Obamacare Form 1095-A

Technical topics regarding tax preparation.
#1
Posts:
749
Joined:
15-May-2014 12:26pm
Location:
USA
Taxpayer's Obamacare policy includes his daughter on it. Last year, his daughter started working and I know her income has to be included in order to calculate the premium tax credit on the tax return.

If I have remember correctly, they can choose whether the Form 1095-A is to be reported in the parent's tax return or to be reported in the daughter's tax return. And they can make the decision based on which way is more beneficial to them tax-wise. Is my memory correct?
 

#2
EZTAX  
Posts:
1608
Joined:
24-Apr-2014 6:48pm
Location:
California
Are they claiming the daughter as a dependent?
 

#3
Posts:
749
Joined:
15-May-2014 12:26pm
Location:
USA
EZTAX wrote:Are they claiming the daughter as a dependent?


No, the daughter has graduated in 2016 and worked in 2017. So the taxpayer cannot claim her in 2017.
 

#4
Posts:
749
Joined:
15-May-2014 12:26pm
Location:
USA
I have just run the numbers.

Parents tax return has a AGI of about $40,000. Daughter's tax return has a AGI of about $12,000.

If 100% of everything is allocated to the parents' tax return, they need to repay $400 of the advance premium tax credit.

But if 100% of everything is allocated to the daughter's tax return, daughter has a premium tax credit refund of $1,700 and parents has no advance premium tax credit to repay.

It is combined difference of $2,100 there just by simply allocating everything to the daughter's tax return. That seems to be too good to be true.

Have I missed anything or possibly done something wrong?
 

#5
EZTAX  
Posts:
1608
Joined:
24-Apr-2014 6:48pm
Location:
California
I have found no definitive guidance on this but we have done that for two clients. Both received notices from the IRS because they could not seem to understand the allocation. We replied and are still waiting for closure. Warn the client and go for it.
 

#6
Posts:
749
Joined:
15-May-2014 12:26pm
Location:
USA
Does anyone else have an opinion or know of a 'safe' way to handle the situation?

Client is obviously pushing to allocate everything to the daughter. But I am very hesitated and feel very uncomfortable to do that since it gives the impression that we are manipulating the numbers even though the manipulation seems to be allowed by the rules.

That brings up the main question: Why would they create such a loophole for the taxpayers to manipulate the numbers? The ACA rules have been around for like 5 years and I am sure they have known about this loophole already. If that is the case, why nothing has been done about it?
 

#7
Doug M  
Posts:
3558
Joined:
22-Apr-2014 1:09pm
Location:
Oregon
I always thought that the income of the household has to be at least 100% of federal poverty level to obtain the PTC. Sec. 36B(d)(2). I don't very much of this, so help me out here.

It appears daughter is right at the federal poverty level of $12,060.
 

#8
EZTAX  
Posts:
1608
Joined:
24-Apr-2014 6:48pm
Location:
California
Here is a discussion from last year:

viewtopic.php?f=8&t=9520
 

#9
Doug M  
Posts:
3558
Joined:
22-Apr-2014 1:09pm
Location:
Oregon
pages 29-39 of pub 974 has many examples of allocating premiums between two or more parties. Most is divorce related. There is an example on page 39 of father and two sons.
 


Return to Taxation



Who is online

Users browsing this forum: BestQuestion, CaptCook, ChrisGCPA, Coddington, deniz, dsocpa, eric1032, Google [Bot], Google Adsense [Bot], ManVsTax, MAPCPA60, Nightsnorkeler, NorthCAEA, sjrcpa, zl28 and 184 guests