File it or lose it: are your clients about to lose their advance premium tax credit?

• Author: Counts, II, James C.
• Position: Taxation information

Do you have a client or know someone who received Advance Premium Tax Credits (APTC) in 2014 and have neither filed their 2014 individual tax return nor filed an extension on their 2014 return? If so, they may lose their 2015 APTC if they do not file a return and reconcile their APTCs received in 2014 with what they were entitled to receive for 2014.

As it was reported in the news when Congress was considering the Affordable Care Act (ACA), House Minority Leader Nancy Pelosi said, "We have to pass the bill so that you can find out what is in it, away from the fog of the controversy."

The More You Know

One item in the ACA not widely known is the requirement for taxpayers to reconcile the APTC they received with what they were entitled to receive. This is done when filing their individual income tax return and the reconciliation is done on Form 8962.

Per Form 8962 instructions, taxpayers must file Form 8962 with their income tax return (Form 1040, Form 1040A or Form 1040NR) if any of the following apply:

1. They are taking the Premium Tax Credits;

2. The APTC was paid for them or another individual in their tax family; or

3. The APTC was paid for an individual (including them) for whom they told the health insurance marketplace they would claim a personal exemption and neither they nor others claim a personal exemption for that individual.

   If a client in 2014 received APTC and has done one of the following then they do not have a problem;

1. Filed their 2014 individual income tax return and it has been processed;

2. Filed their 2014 individual income tax return, the IRS has some questions about the Form 8962 and is working with the taxpayer to determine the correct amount; or

3. Filed for an extension for their 2014 individual.

   If the individual has not done one of the above, then it's likely they received Letter 5591 from the IRS. The letter informs taxpayers they need to file a return and reconcile their APTC, otherwise they will lose their current and future APTCs. These taxpayers will have their APTCs stopped for not reconciling their Premium Tax Credits on Form 8962.

   The IRS does not have a date when taxpayers will lose their current APTCs as it is the health insurance marketplace, which is the federal organization that deals with medical insurance, that will deny taxpayers current APTCs and it has not announced a date.

   To Whom Does This Apply?

   The requirement to reconcile their APTCs is for all taxpayers who received APTCs. Thus, taxpayers...