962 Part 2 ). In the fields for entering the monthly advance premium tax credit information, enter the same amount showing on Form 1095-A for a given month and column except for the months being allocated, where the number you enter is calculated as follows:
(amount on Form 1095-A) x (allocation percentage) = amount to enter
If there are multiple shared policies, add together the applicable amounts for each month on each policy.
Once all the amounts have been entered for each month that the taxpayer had coverage through the shared policy, exit the menu.
If there is a net Premium Tax Credit, this amount will be reflected as a payment on Form 1040 and the taxpayer will receive the benefit of that amount. If the amount of Premium Tax Credit the taxpayer received in advance exceeds the amount that the taxpayer was entitled to receive, an Excess Advance Payment of Premium Tax Credit will be reflected in the Taxes section of Form 1040 for the taxpayer to repay.
Note: This is a guide on entering Share Policy Allocations into the TaxSlayer Pro program. This is not intended as tax advice.
Additional Information:
Desktop: Form 8962 Shared Policy Allocation Examples