Tax Form 8962 is a form that you need to fill out and attach to your federal income tax return if you want to claim the premium tax credit (PTC) or if you received advance payments of the premium tax credit (APTC) during the year.
The PTC is a refundable tax credit that helps eligible individuals and families pay for health insurance premiums purchased through the Health Insurance Marketplace.
The APTC is a payment that the Marketplace makes directly to your health insurance provider to lower your monthly premium.
In this article, we will explain what Tax Form 8962 is, how to use it, and why it is important for your taxes. We will also provide some tips and resources to help you complete the form correctly and avoid common mistakes.
Understanding Tax Form 8962
Purpose and Use of the Form
The main purpose of Tax Form 8962 is to reconcile the amount of APTC you received during the year with the amount of PTC you are eligible for based on your actual income and family size.
This reconciliation determines whether you owe any money back to the IRS or whether you are entitled to a refund.
You need to use Tax Form 8962 if you meet any of the following conditions:
- You enrolled in a qualified health plan through the Marketplace and want to claim the PTC for yourself or another member of your tax family.
- You enrolled in a qualified health plan through the Marketplace and received APTC for yourself or another member of your tax family.
- You are allocated APTC from another taxpayer who enrolled in a qualified health plan through the Marketplace.
You do not need to use Tax Form 8962 if you meet any of the following conditions:
- You did not enroll in a qualified health plan through the Marketplace.
- You enrolled in a qualified health plan through the Marketplace but did not receive any APTC and do not want to claim any PTC.
- You received APTC but your household income is more than 400% of the federal poverty line, which means you are not eligible for any PTC.
Eligibility Criteria for Filing
To be eligible for the PTC, you must meet the following criteria:
- You must have a tax filing status of single, married filing jointly, head of household, or qualifying widow(er) with a dependent child. You cannot claim the PTC if you are married filing separately unless you qualify for an exception. See the instructions for Form 8962 for more details.
- You must have a household income that is at least 100% but not more than 400% of the federal poverty line for your family size. See the instructions for Form 8962 for the federal poverty line amounts for each year.
- You must not be eligible for other minimum essential coverage, such as Medicare, Medicaid, employer-sponsored health insurance, or other government-sponsored health insurance. There are some exceptions to this rule. See the instructions for Form 8962 for more details.
- You must not be claimed as a dependent by another taxpayer.
- You must enroll in a qualified health plan through the Marketplace that covers at least one month during the year.
Recent Updates and Changes
The IRS has made some updates and changes to Tax Form 8962 and its instructions for the tax year 2022. Some of the most notable changes are:
- The IRS has suspended the repayment of excess APTC for the tax year 2021 due to the coronavirus pandemic. This means that if you received more APTC than you are eligible for based on your 2021 income, you do not have to pay it back to the IRS. However, you still have to file Form 8962 to report your APTC and PTC amounts.
- The IRS has updated the federal poverty line amounts and the applicable percentage table for calculating your PTC for the tax year 2022. See the instructions for Form 8962 for the updated amounts and table.
- The IRS has corrected an error in Table 1.2 of the instructions for Form 8962 regarding the filing status exceptions for married filing separate taxpayers. See the instructions for Form 8962 for the corrected table.
Steps to Complete Tax Form 8962
1. Gather Necessary Documents and Information
To complete Tax Form 8962, you will need the following documents and information:
- Your federal income tax return (Form 1040, 1040-SR, or 1040-NR) and its schedules and forms.
- Your Form 1095-A, Health Insurance Marketplace Statement, which you should receive from the Marketplace by early February. This form shows the amount of APTC you received and the monthly premiums for your qualified health plan.
- Your modified adjusted gross income (MAGI), which is your adjusted gross income (AGI) plus certain income that is not taxable, such as foreign earned income, tax-exempt interest, and nontaxable social security benefits. See the instructions for Form 8962 for how to calculate your MAGI.
- Your tax family size is the number of individuals for whom you claim a personal exemption on your tax return, including yourself.
2. Accurately Calculate Premium Tax Credit Using Form 8962
To calculate your PTC using Form 8962, you will need to follow these steps:
- Fill out Part I of Form 8962 to determine your annual and monthly contribution amounts. These are the amounts that you are expected to pay for your health insurance premiums based on your income and family size. You will use the federal poverty line amounts and the applicable percentage table from the instructions for Form 8962 to calculate these amounts.
- Fill out Part II of Form 8962 to determine your annual and monthly PTC amounts. These are the amounts that the IRS will pay for your health insurance premiums based on your income and family size. You will use the information from your Form 1095-A and Part I of Form 8962 to calculate these amounts.
- Fill out Part III of Form 8962 to reconcile your APTC and PTC amounts. This is where you compare the amount of APTC you received during the year with the amount of PTC you are eligible for based on your income and family size. You will use the information from Part II of Form 8962 and your Form 1095-A to do this reconciliation. If your APTC is more than your PTC, you have excess APTC and you may have to pay it back to the IRS. If your APTC is less than your PTC, you have a net PTC and you may get a refund from the IRS.
- Fill out Part IV of Form 8962 if you are allocated APTC from another taxpayer or if you allocate APTC to another taxpayer. This is where you report how much APTC was shared between you and another taxpayer who enrolled in a qualified health plan through the Marketplace together. You will use the information from your Form 1095-A and the allocation agreement between you and the other taxpayer to fill out this part.
3. Common Mistakes to Avoid When Filling Out Form 8962
Some of the common mistakes that taxpayers make when filling out Form 8962 are:
- Not filing Form 8962 when required: If you received any APTC during the year or if you want to claim any PTC on your tax return, you must file Form 8962 and attach it to your tax return. Failing to do so may result in a delay or denial of your PTC, an increase in your tax liability, or a penalty from the IRS.
- Not using the correct federal poverty line amounts and applicable percentage table for the tax year: The IRS updates these amounts and tables every year, so make sure you use the ones that correspond to the tax year for which you are filing Form 8962. Using the wrong amounts and table may result in an incorrect calculation of your PTC and APTC reconciliation.
- Not reporting the correct MAGI and tax family size: Your MAGI and tax family size are the key factors that determine your eligibility and amount of PTC. Make sure you report them accurately and consistently on your tax return and Form 8962. Reporting incorrect or inconsistent information may result in an incorrect calculation of your PTC and APTC reconciliation.
- Not using the correct information from Form 1095-A: Your Form 1095-A shows the amount of APTC you received and the monthly premiums for your qualified health plan. Make sure you use the correct information from this form when filling out Form 8962. Using incorrect or incomplete information may result in an incorrect calculation of your PTC and APTC reconciliation.
Importance of Tax Form 8962
Tax Form 8962 is important for several reasons:
- Reconciling Advance Payments of Premium Tax Credit: Filing Form 8962 allows you to reconcile the amount of APTC you received during the year with the amount of PTC you are eligible for based on your income and family size. This ensures that you pay or receive the correct amount of tax credit for your health insurance premiums.
- Maximizing Potential Tax Credits: Filing Form 8962 allows you to claim the PTC on your tax return if you did not receive any APTC during the year or if you received less APTC than you are eligible for based on your income and family size. This could reduce your tax liability or increase your refund for the year. You may also be able to carry forward or back any unused PTC to other tax years. See the instructions for Form 8962 for more details.
Avoiding Penalties and Audits: Filing Form 8962 allows you to avoid penalties and audits from the IRS if you received any APTC during the year. The IRS may impose a penalty or audit your tax return if you do not file Form 8962 or if you file it incorrectly. Filing Form 8962 correctly and timely can help you avoid these consequences.
