Question

ACA Tax Credit Forgiveness

Forum|Forum|5 years ago
March 19, 2021
4 replies
0 views

I have already filed my 2020 taxes. I have not received my refund yet. I took advantage of the ACA Marketplace subsidies and I underestimated my income - so, I had to pay back the overage credits. According to the newly passed American Rescue Act, I no longer own this payback. Will I need to refile or amend my completed return? Will Turbotax help with this?

B

BillM223

The changes in the American Rescue Plan for the premium tax credit apply to tax years 2021 and 2022, not to tax year 2020. See Premium Tax Credit in the bill's text.

So you do not need to amend your 2020 tax return, but watch for changes in your 2021 tax return, that you will file in early 2022.

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W

WaynePersutteAuthor

Bill,

Several recent sources on the Internet state: "The American Rescue Plan makes significant changes to bolster the ACA and improve marketplace access and affordability by. . . Preventing taxpayers who misestimated their income in 2020 from having to repay excess premium tax credits at tax time." https://www.healthaffairs.org/do/10.1377/hblog[phone number removed]37/full/

Another source stated: "In tax year 2020, individuals receiving tax credits will not be required to reconcile premium tax credits if their annual income increases during the year." https://www.jdsupra.com/legalnews/congress-passes-american-rescue-plan-9599956/

If I understand you correctly, your view is that these recent sources are wrong?

B

BillM223

OK, you guys are all correct. What I missed in the hundreds of pages of the American Rescue Plan was that this particular section applied to 2020, not 2021. Actually, the other sections about the Premium Tax Credit in the plan apply to 2021, but I will admit that this one section didn't.

To address your other questions:

TurboTax is waiting for guidance from the IRS on how they want taxpayers and tax preparation companies to handle the repayment of the Premium Tax Credit.

Just because the law was passed doesn't meant that TurboTax and other vendors have sufficient information on how to code this. The reason there needs to be guidance is because the law does not - indeed, cannot - anticipate all contingencies (like the one below), and Congress counts on the IRS to fill in all the gaps.

So far, we are given to understand by the IRS that taxpayers should not amend their returns yet, because the IRS is considering automatically refunding these amounts (in a way similar to how they say they will refund the taxes on the first $10,200 of unemployment).

However, because any self-employed taxpayers who have Marketplace insurance can deduct excess Premium Tax Credit (PTC) as part of the Self-employed health insurance deduction on line 16 of Schedule 1 (1040), this will have to be changed as well if the excess (PTC) is no longer taxable (if it's not taxable, then it can't be deductible, either).

My point is that this is all a non-trivial exercise since there are potentially many moving parts, and that everyone needs to hold their breath and let the IRS and the tax software vendors work through this.

It's simply not possible for TurboTax to have a release date if we don't even know what the IRS wants us to do.

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R

RobertN2

BillM223,

Can you update your INITIAL comment with correct information? Your initial comment is being posted by Google right at the top of the search results for several questions related to Premium Tax Credit clawback and the American Rescue Plan. In other words, Google is showing your answer within its own results page, and it presents as being an established fact with no related discussion.

To clarify what I'm saying, many people using Google will never click through to the article, and even if they do, they may not read through all the replies down to reply #6 which has the correction.

I suggest you add an "Edit: ... applies to 2020..." right at the top of your initial comment, so that Google's algorithms pick it up, and that would allow the replies other people made to your initial comment to still make sense.

MaryM428

The IRS has not yet issued guidance for how this situation will be handled. TurboTax will work with the IRS to make sure that people who are entitled to forgiveness for the premium tax payment credit will receive the 2020 credit granted under the American Rescue Plan.

IRS American Rescue Plan

S

scurcio1

It's now April 1st. I have already filled out my taxes but I am waiting as everyone else is on the credit forgiveness before I submit my forms to the IRS. Has anyone heard anything new?

L

Loverio

Great topic. My question may be much easier to address. I had excess Premium Tax Credit and filed earlier (like one week earlier) than the announcement on the waiver on payback for excess. So, doing what I should I set up an installment agreement with the IRS. Seven months later, I am still paying the monthly installment. The IRS simply doesn't know why I am paying, and I get it. I know, I know, call them, right? Tried 300 times. If I stop it's let's grab his funds from his checking and/or at a minimum, let's levy his assets. Not a good option.

I paid for this razzmatazz support from TurboTax and realize they are as hard to get through as the IRS. Everything points to the community.

DoninGA

Employee

@Loverio See this IRS website - https://www.irs.gov/newsroom/irs-suspends-requirement-to-repay-excess-advance-payments-of-the-2020-premium-tax-credit-those-claiming-net-premium-tax-credit-must-file-form-8962

Taxpayers who have already filed their 2020 tax return and who have excess APTC for 2020 do not need to file an amended tax return or contact the IRS. The IRS will reduce the excess APTC repayment amount to zero with no further action needed by the taxpayer. The IRS will reimburse people who have already repaid any excess advance Premium Tax Credit on their 2020 tax return. Taxpayers who received a letter about a missing Form 8962 should disregard the letter if they have excess APTC for 2020. The IRS will process tax returns without Form 8962 for tax year 2020 by reducing the excess advance premium tax credit repayment amount to zero.

Call the IRS: 1-800-829-1040 hours 7 AM - 7 PM local time Monday-Friday
When calling the IRS do NOT choose the first option re: "Refund", or it will send you to an automated phone line.
So after first choosing your language, then do NOT choose Option 1 (refund info). Choose option 2 for "personal income tax" instead.
Then press 1 for "form, tax history, or payment".
Then press 3 "for all other questions."
Then press 2 "for all other questions."
- When it asks you to enter your SSN or EIN to access your account information, don't enter anything.
- After it asks twice, you will get another menu.

Press 2 for personal or individual tax questions.
Then press 4 for all other inquiries
It should then transfer you to an agent.
Or you can contact your local IRS office. See this IRS website for local IRS offices - http://www.irs.gov/uac/Contact-Your-Local-IRS-Office-1 or call 1-844-545-5640 to set up an appointment
Or you may want to contact a Taxpayer Advocate in your area. See this IRS website for Taxpayer Advocate in your area and a toll free number - http://www.irs.gov/Advocate/Local-Taxpayer-Advocate

L

Loverio

Thanks for the fast response. Sure, I understand this. I filed my 8962. I guess my point was the IRS systems, or TT were not aware of my situation when they approved the return,wasn't as the new waiver rule didn't exist. So the IRS thinks I truly owe them money. TT is saying wait, they will amend (but when?). I would have bet that in almost 8 months they would have been able to catch up (hoping) but in the meantime I still write the checks monthly.

As far as the call pattern below, I have tried that one. I passed it around as well and had no luck. Was hoping to make an appointment with my local office but get the same "because of the volume of calls please call back message).

I am hoping some other poor sap that was in the same boat and has licked this can say >>go this way, son...

Again, I truly appreciate the help!

PS. I know this is my doing, for sure. I should have adjusted my income during the year and neglected to do so. The thing is writing checks monthy wothout seeing any light at the en of the tunnel is frustrating.