IRS Will Reject E-Filed Returns Without Required Forms 8962

The IRS will reject electronically filed tax returns for 2021 that are missing a required Form 8962, Premium Tax Credit (PTC). Form 8962 reconciles advance premium tax credit (APTC) payments with the health insurance premium credit claimed on the taxpayer’s return. 

All taxpayers who claim the PTC must file Form 8962. However, it appears that the IRS will reject an e-filed return that’s missing a Form 8962 only if APTC payments were used by or on behalf of the taxpayer. 

Health Insurance Premium Tax Credit

The IRC §36B premium tax credit is a refundable tax credit that helps eligible taxpayers pay for individual or family health insurance coverage obtained through a Marketplace Exchange. This coverage includes a qualified health plan purchased on HealthCare.gov or through a State Marketplace.

To be eligible for the PTC, the taxpayer’s household income must be between 100% and 400% of the federal poverty line for a family of the same size. The taxpayer also must not be offered minimum essential coverage from an employer that is affordable and provides minimum value.

The amount of the PTC is determined on a sliding scale depending on household income and family size. The calculation of the credit is very complicated, but taxpayers who had insurance through a Marketplace Exchange at any point during 2021 should receive Form 1095-A, Health Insurance Marketplace Statement, from the Marketplace. The marketplace also sends a copy of Form 1095-A to the IRS.

Form 1095-A provides information about:

• The taxpayer’s family members who were covered by the insurance, including the periods they were covered;
• The premiums for coverage for each month during the year;
• The monthly premium for the second lowest cost silver plan (SLCSP) that is used to compute the taxpayer’s PTC; and
• Any APTC used to pay the taxpayer’s insurance premiums.

Advance Premium Tax Credit

The APTC pays all or a portion of the taxpayer’s estimated PTC directly to the insurer. Thus, it reduces the taxpayer’s out-of-pocket expense for the insurance premiums. The APTC is based on the Marketplace’s estimate of the PTC the taxpayer will be able to claim for the year. The taxpayer chooses how much, if any, of this amount to apply toward the insurance premiums.

If the PTC is more than the APTC, the difference is a refundable credit. However, if the PTC is less than the APTC, the difference may increase the taxpayer’s income tax liability. 

The taxpayer must use Form 8962 to reconcile the APTC and the final PTC determined for the year. Taxpayers must file Form 8962 even if they were covered by Marketplace insurance for less than all of 2021, or if they terminated coverage at the end of 2021.

How to Fix a Missing Form 8962

If the taxpayer’s e-filed return does not include a required Form 8962, the e-filing software should notify the taxpayer that the return was rejected. The software should also explain what the taxpayer must do to refile a complete return. 

To correct the error, the taxpayer must refile the return and attach Form 8962, or a written explanation for its absence. The taxpayer should also review health insurance records, including Form 1095-A, before refiling the complete return with Form 8962 attached.

This is the first year the IRS has rejected e-filed returns that are missing Form 8962. In prior years, the IRS corresponded with the taxpayer to request the missing Form 8962 or an explanation for its absence. This delayed the processing of the taxpayer’s return.

The IRS will continue to correspond with taxpayers who file a paper return without attaching the required Form 8962. The IRS may also correspond with taxpayers when more information is needed concerning the explanation for the missing Form 8962.