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Lev
Lev, Tax Advisor
Category: Tax
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Experience:  Taxes, Immigration, Labor Relations
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Premium Tax Credit Question: Parents do not claim child, but

Customer Question

Premium Tax Credit Question:
Parents do not claim child, but has the 24 year old child covered on their market place insurance and pay all the premiums.
The child's original return did not include a premium tax credit, but the IRS kicked back the return because they said it should have a 1095A. Now we are adding the information from the 1095A that is in the mother's name, but has the child listed as a covered individual and the tax program is giving the child a huge premium tax credit because his income is so low.
My question is: Does the child get the premium tax credit even though the parents pay the premium?
Submitted: 5 months ago.
Category: Tax
Expert:  Lev replied 5 months ago.

The insurance payments and advance PTC must be allocated on parents tax return.
Then - the child will use allocated portion on his/her tax return.

Also whether the child is eligible for the PTC is determined on that tax return and advance PTC is re-conciliated.

The child may be eligible for PTC regardless if premiums were paid by parents.

Customer: replied 5 months ago.

I don't understand all that you are saying.

Also whether the child is eligible for the PTC is determined on that tax return and advance PTC is re-conciliated. - What do you mean by THAT return - (Parent's return or the Child's return??) I think you mean child, but not sure.

Expert:  Lev replied 5 months ago.

If the child files SEPARATE tax return - eligibility for for PTC is determined on the tax return which is prepared by the child.

Each taxpayer determines his/her own eligibility for PTC.

Expert:  Lev replied 5 months ago.

Regarding allocations.

As parents receive 1095A which includes the child and for whatever reason - they do NOT claim the child as a dependent - parents file form 8962 Part IV Shared Policy Allocation

and calculate the amount ALLOCATED to the child.

The child will use these ALLOCATED amounts on his/her tax return - and will reconcile allocated advance PTC.

Rules for allocating are in IRS publication 974

https://www.irs.gov/pub/irs-pdf/p974.pdf

So - first step - parents file their tax return - and allocate premiums and advance PTC to the child

Then - parents will determine their PTC eligibility and reconcile advance PTC allocated to them.

After that the child will be able to prepare his/her tax return - will determine PTC eligibility (regardless if premiums paid by parents - but will use amounts allocated to the child)

And finally - the child will reconcile advance PTC allocated to the child.

Questions?

Expert:  Lev replied 5 months ago.

.

Customer: replied 5 months ago.

Is it required to allocate the PTC between the parents and the child or can the parent take all of the credit?

Expert:  Lev replied 5 months ago.

Parents may NOT claim PTC for the child if they do not claim that child as a dependent.

Regarding allocations - parents may choose to allocate 100% of premium and 100% of the advance PTC to themselves and correspondingly - allocate zero to the child - but that must be clearly indicated on form 8962 included with parent's tax return.

Customer: replied 5 months ago.

Lev, I haven't forgot about you.

I am still working this issue and may have more questions, that is why I am leaving it open