Form 8962 - 2014 Tax Year Checklist
Premium Tax Credit Reconciliation
Purpose
Form 8962 reconciles advance Premium Tax Credit payments received during the 2014 tax year with the final credit allowed based on household income, family size, and filing status under the Affordable Care Act. It applies only to taxpayers who enrolled in a Health Insurance Marketplace plan and received Form 1095-A.
The 2014 tax year represents the first full year of mandatory reconciliation under Code Section 36B, using federal poverty level thresholds capped at four hundred percent. The form determines whether an additional tax credit is allowed or if excess advance payments must be repaid on the tax return.
Completion Steps
Step 1: Determine family size for Premium Tax Credit purposes
Determine family size using the number of personal exemptions claimed on the 2014 tax return. Family size is based on the tax family, which generally includes the taxpayer, their spouse (if filing jointly), and all dependents claimed as such.
The family size figure determines which federal poverty line table applies and directly affects eligibility for the Premium Tax Credit. Alternative family size calculations are not permitted unless a year-end marriage election applies.
Important note: If no personal exemption is claimed for the taxpayer, but the Marketplace application indicated one would be declared, special rules in Publication 974 apply.
Step 2: Calculate modified adjusted gross income
Calculate modified adjusted gross income using the 2014 definition specific to IRS Form 8962. Modified AGI equals adjusted gross income plus tax-exempt interest, excluding foreign earned income, and the non-taxable portion of Social Security benefits.
Worksheet 1-1 in the 2014 instructions is required to compute this amount accurately. The dependents' modified AGI is calculated separately and is included only when the dependent is required to file a return.
Exclusion: Do not include dependent income when the dependent files solely to claim a refund of withholding or estimated tax payments.
Step 3: Combine household income amounts
Add the taxpayer's modified AGI and required dependent modified AGI amounts to determine total household income. This combined figure is used exclusively for Premium Tax Credit calculations.
If the combined amount is less than zero, enter zero as household income. This step establishes the income base for comparison to the federal poverty level.
Step 4: Select the correct federal poverty table
Select the 2014 federal poverty table based on the state of residence during the tax year. Separate tables apply for Alaska, Hawaii, the remaining states, and the District of Columbia.
Use the table with the higher dollar amount if the residence changed between applicable states or if spouses lived in different locations. An incorrect table selection results in invalid Premium Tax Credit calculations.
Step 5: Compute household income as a percentage of poverty
Divide household income by the applicable federal poverty line and apply the 2014 rounding rules. The resulting percentage determines both eligibility and repayment limitations.
Percentages below 100 percent and at or above 400 percent trigger special rules under the 2014 guidance. A percentage of four hundred or more eliminates Premium Tax Credit eligibility.
Important note: Taxpayers at or above 400% of the poverty level must repay the full advance payment with no statutory cap.
Step 6: Locate the applicable percentage from the 2014 table
Using the poverty percentage, locate the applicable percentage in the 2014 Premium Tax Credit table. This percentage represents the expected household contribution toward health insurance premiums.
The applicable percentage table is unique to 2014 and differs from later tax years. Using a table from a previous year yields incorrect results.
Step 7: Calculate annual and monthly contribution amounts
Multiply household income by the applicable percentage to determine the annual contribution amount. Divide the yearly contribution by twelve to compute the monthly contribution.
These figures represent the expected cost of coverage based on the second-lowest-cost silver plan. Alternative marriage calculations may replace the standard monthly amount for specific months.
Step 8: Determine whether the annual or the monthly calculation applies
Use the yearly calculation method only if coverage, premiums, and benchmark plan amounts were unchanged for all twelve months. Any midyear change requires monthly reconciliation.
Monthly calculations are mandatory when enrollment changes, premium adjustments occur, or coverage gaps exist. Credits are disallowed for months with unpaid required premiums.
Exclusion: A monthly credit is not allowed if required premiums were unpaid by the return due date.
Step 9: Reconcile allowed credit with advance payments
Compare the total allowed Premium Tax Credit to advance payments received. Annual filers reconcile using Line 11, while monthly filers total Lines 12 through 23.
If the allowed credit exceeds advance payments, the difference is claimed as a refundable tax credit. If advance payments exceed the allowed credit limit, repayment is required.
Step 10: Apply repayment limitation rules
When advance payments exceed the allowed credit, calculate the excess advance repayment. Use the 2014 repayment limitation table based on filing status and income percentage.
Repayment is capped unless the household income equals or exceeds 400% of the poverty level. The final repayment amount increases tax liability on the return.
Important note: No repayment cap applies at four times the poverty level or higher.
Step 11: Complete shared policy allocation if required
Complete shared policy allocation when a Marketplace policy covers individuals from different tax families. Allocation applies when divorce, separation, or mixed-family enrollment occurred.
Allocated percentages must total 100% for each policy. Monthly amounts are adjusted before calculating allowed credits.
Step 12: Apply alternative marriage calculation when eligible
Elect the alternative marriage calculation when marriage occurred during 2014 and advance payments were made before marriage. This option may reduce repayment exposure.
The election applies only to monthly calculations and replaces standard contribution amounts for eligible months. It cannot be used with the annual calculation method.
Exclusion: The alternative marriage calculation does not apply when using the annual reconciliation method.
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This checklist is for educational purposes only and does not constitute tax or legal advice. Always review official IRS instructions and consult a qualified professional for guidance.
