Filing taxes can sometimes be overwhelming, especially when claiming specific credits like the Premium Tax Credit. The credit helps a taxpayer cover premiums that he or she has paid for health insurance through the Health Insurance Marketplace. Below follows an overview of how to claim this credit using IRS Form 8962, step-by-step instructions to fill out the same, and how unresolved IRS tax issues may affect one’s capability to claim this vital credit. We shall look into what happens when there is an IRS audit reconsideration and how taxpayers with serious delinquent tax debt can address passport revocation.
What Is the Premium Tax Credit?
The Premium Tax Credit is a refundable credit that helps pay for health insurance coverage that you buy through the Health Insurance Marketplace. The amount of the credit varies depending on your household size and your household income as compared with the federal poverty level. If your income falls between 100 and 400 percent of the poverty level, you may qualify for this credit, which can reduce what you pay for your monthly health insurance premiums. Premium Tax Credit can be utilized in two ways for the eligible:
Advance Payment of the credit to the insurance provider to reduce your monthly premium payments.
Credit at Time of Filing: If not applied as an advance credit, it may be claimed on filing using IRS Form 8962.
Step-by-Step Process of IRS Form 8962 Completion
Here’s how to claim your Premium Tax Credit using IRS Form 8962:
Step 1: Get Your Form 1095-A
You cannot complete Form 8962 without first receiving Form 1095-A, which the Health Insurance Marketplace sends to each individual who has purchased health insurance through the marketplace. The form will contain information about the health coverage you purchased, including what your premiums cost and how much advance credit payment you have received. Make sure your information in Form 1095-A is accurate. Box errors will translate into errors on Form 8962 and may delay your refund or even problems with the IRS.
Step 2: Calculate Your Premium Tax Credit
Form 8962 will help you determine how much of the Premium Tax Credit is in your entitlement. It compares the amount of advance credit payments you received against the actual credit entitled to you by using your final income. Here is a rough breakdown of steps involved in the calculation:
- Enter your household income.
- Compare your income to the federal poverty level.
- Determine your applicable percentage—the percent of your household income that you are supposed to pay toward premiums.
- Calculate the actual premiums paid minus the amount of the advance credit payments.
Step 3: Complete Form 8962
With your 1095-A form in hand and a calculation of your premium tax credit in hand, you’re ready to start completing IRS Form 8962. The form has several parts:
Part I:
Your filing status and household income are considered basic information.
Part II:
The monthly premium amounts applied and tax credit eligibility, directly from the 1095-A form.
Part III:
Advance payments of the Premium Tax Credit are reconciled with the actual Premium Tax Credit you are eligible to claim.
Part IV:
If the payment amounts for any policy were shared with another person, for example, as a result of divorce, then the amount for each policy is accounted for here.
Part V:
This section ensures repayment of excess advance credit payments in case the individual has received more than his or her eligibility.
Step 4: Attach Form 8962 to Your Tax Return
After having filled out the form, you should then attach it to your federal tax return. If filing electronically, most tax preparation software programs are designed to guide the process through with ease and professionalism. When you use a paper return, make sure Form 8962 is attached to your 1040 form.
How Unresolved IRS Tax Issues Can Impact Claiming Premium Tax Credits
That would include unresolved IRS problems, like owing taxes. Such could impact your eligibility for Premium Tax Credits. Besides that, the IRS will reduce or offset your refund to pay your debts. You may also be flagged for unresolved tax issues, which could trigger an audit or further delay in processing your return.
If you are dealing with serious tax debt, you may want to consult with a former IRS agent or professional tax attorney that can specialize in IRS debt settlement. They will be able to walk you through the steps involved to settle your debt and may offer things like an IRS Offer and Compromise to settle your taxes in order to stop further penalties and interest from accruing.
What to Expect from an IRS Tax Audit Reconsideration
If one has gone through an audit, then disagreed with the findings and results, one may be allowed to request an IRS tax audit reconsideration. An IRS tax audit reconsideration may be obtained by a taxpayer to present additional information or dispute the findings from the audit when a mistake on the part of the IRS is believed to have taken place. On the other hand, if you are in audit or have outstanding audit issues, this situation can embroil your tax filing, including claiming the Premium Tax Credit. In this regard, the audit reconsideration will be reviewing your finances anew and thus may delay the processing of your tax return and credit claims.
Solutions of IRS Passport Revocation for Delinquent Taxpayers
If you have seriously delinquent tax debt over $55,000—including penalties and interest—the IRS may notify the State Department to revoke or deny your passport. In some taxpayers, this can be very distressing as traveling may be involved in their line of business or activity.
Delinquent taxpayers can explore a couple of avenues of resolution available for this scenario, including:
Entering into an Installment Agreement:
You are allowed to make payments in installments for your tax debt. In some cases, the IRS may agree to refrain from revocation if a payment plan is set up.
IRS Offer and Compromise:
When one can’t pay the full amount, an offer in compromise settles for less than the full amount owed. Consulting former IRS agents or tax professionals could make all the difference.
Currently Not Collectible Request:
Many a time, one is facing financial hardship at an overwhelming level. Under these circumstances, one may request that his collections be CNC status-provided whereby any collection action is stopped for a while and stalling affects one’s passport status.
Errors on Form 8962 Made During Its Filing
Form 8962 should be filed correctly to avoid delays or even fines. Some of the most frequent errors that taxpayers make during filing are the following:
- Failure to attach Form 1095-A to your tax return: You will experience delays if you fail to attach Form 1095-A to your tax returns.
- Incorrect Entry of Information in Form 8962: First, check the amount on your Form 1095-A before filling out the figures on form 8962. These amounts are used in form calculations, and failure to fill out the correct information results in miscalculations.
- Failure to Reconcile Advance Premium Credits: If an individual received advance payments for the Premium Tax Credit, then he or she must reconcile the amount on the tax return.
Conclusion
IRS Form 8962 is a necessary form to be filled out by any person desiring to claim the Premium Tax Credit, and due care should be exercised while filling out this form. Follow this guide and with the right forms and calculations, you are well on your way to claiming such credits due to you. Any outstanding IRS tax issues—audit or delinquent tax debt—affect the potential for claiming this credit. If faced with this situation, it’s a prudent idea to consult a former IRS agent or seek an IRS debt settlement or an IRS Offer and Compromise solution to sort out these issues and keep up with taxes.
