Instructions for IRS Form 8962

A tax credit is a tax benefit. This benefit can often increase the amount of tax refund you’ll receive. There are several different types of tax credits, each one an entity unto itself. In other words, they all have their own set of rules and regulations to follow. The tax credit we’re concerned with today is called the Premium Tax Credit, or PTC.
The Premium Tax Credit uses Form 8962 to figure out the amount of PTC you can claim. In order to claim anything, you had to have paid health insurance premiums on a plan you secured through the Health Insurance Marketplace. By finishing this form, you’ll know whether you can get any credit back or whether you owe the IRS because you already got an excess in advance premium tax credit or APTC.

Instructions for IRS Form 8962

The “instructions for IRS Form 8962” refer to a guide found on the IRS website that assists you in filling out the Form. These instructions take you through the process line by line and even contain a glossary. This glossary provides the user with correct definitions for terms used in Form 8962 that may be difficult to understand otherwise. The instructions for IRS form 8962 are here, https://www.irs.gov/instructions/i8962.

Who Can Use Form 8962?

Form 8962 isn’t for everyone. To be eligible for this tax credit, you had to have had health insurance via the Affordable Care Act Marketplace or exchange. However, eligibility is one thing; qualification is another. To qualify for the Premium Tax Credit, you needed to use the health insurance exchange in your state or healthcare.gov.

How to Fill out IRS Form 8962

Suppose you qualify for the 8962 Premium tax credit; you then need to obtain the 8962 form and file it with your federal income tax return. The Premium Tax Credit or PTC was designed to assist those who spent money on Marketplaces health insurance premiums. Also, please remember that you’ll need Form 1095-A. The Exchange or Marketplaces requires Form 1095-A to acquire information about those who are enrolled in a plan via the Marketplace.

Now that you know it has to be filed alongside your Federal Income Tax return, let’s take a step-by-step guide on how to file one for yourself. 8962 is constructed of five parts, and we’ll go into each of them right now.

Part I—Annual and Monthly Contribution Amount

Part one holds your essential information. The purpose of Part I is to figure out your contribution amount, which you’ll place on line 8. To complete Part I, you’ll need to use this table https://www.irs.gov/pub/irs-pdf/i8962.pdf#page=9. Below are the items you’ll need to complete Part I:

  • Full Name: Print your name as it appears on your tax return
  • Social security number: Your social security number must match the one on your federal return

Beginning the 8962 Form

Well, here we go. It’s time to start filling out your Form 8962. Keep in mind that this is an abbreviated introductory piece. Nothing replaces the IRS instructions, which come with the Form 8962, even a tax preparer. You are responsible for the numbers that are placed on the form, no matter what information you glean from other sources. Okay, let’s begin!

Line 1: Enter your tax family size. The term tax family refers to those in your home that are utilizing the same tax return, such as your spouse.

Line 2a: This is where you place your modified AGI. A worksheet is provided to you to help you get the correct amount.

Line 2b: This line is for your dependents combined Modified AGI. Again, the IRS provides you with a convenient worksheet to get you the right amount.

Line 3: Take the amounts entered on lines 2a and 2b, add them. If the resulting amount is less than zero, enter “0” on line 3.

Line 4: For this one, you’ll need IRS table 1-1, 1-2, or 1-3. First, find your state and check its box. Look at the aforementioned tables and enter the amount from the table. For instance, if you reside in Alaska, look for that state on the tables. If the size of your tax family is 6, then enter $43,250.

Line 5: Enter your household income here. You’ll need to use the worksheet, as you’ll be entering the household income as a percentage of the Federal Poverty Line.

Line 6: Take a look at line 5. If the amount entered on line 5 is at least 100 percent but still under 400 percent, then you are to check the “No” box. If you checked “No,” it’s time to move to line 7.

If the number entered on line 5 is under 100 percent, you need to check to see if you even qualify for the PTC. You do this by looking at the ‘Household income below 100 percent of the federal poverty line. If the number entered on line 5 is 401 percent, you cannot claim the PTC. As such, you are to check the “Yes” box and follow the instructions given with regards to repaying any APTC.

Line 7; For line 7, you’ll need to take a look at Table 2 and the amount on line 5. Take the number entered on line 5, and enter the decimal number found in Table 2. This is your contribution amount. For example, if the number on line 5 is 175, then the number you enter on line 7 is 0.00531.

Line 8a: For line 8a, you are to take the amount in line 3 and multiply it by the amount found in line 7.

Line 8b: Here, take the number in 8a and divide it by 12.0. Enter this number on line 8b.

Part II— Premium Tax Credit Claim and Reconciliation of Advance Payment of Premium Tax Credit

Line 9: Here, you’re asked if you are “allocating policy amounts with another taxpayer” or do you plan on using the alternative calculation regarding your year of marriage.

