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Lev
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 28084
Experience:  Taxes, Immigration, Labor Relations
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I'm desperately trying to help my friend. I have a Ph.D.

Customer Question

Hello, I'm desperately trying to help my friend. I have a Ph.D. in Finance but NO experience with this Obama Care quagmire. He's the detail. My friend has been claiming her adult son as a dependent for two years (he's penniless and got divorced in early 2015). But his wife had enrolled herself and him in the Marketplace health insurance coverage in late 2013. She continued working but lost her job and all last year they lived (divorced but still friends and co-parenting in the same house which my friend pays for) on my friend's generosity. She did support her son and claimed him but didn't understand the 1095-A and 8962 mess as if anyone does.
Shes has just received a letter from the IRS stating that someone she claimed as a dependent (her son) was enrolled in the marketplace insurance and they need a 1095-A from her to adjust or settle the subsidy payment, or whatever, in order for her to claim the 8962 premium advanced tax credit? Sorry to be obtuse but I know nothing about this.
Since she never paid anything and since her son was covered already (he and his wife are terrible in terms of not keeping documents or being responsible, to be honest, and cannot even find the forms), should she just amend her 2014 and 2015 returns and say she was unaware of all the Obama Care rulings and needs to remove her son from her tax return? She is on Medicare as is her husband.
To further exacerbate the situation her son and his (ex-wife now) still received the insurance and a huge subsidy for it but had no income for 10 months of 2015. What do they do? And they're legally divorced so they can't get coverage together, obviously.
Thank you. I know this is complex but I will pay well. Please help. My poor friend is hysterical and her husband is ill, so is the last thing she needs to deal with.
Submitted: 8 months ago.
Category: Tax
Expert:  Lev replied 8 months ago.
The issue is mainly with the subsidy...That is not actual subsidy - but an advance payment of health insurance premium tax credit (PTC)That is - the taxpayer might be eligible to claim a premium tax credit.Eligibility in part is based on income level and is calculated on the tax return.However when the taxpayer applies for the health insurance via teh Marketplace - he/she may choose either to advance PTC OR the full amount of PTC will be applied on the tax return.Because there is no full information about future income (and that is hard to predict) - the advance PTC is calculated based on estimated income.So when the tax return eventually is prepared - and the exact amount of PTC is calculated - there will be reconciliation - and depending on circumstances - there will be additional PTC or a part of the advance payment will be paid back..In your situation - if the dependent was covered and the advance PTC was paid out on that dependent - that must be on the tax return.So far - your friend will need to communicate with the IRS and and find out the form 1095A that was issued and use it for tax preparation.
Expert:  Kent-cssm replied 8 months ago.
Hello,
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Expert:  Lev replied 8 months ago.
In your situation - if the dependent was covered and the advance PTC was paid out on that dependent - that must be on the tax return.So far - your friend will need to communicate with the IRS and and find out the form 1095A that was issued and use it for tax preparation.

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