What You Need To Know About Form 8962 (Easy Guide)

What You Need To Know About Form 8962 (Easy Guide)

USA taxpayers know how confusing and stressful getting your taxes in order can sometimes be, especially when you come across new forms that are unfamiliar to you. One of the forms that generates a lot of doubts is the IRS From 8962, also known as the Premium Tax Credit (PTC) form. 

But don’t worry. We will break it down for you so that, by the end of this guide, you will have a clear picture of what Form 8962 is, if you need it, how to file it, and why it’s important.

What is Form 8962?

At its core, Form 8962 is a document that helps you and the IRS determine the financial assistance you received for your health insurance. Therefore, if you purchased health insurance through the Health Insurance Marketplace and received some financial help (in the form of PTCs), this form is for you. 

Who Should Fill Out Form 8962?

Understanding who should and shouldn’t fill out Form 8962 is perhaps one of the trickiest parts of the process. And, often, where the most mistakes happen. Let’s put it simply:

You should fill out Form 8962 if:

You’ve bought health insurance through the Health Insurance Marketplace and received some financial help in the form of PTCs.

You should not fill out Form 8962 if:

You didn’t get any financial assistance in the form of PTCs.

How is the Financial Help (PTC) Calculated?

If you are required to fill out Form 8962, it’s crucial that you understand how the PTC is calculated. This will help you to submit the right information when the time comes. The amount of financial help you get is based on three main things:

  1. Your Income: How much money you make annually.
  2. Family Size: The number of people in your household.
  3. Insurance Costs: How much you pay for your health insurance.

The rule of thumb is the less you earn, the more financial help you get. 

Filling Out Form 8962: An Easy Step-by-Step Guide

When the taxpaying season begins at the end of the year, you will need to be prepared to complete Form 8962 with the updated information about your annual income, members in your household, and insurance costs. Then, you will need to compare the financial help you received with what you should have got, based on your actual yearly income.

What happens if the numbers don’t match?

If you complete the comparison of the financial help and the numbers between what you received versus what you should have got don’t match, here is what may happen:

  • You might get extra money if you received less help than you should have.
  • You might need to pay the government some money back if you got more help than you were eligible for.

Now, let’s break down how to fill out the Form into easy-to-follow steps.

Step 1: Confirm Your Eligibility

Before diving into the form, ensure you’re eligible. You should have bought insurance through the Marketplace and fall within a specific income range.

Step 2: Gather Your Information

As mentioned above, you will need updated information about your annual income, family members in your household, and insurance costs. For more information on this step, you can refer to the Form 1095-A, provided by the Health Insurance Marketplace. This document contains more in-depth information on each of these three requirements.

Step 3: Fill Out the Form

Form 8962 comprises different sections but can be counted as two main ones. The first one details your annual income, household members, and insurance costs. The second matches the financial help you received from the Health Insurance Marketplace with what you should have gotten.

Avoid These Three Common Mistakes When Filing Form 8962

Completing this Form should not represent a roadblock if you understand the process and have gathered the correct and updated information. However, many people make mistakes, especially in these three areas:

  1. Not Reporting All Income.
  2. Forgetting to Update Family Size: If your family size changes (like having a baby), update it.
  3. Mismatching PTCs: Make sure you correctly match the help you received with what you should have gotten.

Staying Up to Date With Form 8962

Keeping up with the ever-changing tax laws and forms is a must. Form 8962 hasn’t seen any major changes for the current tax year. But, the IRS is constantly tweaking tax laws and forms. Therefore, it’s important to keep an eye on the official IRS website or talk to a tax professional to ensure you have the latest information.

Domesticating the Form 8962 Beast

Form 8962 may seem daunting at first glance, and if you add that to the complicated way these things are typically explained on the IRS website, it’s even worse. However, this doesn’t have to be the case. It becomes manageable once you understand the fundamentals of Form 8962, who needs to file it, and how to do it.  

Correctly filing this Form is paramount to ensure that everyone who needs health insurance receives the right amount of support. Make sure to re-read this guide when the taxpaying season begins, and remember that, when in doubt, it’s always best to consult with a tax professional rather than filing a wrong report to the IRS. A tax professional will always be able to provide guidance tailored to your specific situation.

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