A Huge Mess, Appreciate any help!

[Tax Prep by Deb]

Ok, I will try to make this as clear as I can.  I have a family that I prepared their taxes.  Husband and Wife has two children, one is a dependent on parents return, however the second is not.  The son that is not was suppose to go away to college so mom and dad included him when they enrolled for Covered California.  He was and still is working for a company that provides health insurance.  The idea behind enrolling him under them was that he planned on quitting his job to go to school and they wanted him insured.  That never happened.

The second son (who is a dependent) had a part time job and can still be claimed as a dependent on their return but he was enrolled for Medi-Cal and is not listed on their 1095-A.  It appears to me that because the other son had health insurance thru his job he is not eligibile for any premium assistance, yet he was factored on the premium assistance given to the parents.  How do I unravel this mess?

I thought about doing a policy allocation and allocating 100% to the parents and 0% to the son.  This is just for the 1095-A reconciliation, however how do I show the amount they should be paying back because he was not eligible?  Does anyone know of a way thru Covered California to get the SLCSP amount?  I feel this should be adjusted, but I haven't been able to find the info.

Any thoughts would be greatly appreciated.

[jklcpa]

Sorry, this does sound like a mess!

The nondependent son could be covered under parent's plan up to age 26 even though he was eligible for an employer's plan, and you are correct that this does mean that he wasn't eligible to receive the PTC on his insurance through a Marketplace.   Since you say that he isn't a dependent, is working, and is eligible for his own insurance, I'll assume for purposes of preparing the 8962 that this son is NOT part of the tax family, that his MAGI is not included in the household income. 

Next, you are also correct that the 1095-A amounts must be between the parents and the nondependent son under the special situation #4 reason described in the 8962 instructions. I do think you have to use a corrected amount for the SLCSP, and I don't know how to get that for someone in CA.  If you are preparing this son's return, maybe try to work out how best to allocate to minimize the tax impact of their errors.  You must be consistent in applying the allocation across all amounts for that month or months, and the percentage agreed on can be changed for other months.  I don't know how you will explain that you are using a different amount than is shown for the SLCSP amounts before allocating. I haven't had that situation. Would you attach a statement of explanation?

Lastly, for the dependent son that worked part-time, if he is required to file a return (filing for other than to recover withholding) you will have to include his MAGI on the 8962 because it sounds like he is part of the tax household. If parents do have to include his income, it may further reduce the amount of PTC they are finally allowed!!

You are right, it is a mess.  Sorry, I don't think I helped you, only confirmed that you are on the right track.

[Tax Prep by Deb]

Yes but your confirmation helps me.  You and I are in total agreement and I did includen the dependent son's income in to figure the credit and it is causing them to have to pay back.  But they are cool with this and are in the process of taking him off their insurance.