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Financial Planning > Tax Planning

3 ways the 8962 PPACA tax form update could drive your clients crazier

By Allison Bell

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The Internal Revenue Service (IRS) is drafting the new version of the instructions for a key piece of Patient Protection and Affordable Care Act (PPACA) paperwork, Form 8962 — and the new draft looks even more complicated than the original 2014 version.

Drafters of PPACA made the IRS the administrator and enforcer for many PPACA provisions, including the PPACA premium tax credit program.

Consumers with incomes under 400 percent of the federal poverty level, and above a cut-off that varies from state to state, can use the PPACA premium tax credit to pay for private health insurance sold through the PPACA exchange program.

Most tax credit users are getting the aid in the form of an advance premium tax credit (APTC) that helps pay the premium bills while the coverage year is still under way. 

Tax credit users are supposed to use Form 8962 to tell the IRS what kind of coverage they actually had. APTC users should use the form to determine whether they received too much APTC help, and need to pay cash to the IRS, or too little APTC help, and ought to get cash from the IRS.

The premium tax credit program came to life in January 2014, and taxpayers began filing their first 8962 forms in January 2015, when the tax return filing season for the 2014 tax year and health coverage year began.

In April, toward the end of the regular tax return filing season for 2014, H&R Block warned that 8962 filing volume seemed light, and that many tax credit users might be too confused to know how to file the form, or too disconnected from the tax system to realize that the filing requirement existed.

See also: H&R Block warns of PPACA tax filing danger

Eventually, taxpayers who rushed into tax preparation offices in April, or who filed late returns, helped close much of the apparent gap between the number of 8962 forms the IRS expected and the number it received.

See also: Last-minute filers narrow PPACA tax credit reporting gap

But, as of May 7, many premium tax credit users had still not filed their 8962s.

Now, the IRS is putting the finishing instructions on the 2015 update. The latest draft has many new and heavily revised sections, including sections informing individual taxpayers about the start of the employer 1095-C coverage reporting system and a new section that explains how Medicaid and Children’s Health Insurance Program (CHIP) coverage fit in.

For a look at some other interesting bits we found when we compared the old form with the new form, read on. 

Form 8962 instructions draft - length

1. It grew.

The 2014 edition of the form filled 15 8.5-inch by 11-inch sheets of printer paper. The version draft fills more than 17 pages of printer paper.

See also: New PPACA tax form drafts have a language all their own 

Form 8962 vignettes: Maryanne

2. The Tales of the Tax and Coverage Families have multiplied. And changed.

IRS form instruction drafters use many vignettes to try to explain how to apply the new tax credit reporting rules, and the drafters have added many new, complicated little financial soap operas to the new draft.

In a new vignette in the new draft, for example, Don gives up on his no-good employer’s lousy, unaffordable plan and strikes out to buy his own, subsidized coverage through his state’s Marketplace. He then broke free from that no-good employer and got a job with a new employer, with its own coverage, in the middle of the year. He’s just now telling the exchange about his new coverage.

The suspense in Don’s story comes from the outcome of his new APTC eligibility determination. But taxpayers who care about Don and want to know about what comes next have to read the eligibility rules in another document, IRS Publication 974.

The IRS drafters also change some returning vignettes in unexpected ways. In the original instructions, for example, Bret was married to Maryanne. He divorced her, and they left their daughter, Sophia, as a dependent with her grandfather, Mike.

In the new revision, Maryanne is gone. Bret is married to, and getting divorced from, Paulette.

The drafters fail to say what happened to Maryanne, or why Bret and whatever other women he marries do such a poor job of providing for poor Sophia.

See also: PPACA tax credit: What if you get married?

 Form 8962 instructions draft - Void box

3. The drafters have to come up with bureaucratically correct ways to point out that the current PPACA coverage situation is…functioning less than perfectly smoothly.

In one new section in the instructions draft revision, drafters introduce the concept of the “Void Box.” That’s a box at the top of the PPACA public exchange coverage reporting form, Form 1095-A.

If a taxpayer receives the form with the void box at the top of the form checked, “that means you previously received a Form 1095-A for the policy show in Part I that was sent in error,” according to the drafters. “You should not have received a Form 1095-A for the policy shown in Part I of the Form 1095-A. Do not use the information on the Form 1095-A with the void box checked or the previously received Form 1095-A to complete Form 8962.”

A taxpayer could also receive a form 1095-A with the corrected box checked. That taxpayer is supposed to be organized enough to put the old 1095-A aside and use information from the new, corrected 1095-A to fill out the Form 8962.

See also: Meet the PPACA 1095 reporting form corrections

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