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, however, 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)."
Entering Form 1095-A that's being allocated
To enter Form 1095-A with a Shared Policy Allocation in Form 8962 in TaxSlayer ProWeb, start by indicating the taxpayer was covered under a marketplace insurance policy:
- Click Health Insurance
- Click Yes to the questions about someone in the return having insurance under the Affordable Care Act, then click Continue.
- Click Continue past the list of household members.
On the page headed Advanced Premium Tax Credit (1095-A):
- Click the button for Allocate policy amounts (8962, Part IV).
- In Allocation 1, enter the following information:
- Policy Number (1095-A line 2) - 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 other taxpayer - 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 the first month the policy was being shared.
- Allocation stop month - Enter the last month the policy was being shared.
- Premium, SLCSP, Advance Payment of the PTC - Enter this taxpayer's allocation percentage for each of these. You must enter the same percentage in each field.
- If a second allocation needs to be entered, click Add Another Allocation and follow the same steps as in the first allocation. More than one allocation is needed in these scenarios:
- The taxpayer was covered under more than one policy during the year also with one or more other taxpayers.
- The taxpayer's allocation percentage changed during the year.
- Have you completed all policy amount allocations? - Click Yes unless you have more than four allocations. (For such a return, you would need to attach a document to the return indicating the additional allocations. Such a return cannot be electronically filed in TaxSlayer ProWeb.)
- Click No for Are you required to repay all of the APTC received? unless the taxpayer was in the country unlawfully.
- Click the appropriate answer to the question regarding household income below 100% of the poverty line.
- Click No to the question regarding all Forms 1095-A including coverage from January through December with no changes. (With a shared policy allocation, you must enter each month's amounts - you can't use the option to enter the annual totals.)
- 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 you 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.
When finished entering Form 1095-A, click Continue.
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 TaxSlayer ProWeb. This is not intended as tax advice.
Additional Information: