I have a new client who’s previous accounting firm had allowed them a Shared Policy Allocation of 0% to Parents and 100% to the Nondependent Child:2022 details:Covered Individuals: Parents & 2 Children (1 is a dependent and 1 nondependent)1095-A issued to ParentsParents household income is above the 400% federal poverty lineParent would have had a large Excess Advance Premium Tax Credit Repayment due on their tax return if 100% was allocated to them; however, the preparer allocated 100% to the nondependent child and 0% to the parents. This created a PTC Credit on the nondependent tax return and ultimately a refund.If I am reading the Instructions properly, it states that if both filers agree to a specific allocation, that is acceptable. The scenario above just seems too good to be true. A possible red flag? I am trying to determine if this is legal.I really appreciate anyone's advice or suggestions on this. Thank you so much!

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Question

Form 1095-A Shared Policy Allocation Loophole

Forum|Forum|1 year ago
October 11, 2024
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I have a new client who’s previous accounting firm had allowed them a Shared Policy Allocation of 0% to Parents and 100% to the Nondependent Child:

2022 details:

Covered Individuals: Parents & 2 Children (1 is a dependent and 1 nondependent)
1095-A issued to Parents
Parents household income is above the 400% federal poverty line
Parent would have had a large Excess Advance Premium Tax Credit Repayment due on their tax return if 100% was allocated to them; however, the preparer allocated 100% to the nondependent child and 0% to the parents. This created a PTC Credit on the nondependent tax return and ultimately a refund.

If I am reading the Instructions properly, it states that if both filers agree to a specific allocation, that is acceptable. The scenario above just seems too good to be true. A possible red flag? I am trying to determine if this is legal.

I really appreciate anyone's advice or suggestions on this. Thank you so much!