Relief from Advance Premium Tax Credit Repayment - Spidell

Relief from Advance Premium Tax Credit Repayment

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Message Board Relief from Advance Premium Tax Credit Repayment

This topic contains 2 replies, has 3 voices, and was last updated by Gerald Weiss 2 months, 1 week ago.

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  • #158670

    Are there any relief options available in tax year 2018 for retired taxpayers that are required to repay ALL of the health insurance premium assistance received through the Health Insurance Marketplace due to income turning out to be higher than projected?  Is there a way to go back and reduce income if the taxpayer took out an IRA distribution in 2018 which resulted in income exceeding the repayment income limits?  Please advise.  Thank you.

  • #161120
    Larry Pon

    This has been a problem since this went into effect in 2014.    There have been many articles on this topic and your situation.

    We have some angry clients who owe $15,000, $20,000 and $30,000.   The Covered CA people tell the client to only enter her info and ignore the husband’s.  Covered CA seems to apply the subsidies even when the clients do not qualify for them.  This is very frustrating.

    I tell clients to forgo the subsidy and we’ll take the Premium Tax Credit on their tax returns.   At least we know they get a nice refund instead of owing a lot of money.   Unfortunately, they like to pay nothing for their health insurance during the year and get the rude surprise at tax time.

    There have been a number of Tax Court cases on this.   The first one was a couple of years ago with your client’s fact pattern.   The Tax Court judge was sympathetic to the taxpayers’ situation, but the law is pretty clear and he could not provide any relief.   (Don’t have the cite handy, but you can look it up.)

    Here’s a recent case:

    <b><span style=”font-family: Helvetica; font-size: small;”>Taxpayer Ineligible for Premium Tax Credit after Marriage:</span></b>  In December 2014, the taxpayer purchased a health insurance policy through the Exchange after it determined she was eligible for an advance Premium Tax Credit (PTC). Beginning 1/1/15, the Exchange applied the advance PTC to her monthly insurance premium. In November 2015, the taxpayer got married. She filed a joint return with her spouse for 2015, which reflected adjusted gross income of $113,975. The IRS issued a notice of deficiency, claiming that the taxpayer’s income exceeded 400% of the amount of the federal poverty line. The taxpayer argued that she shouldn’t be required to repay the entire amount of the advance PTC because she was eligible for the credit before she got married. The Tax Court rejected this argument, holding that it couldn’t ignore the plain language of the statute to achieve what may be an equitable end. Therefore, the taxpayer was required to pay back the PTC. Timothy and Christina Fisher, TC Memo 2019-44 (Tax Ct.).

  • #161149
    Gerald Weiss

    Can try MFS if available to see if can get each MFJ taxpayers income under 400% resulting in being able to use the repayment caps rather than full repayment of the APTC.