If you answer “Yes” to either of the above, you must click the “Yes” box and go to Part IV Allocation of Policy Amounts of Part V, Alternative Calculation for Year of Marriage. If you answered “No,” Then go to line 10.

Now, this is where it might get tricky for some. You’ll need to be on your toes for this part as there is much to consider before moving to each new line.

Line 10: For line 10, it’s crucial that you follow the instructions given. This will determine whether you’ll check the “Yes” or “No” box. In this case, you are asked if you were enrolled in an approved health care plan for less than 12 months. If not, check “No” and move to lines 12 to 23. In other words, if you had health care coverage from an approved or “Marketplace” health care provider for the entire year, enter your yearly totals in line 11. If not, you’ll need to use lines 12 to 23.

Part II ends with line 24. Pay attention here because you’ll have three crucial amounts to enter.

Line 24: This is where you’ll place the total PTC amount.

Line 25: This is where you’ll enter that APTC amount.

Line 26: This line holds the net PTC

Part III—Repayment of Excess Advance Payment of the Premium Tax Credit

Congratulations, you’ve made it to Part III. Go and grab a cup of coffee, have a snack, and we’ll start in on Part III, beginning with line 27.

Line 27: Here, you are to subtract line 24 from line 25 if line 25 is more.

Line 28. Read the instructions for Line 28 carefully, as this is where you place your repayment limitation.

Line 29: This line is reserved for the “excess advance premium tax credit repayment”.

Well done! You’ve completed Part III of your Form 8962. Before we move on, know that when it comes to Part IV, you may not be required to fill it out. Part IV is reserved for Shared Policy Allocations. Shared policy allocation refers to a policy that can be shared between several taxpayers. Pay attention here when answering the questions, especially if you have gone through a change in marital status.

As for Part V, the only people who need to fill that out are couples who got married within that same tax year.

IMPORTANT: Changes to the Premium Tax Credit Due to H.R. 1319: The American Rescue Plan Act (ARPA) of 2021

If you do not have a tax preparer, you might have missed this when the filing season rolls around. The American Rescue Plan Act of 2021 was enabled to help Americans hurt by the pandemic. Here (https://www.irs.gov/newsroom/more-details-about-changes-for-taxpayers-who-received-advance-payments-of-the-2020-premium-tax-credit) is a detailed rundown of the changes and how they impact taxpayers who received the advanced payments. In short, the ARPA makes it, so any taxpayers that received extra 2020 APTC payments do not have to repay them. Also, the IRS stated that for the 2020 tax year, those with an excess APTC for 2020 don’t have to fill the form 8962. These changes are probably reflected on the current 8962 form, but the information on the changes is here if necessary.

Tips & Warnings for IRS Form 8962

  • Remember that you’ll need to fill out Form 1095-A
  • Print legibly
  • Provide current and correct information
  • Use the IRS tables when necessary
  • Be truthful in all answers
  • Taxes aren’t easy, so employ the help of a professional tax preparer if necessary
  • If you need extra time, apply for an extension using Form 4868

FAQs

What happens if I don’t file form 8962?

If you file your federal tax return but do not include form 8962, it’s known as a “failure to reconcile”. If this occurs, you won’t be able to apply for a PTC the following year. Remember, any year you get an APTC, you must include form 8962 always.

How do I get my IRS form 8962?

Form 8962 will be present in the PDF of your tax return. But only if you entered form 1095-A in the Health Insurance area of your tax return. You can also visit the IRS.gov website for a PDF copy here, https://www.irs.gov/pub/irs-pdf/f8962.pdf.

What is the purpose of IRS form 8962?

According to the irs.gov website, you are to “advanceable, refundable tax credit designed to help eligible individuals and families with low or moderate income afford health insurance.” https://www.thestreet.com/personal-finance/taxes/how-does-obamacare-affect-my-tax-return-the-premium-tax-credit-13054239) Use Form 8962 to figure the amount of your premium tax credit (PTC) and reconcile it with advance payment of the premium tax credit (APTC).”

How does form 8962 affect tax return?

If you receive to pay back, that will decrease your refund or increase the amount due. An Additional credit bumps up your refund amount or may decrease your balance due.

Do I need to fill out Form 8962 Part 4?

This depends. The only way to know is to carefully answer all of the questions. Part IV is for Shared Policy Allocations only. Shared policy allocation concerns a policy that can be shared between several taxpayers…

Final Thoughts

There you have it, a brief journey into the world of Form 8962. That may sound a bit dramatic, but in all seriousness, Form 8962 has been known to trip up a few filers from time to time, so if you feel confused by the form, don’t be because you’re not alone. While this article can only be considered an introduction to the form, know that IRS.gov has plenty of literature that’s designed to assist you in filling out your forms. Pay attention to the questions, use the worksheet areas the IRS provides you for each form, answer the questions truthfully as possible, and you should be good to go. If you’re still confused, then, by all means, contact a professional tax preparer.