When a taxpayer enrolls in health insurance through Healthcare.gov or a state health insurance exchange, they’ll receive Form 1095-A, a Health Insurance Marketplace Statement. All of their health insurance costs and coverage are reported on the 1095-A, along with any Affordable Health Act subsidies that they received.
At the end of the year, they need to submit Form 8962 to reconcile that credit with their actual income. If they underestimated their income, they might need to pay some of that healthcare subsidy back. If they overestimated their income, they might be entitled to more of a credit. That calculation occurs on Form 8962.
If you received an insurance subsidy through the health insurance marketplace and do not file Form 8962, then the IRS will demand that you send Form 8962 to them. They’ll delay your refund until you send it, too. Form 8962 isn’t too hard to fill out with the help of tax preparation software – but if you forget to report your subsidy and then try to do Form 8962 by hand, it can be a difficult form to complete.
The good news is that the IRS E-filing system is finally catching up with this problem. In 2022, the IRS started rejecting returns that are missing Form 1095-A.
There are many taxpayers who purchased health insurance through the marketplace, but did not receive the Advance Premium Tax Credit. Some of them are eligible for that subsidy and could claim it on their tax return. In order to do that, they too would need to fill out Form 8962. Unfortunately, the IRS isn’t rushing out to remind taxpayers to check their qualifications for these unclaimed subsidies.
