Consider protective claims for ACA-related taxes - Spidell

Consider protective claims for ACA-related taxes


The U.S. Supreme Court has agreed to hear California v. Texas (U.S. Supreme Court Docket 19-840), which addresses the constitutionality of the Affordable Care Act (ACA). If the Court holds that all, or a portion, of the ACA is unconstitutional, taxpayers may be entitled to refunds for the taxes imposed by the ACA. These include the extra 0.9% Medicare tax and the 3.8% net investment income tax that have been paid on prior year returns.

Refunds are limited to years where the statute of limitations is still open. As a result, taxpayers may want to file protective refund claims to protect their refund rights. For taxes paid on timely filed 2016 returns, these protective refund claims must be filed by July 15, 2020.

The good news is that an amended return is not required. For a refund claim to be valid, it must be in writing and signed, and it must include:

  • The taxpayer’s name, address, SSN or ITIN, and other contact information;
  • A description of the contingencies the claim is based on (in this case, the pending outcome of California v. Texas);
  • The essential nature of the claim (the refund of the extra 0.9% Medicare tax and the 3.8% net investment income tax); and
  • The specific year(s) for which a refund is sought.

Mail the protective claim to the mailing address that applies to the taxpayer for Form 1040X.

Click here to download Spidell’s sample refund claim letter for these taxpayers.

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