 and they came up basically with this concept that they were going to try to pre-calculate the credit and then and then and then apply it when you're paying for the health insurance and then you'll kind of shore up whether or not that credit was actually correct at the end of the year which is kind of complex but but they've been applying this concept more and more so that's a little bit of the background so I'll get into it a little bit more detail here as we go okay requirement to reconcile advance payments of the premium tax credit all right so the premium tax credit helps pay premiums for health insurance purchase from the marketplace so typically if you're in a low income situation you might basically buy insurance through the marketplace and if you buy insurance through the marketplace then you might be eligible for a tax credit now the tax credit because they want it to help people purchase the insurance upfront then then they want to basically pre-calculate the credit so in other words usually the way the credit works if you're talking about tax year 2023 you would have to go through tax year 2023 and then when you file the tax return on April 15th or whatever of 2024 you calculate the actual credit at that point in time based on the income and thresholds and whatnot of the tax year 2023 but we would like to basically pre-calculate what the credit dollar amount would be so that we can pay for the for the insurance with the credit instead of waiting till the end of the year so you can see that becomes kind of complex now because now you have to basically kind of figure out what you think the credit would be and then lower your health insurance instead of getting the money in the form of a credit they're going to take the money and pay on your behalf for the health insurance so it's kind of like they gave you the money and then you paid for it you paid the health insurance with that money but of course instead of trusting you with the money they're going to just pay the health insurance and and lower the amount of the premium when you pay for the health insurance now then what happens then at the end of the year you're going to have to see how much of a credit you got in the form of prepayments of the health insurance versus the credits that you actually should have gotten now that you know what the tax return is and see whether or not you owe more money based on that credit that you took in essence in advance okay eligible individuals may have advanced payments of premium tax credit made on their behalf directly to the insurance company so again and a lot of people when they do this they kind of think look at this my insurance is really cheap but the but the idea is not that your insurance is really cheap the idea is the price of the insurance is is what it is and then you've got a credit which means they basically get it would be like they gave you the money and then you use that money to pay down part of the insurance premium is what is is what is really happening and so at the end of the year then you have to determine whether or not that the amount of credit you got is valid based on your income levels right so if you are your family member enrolled in a health insurance through the marketplace and advance payments of the premium tax credit were made on your insurance company to reduce your monthly premium payment you must attach form eight nine six two to your return to reconcile compare the advance payment with your premium tax credit so if you got this advance payment then they're going to have to give you a form to tell you in essence what the advance payment was so then then in the tax return you're going to have to basically compare this is the advance payment that I got basically a credit in essence you got cash but not really cash you got the payment of your insurance by this credit in advance and then you're going to have to compare that to what you should have got in terms of the credit and if you overpaid the credit you would think then possibly that can have a negative impact on your taxes having a larger you know tax liability and if you underpaid then you might get more benefit in terms of possibly a refund or reduction of the tax liability so the marketplace is required to send form 1095 a so as a tax preparer if you're doing taxes and you see and you see that 1095 a you go oh no it's a marketplace situation I'm gonna I'm gonna have to deal with this comparing the the credits thing so uh by January 31st 2024 listing the advance payment and the other information you need to complete form eight nine six two so you will need form 1095 a from the marketplace complete form eight nine six two to claim the credit and to reconcile your advanced credit payments and then include form eight nine six two with your form 1040 1040 s r or form 1040 in r so health insurance coverage reporting so if you or someone in your family was an employee in 2023 the employer may be required to send you form 1095 c part two of form 1095 c shows whether your employer offered you health insurance coverage and if so information about the offer so you should receive form 1095 c by early March 2024 so you can kind of see the remnants here so obviously the credit is is to help people kind of get access to the health insurance and so on and help people that possibly can't afford the health insurance to pay for the insurance you can see kind of the remnants of the idea that if you didn't buy health insurance then we're going to hit you with with the penalties and that's part of the that's part of the the the plan that they had in place that was was heavily questioned uh as to the legitimacy of that so so you could see they wanted to have these forms to say to have proof that you had self health insurance and if you didn't possibly then being subject to uh to to penalties which some of the teeth got taken out of that meaning you know they but also note that on the state level you could possibly depend on the state you're in have a similar type of situations in terms of the state trying to require you to have uh health insurance uh so you want to be aware of that on the state level as well so this information may be relevant if you purchase health insurance covered for 2023 through the health insurance marketplace and wish to claim the premium tax credit on schedule three line nine so however you don't need to wait to receive this form to file your tax return you may rely on other information received uh from your employer if you don't wish to claim the premium tax credit for 2023 you don't need the information in part two a form 1095c for more information on who is eligible for the premium tax credit you can see the instructions for form eight nine six two so clearly the premium tax credit is generally designed for lower income individuals as a way to try to get more people to be able to afford the health insurance the idea being that if more people can get on health insurance it might actually lower health insurance and obviously it would be a benefit you know to give to get people coverage by the health insurance so generally the idea you would think would be that as your income levels rise then you're going to it's going to be less likely that you're you're going to have a phase out in terms of whether you'll be eligible for the credit or not so if you're working with lower income individuals then you would think you'd be more likely to be eligible for the credit higher individuals more likely not to be eligible for the credit would be the general thought process but you also want to keep the state implications involved or in mind as well in terms of whether or not you need documentation to prove that you had coverage throughout the entire year uh in in the event that the state tries to take some kind of action such as taxing you or penalizing you or whatever they want to call it hitting you with something uh if you don't have the right kind of evidence of health insurance