IRS Form 8962 (2018): Premium Tax Credit Guide

What IRS Form 8962 (2018) Is For

IRS Form 8962 (2018) is used to reconcile the premium tax credit with any advance payments sent to a health insurance marketplace plan during the year. The form compares your advance payments to your actual premium tax credit based on your final household income. It helps determine whether you will receive a refund, owe a fee, or simply verify that the amounts on your income tax return match the information reported on Form 1095 from the marketplace.

For a comprehensive overview of related tax documents, visit our IRS Form Help Center.

When You’d Use IRS Form 8962 (2018)

You use this form when specific events during the tax year require you to report marketplace coverage and credit amounts.

• Received Advance Payments: You would file this form when the marketplace made advance payments of the premium to your insurer, and those payments must be reconciled on your federal tax return.
• Claim the Premium Tax Credit: You would use this form to claim the premium tax credit, even if no advance payments were made during the year.
• Enrolled Through a Marketplace Plan: Include the form when you or a household member enrolled in a marketplace plan, and Form 1095 lists payments that need to be reported.
• Correcting Previously Filed Information: You would use the form when you received an updated Form 1095 or discovered incorrect amounts that affect credit eligibility or refund calculations.
• Filing Late or Amending a Return: You would attach the form when you file late or submit an amended tax return that updates tax information related to premiums and credit amounts.

Key Rules or Details for IRS Form 8962 (2018)

You must follow several vital rules when completing this form, as your eligibility and credit amount depend on the accuracy of your financial and enrollment information.

• Income Limits Determine Eligibility: You qualify for the premium tax credit only when your household income falls within the federal poverty guideline range that applies to the 2018 tax year.
• Marketplace Enrollment Requirement: You must be enrolled in a qualified health insurance marketplace plan for the year to claim or reconcile the credit on your income tax return.
• Minimum Essential Coverage Rules: You cannot claim the credit if you had access to other minimum essential coverage unless that coverage was unaffordable or failed to offer minimum value.
• Filing Status Affects Eligibility: You must file jointly if you are married, unless you qualify for an approved exception that allows separate filing without losing eligibility for the credit.
• Payment and Reporting Requirements: You must pay required premiums by the filing deadline and report household or income changes because these updates affect your final credit calculation.

Step-by-Step (High Level)

You complete this form in several stages, which calculate the credit amount and compare it with the advance payments made during the year.

1. Determine your household and income: Begin by identifying your household size and calculating your modified income to determine your federal poverty guideline percentage.
2. Find your contribution amount: You use the IRS instructions to locate your applicable contribution percentage and calculate the amount you are expected to contribute toward your health insurance premiums.
3. Calculate the Premium Tax Credit: You determine the allowable premium tax credit by comparing your required contribution to the second-lowest-cost silver plan for your area.
4. Compared to advance payments: You reconcile the credit you qualify for with the advance payments listed on Form 1095 to identify whether you owe money or are due a refund.
5. Complete and attach the form: You fill out each required line on Form 8962 and attach the completed form to your federal income tax return to ensure accurate processing.

If you need guidance on submitting an unfiled federal income tax return, explore our unfiled federal income tax return resource for step-by-step assistance.

Common Mistakes and How to Avoid Them

You can avoid many issues by reviewing common errors and confirming that each entry on the form matches the information reported by the marketplace.

• Rounding Errors: You avoid rounding problems by converting all entries to whole dollars before entering the amounts on the form and double-checking that you applied the rounding consistently.
• Wrong Annual or Monthly Use: You prevent calculation mistakes by verifying whether the form requires annual totals or monthly amounts and matching your entries to the correct lines.
• Incorrect SLCSP Amount: Reduce errors by confirming the second-lowest-cost silver plan amount with the marketplace or IRS tools and ensuring the figure matches the correct month of coverage.
• Dependent Income Confusion: You avoid misreporting by including only dependent income that requires its own tax return and omitting income from dependents who are filing solely to obtain a refund.
• Missing the Form Entirely: You prevent processing delays by attaching Form 8962 whenever advance payments were made, because the IRS requires the form to reconcile these amounts.

What Happens After You File IRS Form 8962 (2018)

After you file the form, the IRS reviews the amounts you reported and compares them with marketplace records to confirm that your premium tax credit calculation is accurate. If your actual premium tax credit is higher than your advance payments, the difference appears as a refund or lowers your tax balance. If the advance payments were higher than the amount allowed, the excess increases your tax liability and may lead to a repayment notice.

For more on verifying IRS Form 1095 information and using it to accurately complete your return, consult our IRS Form Help Center.

FAQs

What does it mean to reconcile advance payments on IRS Form 8962 (2018)?

Reconciling advance payments means comparing the advance amounts paid to the marketplace with the actual premium tax credit allowed for the year based on your final household income and filing status.

How do I find the correct SLCSP amount when completing Form 8962?

You can find the second-lowest-cost silver plan using marketplace tools or IRS instructions, and confirm that the amount matches the proper line on your form before attaching it to your return.

Does filing separately affect my eligibility for the premium tax credit?

Filing separately typically affects eligibility because the IRS requires most married taxpayers to file jointly, unless they qualify for an approved exception that allows them to claim the credit.

What should I do if I receive a letter in January requesting more details?

You review the letter carefully and provide the information requested because the IRS may need additional details to complete processing and update your federal tax return accurately.

How does Form 1095 assist when I complete Form 8962?

Form 1095 helps you verify amounts related to marketplace enrollment, premiums, and advance payments, and it supports the information you must include on the correct lines of your income tax return.

How does IRS Form 8962 affect my federal tax return?

IRS Form 8962 affects your federal tax return because it determines whether the premium tax credit increases your refund or adds to your tax balance, and the IRS uses the form to confirm that the advance payments reported by the marketplace match your final income for the year.