What IRS Form 8962 (2020) Is For
IRS Form 8962 (2020) is used to calculate the premium tax credit and reconcile advance credit payments made for Marketplace coverage on a federal income tax return. The form compares the monthly premium for the Marketplace plan with the second-lowest-cost silver plan to determine whether the taxpayer received the correct credit amount. It also ensures that households enrolled in a qualifying health plan accurately report premiums paid, eligibility details, and any discrepancies that affect tax liability or refund amounts.
For more support on IRS documents and premium tax credit issues, visit our IRS Form Help Center.
When You’d Use IRS Form 8962 (2020)
Taxpayers use this form when Marketplace insurance and premium tax credit issues must be addressed on a federal income tax return.
- You received advance payments of the premium tax credit: This applies when advance payments were made to help pay Marketplace premiums, and the taxpayer must reconcile those amounts with the actual premium tax credit for which they qualify.
- You want to claim a net premium tax credit: This applies when the actual premium tax credit is higher than the advance payments and the taxpayer wants to claim the difference.
- A family member had Marketplace enrollment: This applies when a spouse or dependent had Marketplace coverage and advance credits were paid on their behalf.
- You are correcting or amending previous tax years: This applies when late or amended filings are required to correct Marketplace insurance details or to include the form that was missing from the originally filed return.
You can review your tax history and confirm details with our IRS Account Transcript Service.
Key Rules or Details for IRS Form 8962 (2020)
Several vital criteria determine when taxpayers are eligible to claim or reconcile the premium tax credit on IRS Form 8962 (2020).
- Household income requirements: This rule requires the taxpayer to compare their household income to the federal poverty guidelines, as the percentage of income affects eligibility and the contribution toward the health plan premium.
- Marketplace coverage rules: This rule requires enrollment in a Marketplace plan and comparing monthly premiums with the second-lowest-cost silver plan to determine the allowable credit amount.
- Filing status rules: This rule prevents most married taxpayers from filing separately and claiming the credit unless they meet specific exceptions due to safety or hardship.
- 2020 Excess APTC Repayment Suspension: This rule removes the requirement to repay excess advance premiums for tax year 2020, allowing the IRS to adjust filed returns without requiring additional action from the taxpayer.
- Dependents and tax family rules: This rule requires taxpayers to include the modified AGI of dependents who are required to file a tax return to determine household income correctly.
Step-by-Step (High Level)
Taxpayers follow several structured steps to complete IRS Form 8962 (2020) and accurately reconcile their Marketplace insurance information.
- Gather Form 1095-A and tax documents: This step requires obtaining the Marketplace statement, which lists monthly premium amounts, enrollment details, and the cost of the silver plan SLCSP needed to complete the form.
- Calculate household income and tax family: This step requires calculating modified AGI and including dependents who must file a federal tax return to determine eligibility for the premium tax credit.
- Figure expected contribution amount: This step involves comparing household income to poverty guidelines, allowing the IRS to determine the portion of the household's income that is expected to be paid toward its health coverage.
- Compare monthly premium information: This step involves reviewing the Marketplace plan premiums and comparing them to the second-lowest-cost silver plan to determine the allowable credit for each month.
- Reconcile advance payments with the actual premium tax credit: This step involves totaling all monthly credit amounts and comparing them to advance payments to determine whether the taxpayer is eligible for a refund or has already paid enough for the year.
For fast help resolving your IRS premium tax credit or Marketplace coverage questions, start your case review today.
Common Mistakes and How to Avoid
Taxpayers often encounter errors that lead to delays or incorrect premium tax credit calculations when completing IRS Form 8962 (2020).
- Rounding errors: Taxpayers should round all amounts from Form 1095-A to whole dollars so the IRS can process the return without delays caused by mismatched figures.
- Mixing monthly and annual amounts: Taxpayers should enter annual totals only on lines that require annual amounts and avoid using them on monthly lines to prevent overstated or understated credit amounts.
- Incorrect dependent income entries: Taxpayers should include dependent income only when the dependent is required to file a federal tax return to avoid improperly inflating household income.
- Forgot to transfer totals to the tax return: Taxpayers should ensure that the correct amounts from IRS Form 8962 (2020) are assigned to Schedule 2 or Schedule 3 so the refund or repayment is accurately reflected.
- Missing Form 1095-A: Taxpayers should contact the Health Insurance Marketplace immediately if they are missing the form so they can complete the reconciliation process correctly.
What Happens After You File
After filing IRS Form 8962 (2020) with the federal income tax return, the IRS reviews the premium tax credit calculation and reconciles it with Marketplace records. If the taxpayer qualifies for additional credit, the amount increases the refund through Schedule 3, while excess advance payments for 2020 are not repaid due to special tax year relief. The IRS may issue a notice if information is missing or unclear; however, adjustments for excess advance payments occur automatically without action from the taxpayer.
FAQs
How does Form 8962 calculate the premium tax credit?
Form 8962 calculates the premium tax credit by comparing your household income to benchmark Marketplace premiums and reconciling those amounts with any advance payments you received. The form ensures that the final credit amount reported on your return is accurate.
What additional information do I need to complete IRS Form 8962 (2020)?
You need details from Form 1095-A, your modified AGI, Marketplace enrollment records, and household income information. The IRS may request additional information if any information on your return differs from the data in the Marketplace.
Do I have to include IRS Form 8962 with my federal income tax return?
You must include the form when you receive advance credit payments or want to claim a premium tax credit. The IRS reviews it with your federal income tax return to determine whether you qualify for a refund or adjustment.
What is the cost of the Silver Plan SLCSP, and why does it matter on Form 8962?
The Silver Plan SLCSP is the second-lowest-cost silver plan used as a benchmark for calculating your credit. The IRS compares this amount with your actual plan premium to figure the correct credit for each month of Marketplace coverage.
Do I need to file Form 8962 if I only had Marketplace coverage for part of the year?
Yes, you must file the form when any advance payments were made for any month of coverage, because the IRS requires a full-year reconciliation even if you were enrolled for only part of the tax year.
