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How to Calculate Monthly Advance Payment of Premium Tax Credit

The vast majority of those who have to repay the upfront overpayments will meet this balance by reducing their expected income tax refund. However, if you owe a balance beyond your refund, you should know that the IRS regularly works with taxpayers who owe amounts they can`t afford. The possibility of entering into a payment agreement for these insufficient payments is identical to the provisions relating to other tax credits. See Publication 4849, Can`t Pay the Tax You Owe? PDF for more information on how to pay your federal income tax late. An employer-sponsored plan is generally affordable if the portion of the annual premium you must pay for pure self-insurance that meets the minimum value requirement (see Question 12) does not exceed 9.5% of your household income, but this percentage is adjusted annually. For plan years that begin with: Refer to the instructions on Form 8962, Premium Tax Credit, for information on refund restrictions. Notifying the Marketplace of changes in circumstances as soon as they occur allows the Marketplace to update the information used to determine the expected amount of the premium tax credit and adjust the amount of your prepayment. This adjustment reduces the likelihood of a significant difference between your initial payments and your actual premium tax credit. Changes in circumstances that may affect the amount of your actual premium tax credit include: To be eligible for a credit amount for a given month, you must generally be enrolled in an eligible health insurance plan through the Market on the first day of that month. However, if a person enrolls in an eligible health insurance plan and registration comes into effect on the day of the person`s birth, adoption or placement for adoption or foster care, or on the effective date of a court order, the person will be considered registered on or after the first day of that month.

To estimate how changes in your situation may affect the amount of premium tax credit you can claim, read the Premium Tax Credit Change Estimator. If you have already filed a return and have an excess premium tax credit, you do not need to file an amended tax return or take any other action. The IRS will refund any excess APTC you paid on your 2020 tax return. There is no need to contact the IRS about this. These efforts to reimburse those who paid an excess APTC repayment amount for their 2020 return are ongoing and will continue throughout 2021. If your registration status is Married, the above refund limit applies to both spouses separately based on the household income reported on each tax return. If you sign up for Marketplace coverage and receive QSEHRA coverage that is affordable, you will not be entitled to a premium tax credit for your Marketplace coverage for months when QSEHRA is affordable coverage. If the QSEHRA is not affordable coverage and you receive a premium tax credit for one month in which the QSEHRA is provided to you, you must reduce your TCO for the month of the eligible monthly benefit granted to you under the QSEHRA. Notice 2017-67 PDF, Questions 65-71, provides more information on how to determine if a QSEHRA is affordable and how to calculate your premium tax credit if the QSEHRA is prohibitive. When you file your tax return, you calculate your credit and compare it to the APTC amount on Form 8962.

If your actual eligible balance on your return is less than your APTC, the difference will be deducted from your refund or added to your outstanding balance, subject to certain refund limits. If your actual authorized balance is greater than your APTC, the difference will be added to your refund or deducted from your outstanding balance. (See Question 4 for information on changes in circumstances. The actual premium tax credit for the year will differ from the prepayment amount estimated by the Market if your estimated family size or household income at the time of registration is different from the family size or household income you provide upon your return. The deeper your family size or household income deviates from the Market estimates used to calculate your initial payments, the greater the difference between your initial payments and your actual balance. Other changes in circumstances, such as marriage or divorce, can also affect the amount of your loan. If your actual eligible balance on your return is less than your advance payments, the difference will be deducted from your refund or added to your outstanding balance, subject to certain repayment limits. If your actual eligible balance is greater than your advance payments, the difference will be added to your repayment or deducted from your outstanding balance. If you purchased coverage through the Marketplace, you should receive Form 1095-A, Health Insurance Marketplace Statement from your Marketplace in early February. If this form indicates that APTC was paid on behalf of a family member, you will need to complete Form 8962, Premium Tax Credit (TCO) to reconcile these advance payments. Form 1095-A contains the information you need to complete Form 8962.

If you have any questions about the information on Form 1095-A or how to obtain Form 1095-A, you should contact your Marketplace directly. The IRS cannot answer questions about information on your Form 1095-A or missing or lost forms. Lol Spouses and dependents are not eligible for a premium tax credit for their Marketplace coverage. The provisions of section 36B provide that an employee who can enroll in an eligible employer-sponsored plan and a person who can enroll in the plan based on a relationship with the employee (a related person) are entitled to substantial minimum coverage under the employer-sponsored plan if the plan is affordable and offers minimum value. In addition, an employee and a related person are not eligible for a premium tax credit for their Marketplace coverage if they could have purchased employer-sponsored coverage that is affordable and offers minimal value. Since all three family members could have signed up for Y`s employer-sponsored coverage by enrolling the employee, and the coverage was affordable and offered minimal value, they are not eligible for a premium tax credit for their Marketplace coverage. If your coverage comes from a former employer,. B such as COBRA or retiree coverage, you can opt out of employer coverage, even if it is affordable and offers minimal value and may be eligible for the Marketplace Coverage Premium Tax Credit. For the purposes of the premium tax credit, your “family” consists of you, your spouse if you file a return together, and any other person you claim as a loved one. Your “family size” is the number of people in your “family”.

If you do not opt for advance payments, or if the Market determines that you were not entitled to advance payments at the time of registration, you must determine if you are eligible to claim the credit, as your situation has changed throughout the year. To claim a credit, you must file Form 8962 when you file your tax return for the year, which reduces the amount of taxes due on that tax return or increases your refund. The amount of the premium tax credit is generally equal to the premium of the second lowest cost money plan available on the Market that applies to your coverage family members, minus a certain percentage of your household income. However, the balance cannot be greater than the rewards of the Marketplace plan or the plans you or your family sign up for (called their sign-up rewards). Your coverage family consists of family members who are enrolled in coverage through the Marketplace and who are not eligible for non-marketplace coverage such as Medicare, Medicaid, or affordable employer-sponsored coverage. (See question 6 to find out who is in your family.) If your household income decreases or you earn a household member, you may be eligible for more upfront payments than are currently paid for you. This could reduce what you pay in monthly premiums. Also, reporting your low household income or a new family member could show that you qualify for more cost-effective Medicaid or CHIP coverage than your Marketplace plan. If APTC is created in your name or on behalf of a family member and you do not file a tax return, you are not entitled to have APTC to help fund your Marketplace health insurance coverage in the coming years. This means that you are responsible for the total cost of your monthly premiums.

If initial payments are made for you or a member of your tax family to be covered in a year other than 2020 and you do not file a tax return, you will not be eligible for initial payments in future years. This means that you are responsible for the total cost of your monthly premiums. In addition, you may be required to repay some or all of the initial payments made on your behalf or on behalf of a member of your tax family. (See Question 8 for what is included in household income.) The affordability test applies only to the portion of annual self-sufficiency premiums and does not include additional costs related to family insurance. If the employer offers multiple health insurance options, the affordability test applies to the most cost-effective option available to you that also meets the minimum value requirement. If your employer offers wellness programs (including programs based on a health factor or requiring that the wellness incentive be earned), the affordability test is based on the premium you would pay if you received the maximum discount for smoking cessation programs and did not get other discounts based on wellness programs. .

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