When determining the Premium Tax Credit on a tax return, the taxpayer must reconcile the amounts reported on Form 1095-A, Health Insurance Marketplace Statement by filing Form 8962, Net Premium Tax Credit with their tax return. However 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. This can occur under the following scenarios:
- 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 your tax family (for example, the ex-spouse enrolled a child whom the taxpayer is claiming as a dependent); or
- 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.
When the taxpayer has a shared policy, the enrollment premiums, SLCSP premiums, and APTC reported on Form 1095-A need to be allocated between the taxpayer's tax return and the tax return(s) of the other individual(s). This is known as a Shared Policy Allocation. A policy can be shared among any number of taxpayers, although the form itself provides space for four allocations.
To enter a Shared Policy Allocation into 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 OK
- Allocation of Policy Amounts (Form 8962 - Part 4)
- Allocation #1
- Policy Number - enter the policy number of the shared policy
- SSN of Taxpayer Sharing Policy - enter the Social Security Number of the other taxpayer who is sharing the policy
- Allocation Start Month
Allocation Stop month - enter two digits for the months the policy was shared (January = 01, December = 12)
- Premium Percentage
PTC Advance Payment Percentage - enter the allocation percentage from 0 to 100 for the taxpayer on this return that the taxpayers have agreed upon between themselves. The percentage may be the same every month for which this shared policy applies, or the taxpayers sharing the policy may agree on different percentages for different months. However, you must use the same allocation percentage for all policy amounts (enrollment premiums, applicable SLCSP premiums, and APTC) in a month.
If the taxpayers cannot agree on an allocation percentage, the allocation percentage is equal to the number of individuals enrolled by one taxpayer for whom the other taxpayer claims a personal exemption for the tax year divided by the total number of individuals enrolled in the same policy as the individual. 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.
- 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 ). For each month, enter the calculated allocation amounts for the Enrollment Premium, the SLCSP premium, and the Advance Payment of PTC. Calculate the amounts by multiplying the amounts on Part III, Columns A, B, and C of Form 1095-A by the percentages entered in the allocation menu. If there are multiple Shared Policies, the applicable amounts for each policy will be added together and entered on the appropriate month. Once all the amounts have been entered for each month that the taxpayer had minimum essential 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 Advance Payment of Premium Tax Credit exceeds the amount that the taxpayer was entitled to receive, the Excess Advance Payment of Premium Tax will be reflected in the Taxes section of the 1040 and the taxpayer will have to repay the excess advance payment on their tax return.
Note: This is a guide on entering Share Policy Allocations into the TaxSlayer Pro program. This is not intended as tax advice.