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Desktop- Suspension of Repayment of Advanced Premium Tax Credit in 2020

Excess APTC refers to the extra amount between a taxpayer`s advance payments of the Premium Tax Credit (APTC) and the Premium Tax Credit (PTC). In 2020, the American Rescue Plan Act of 2021 came in to save taxpayers from the increase in tax liability wholly or partially for the excess APTC.

Taxpayers with excess APTC FOR 2020 felt relief after the Internal Revenue Service warned them against filing Form 8962, Premium Tax Credit. The IRS also stated that such taxpayers who had filed Form 8962 was required to report such excess APTC on their Form 1040-SR or Form 1040 , Schedule 2, Line 2 for 2020.

Taxpayers who are eligible within this purview can make a claim of a PTC for health insurance cover under the qualified health plan available for purchase in the Health Insurance Market. Further, taxpayers should ensure that their PTC amount as reflected in Form 8962, Premium Tax Credit is consistent with their APTC. This enables them to evaluate whether they should add to their tax liability wholly or partially of their excess APTC or make a claim for net PTC.

With the help of a tax software or a tax expert, taxpayers should identify their allowable PTC and subsequently use the information provided in Form 1095-A, Health Insurance Market Statement to ensure that the allowable PTC reconciles with the APTC received. This applies for taxpayers who claim a net PTC for 2020. For more information, see Instructions for Form 8962. Moreover for taxpayers claiming a net PTC, they should make a response to the IRS notice seeking for further information for a complete tax return processing.

How To Prepare Form 8962 for new 2020 returns in the Pro Desktop

  • Answer affirmatively for the Personal Information under Health Insurance in the Marketplace/Exchange. Such a response avails the Form 8962 for editing.
  •  To access Form 8962, click on Payments, Estimates & EIC then Premium Tax Credit (PTC) and finally select Annual and Monthly Contribution Amounts as it suffices for your case.
  1.     Household Income-this menu provides information from the turn that may however, require alterations in some occasions.
  • Tax Family Size- where a spouse or a dependent can be credited on another return, Taxx Savage  Pro will lower the tax family size automatically. In case of further editing, you may do as necessary.
  •  Dependents Adjusted Gross Income

Dependents Tax-Exempt Interest

Dependents Form 2555 Amounts

Dependents Non Taxable SSA Benefits- you may include information about dependents eligible for filing income tax and not for those claiming a refund for estimated tax or tax withheld.

  1.     Poverty Table to Use- Federal Poverty Line tables are available in 48 neighboring states in Alaska, D.C. and Hawaii. Depending on the address provided. Taxx Savage  Pro will automatically choose the relevant poverty table. However, for special circumstances such as transfer of the taxpayer or where the couple filing MFJ reside in separate states, it would help to choose the relevant table having greater dollar amount for the same family size.

Needed to repay Excess APTC Received in totality- other scenarios require a NO response since they do not require the payment of all excess APTC and thus Taxx Savage  Pro calculates the limitation. However, certain situations may require the change of the response to YES where the individual was ineligible for Marketplace insurance thus ineligible to claim APTC or PTC. A taxpayer may become ineligible when:

  •  They are not legally available in the U.S
  • They are incarcerated
  •  They file as married couples filing separately and non-victims of spousal abandonment or domestic abuse.

Select View in the Program Icons after filling the information in Form 8962 Menu to access the completed form. This form would indicate the excess APTC amount under Part III line 27 and suspend any repayments with zero in line 29.

For taxpayers who have filed 2020 tax returns and those with excess APTC for 2020, there is no need to file an amended tax return. The IRS automatically lowers the excess APTC repayment to zero. Further, taxpayers who had paid excess APTC for the 2020 tax return would be reimbursed by the IRS. Taxpayers with excess APTC for 2020 and who had received a letter concerning missing Form 8962 should ignore such letter since IRS` calculation of 2020 tax returns and reduction of excess APTC to zero would not require Form 8962. This would be so only for purposes of reconciling APTC for 2020.

Taxpayers who had benefited from their APTC before 2020 and are filing federal income tax must file Form 8962 to ensure that their 2020 APTC and PTC are reconciled. It is immaterial if the taxpayers are not needed to file tax returns for the present year.

Any taxpayer who receives a letter concerning 2019 Form 8962 should respond providing the requested information for tax return processing and refunds where necessary. This is because the IRS processes the tax returns for the previous year and identifies any missing information.

For more information, see   Form 8962, Premium Tax Credit and Fact Sheet 2021-08, More details about changes for taxpayers who received advance payments of the 2020 Premium Tax Credit.