ACA, Non-Custodial Parent, Form 8332

[GraceNY]

I have not seen this addressed specifically.

 

H and W divorced for several years now.  They have joint custody.  H gets dependent child © in odd years and W gets dependent in even years.

 

I am doing W's 2014 return.  She is claiming C. I have the Form 8332, signed by H releasing claim of exemption.

 

W did not have insurance where she worked so she purchased a plan on the NYS Marketplace Exchange.  Coverage is only for her.  She got a subsidy (Advanced Premium Tax Credit)

 

H has insurance through his employer and he covers the dependent child on his plan.

 

First, I did the tax return without the dependent, C.  Filled out the 8962 and it resulted in an Excess Advance Premium Tax Credit REPAYMENT of $99.

 

Then, I put the dependent, C, on the return and it resulted in $345 Net Premium Tax CREDIT..

 

I reviewed my input thoroughly and then compared the 2 8962's( side-by-side ).  When Line 1 (Family Size) went from 1 to 2 it changed the Federal Poverty Level (FPL), and the Household Income as a Percentage of FPL and thus the rest of the calculations.  All of which I understand.  I can follow the calculations. 

 

What I was wrestling with was the fact that W getting a better outcome on the return that includes the dependent child, C, when the child did not live with W.  She is the non-custodial parent.  And, it all came down to definitions.  "Family Size" on line 1 is defined as the number of exemptions from F-1040, line 6d.  You can't change the number, it is what it is. 

 

Now, this would have been a completely different outcome if the custodial parent, H, had also purchased a plan through the Marketplace for himself and the dependent child, C.  Then Part 4 (Shared Policy Allocation) of the Form 8962 would have been completed in order to allocate the Premium Tax Credit between parents.

 

Am I missing anything?  You know the old adage, "if it sounds too good to be true, it probably is."

 

Also, in my research, I came across IRS PUB 5187 which specifically deals with ACA and is written mainly for taxpayers, but I found that it's also a good reference for tax preparers.  Page 11 deals with the tax credit.  And, according to what I read there it doesn't sound like the taxpayer, the Wife in my case,  should be getting the this extra premium tax credit I calculated.  It reads "A taxpayer is allowed a premium tax credit only for the months that a member of the taxpayer's tax family is (1) enrolled in a qualified health plan offered through the Marketplace and (2) not eligible for minimum essential health coverage (other than individual market coverage).  The taxpayer's tax family consists of the taxpayer, the taxpayer's spouse if filing jointly, and all other individuals for whom the taxpayer claims a personal exemption deduction."  The dependent child is NOT enrolled in a qualified health plan offered through the Marketplace.  He is covered under H's plan at work.  So why is W getting the extra credit?  Only because line 1 of Form 8962 is based on the number of exemptions from F-1040, line 6d.  And, remember, you can't override that entry.

 

Other thoughts on ACA households, dependents, exemptions, etc. and some pitfalls:

 

If W had been the custodial parent (with insurance through market place which included the dependent child) released the exemption via F-8832 to the non-custodial parent, H, who did not have a policy on the marketplace but rather through his employer.  Employer coverage is not eligible for Premium Tax Credit so he couldn't allocate the credit back to her via Part 4 of Form 8962.  She would have to pay back some of the subsidy/APTC.  If she plans on enrolling in Marketplace for 2016, she has to know that if she answers household information based on 2014 tax return, she could have to pay back money.

 

I have also read some conflicting info on who would be responsible for the Shared Responsibility Payment (Penalty) if the child did not have coverage.  Some say it is the taxpayer who claims the child as a dependent on the return, others say it is the parent who "qualifies" to claim the dependent, whether or not they actually claim the dependent on the tax return.  I'll have to look at the ACA section that addresses that or the relevant regs.

 

What about estranged spouses who will not cooperate with providing the necessary documentation to each other to prove coverage?

 

Lastly, heads up ATX users:  When I forget to check the box on line 61 when I have someone with full year coverage, I get a warning.  However, I did not get that warning for this return and am not sure why.  Did it have something to do with F-8962 being filled out? 

 

 

 

 

[jklcpa]

It sounds like you've been thorough in analyzing why this is happening on this return. The only thing I can think of is that the SLCSP reported on the 8962 must be only for the mother and not the mother plus child.  The 1095-A shouldn't have the child included in that figure since the coverage purchased didn't include the child, but that is the only thing that came to mind since the child is part of the "tax family" but isn't part of the "coverage family". 

 

About the warning and line 61, there were several threads posted about this earlier.  ATX only gives a warning about line 61 box not being checked when the return is totally "silent" as to the ACA, so as soon as the return includes either the form 8962 or 8965, that warning will disappear.

 

I'm not going into the other hypotheticals here. Maybe someone else will take up that challenge.