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November 25, 2020

Don’t Let Delays in IRS Processing Impact Your Advance Payments of the Premium Tax Credit to Help Pay for Your Health Insurance

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If you are a recipient of Advance Payments of the Premium Tax Credit (APTC) and:

  • you received a warning notice from your Marketplace telling you you’re in jeopardy of losing APTC benefits next year;
  • your 2019 income tax return has not yet been processed by the IRS; or
  • you have received notification from the IRS about your Form 8962.

You should self-attest on your Marketplace’s website to show that you have complied with your tax filing obligations for tax year 2019.  If you do not complete the self-attestation by the end of the open enrollment period (December 15 for the federal Marketplace), you could be in jeopardy of losing your APTC starting in January 2021.

Individuals Should Self-Attest Now to Prevent Losing Advanced Payments of the Premium Tax Credit to Buy Health Insurance:

  • Taxpayers should self-attest to continue receiving APTC uninterrupted until the IRS provides the necessary information to the Marketplace in the spring.
  • Self-attestation can be completed by logging onto your particular Marketplace and following instructions there.

 
The Premium Tax Credit (PTC) helps eligible individuals and families with low or moderate incomes afford health insurance purchased through the Health Insurance Marketplace, also known as the Exchange.  When you enroll in the Marketplace for insurance, you can choose to receive the PTC in advance throughout the year to subsidize the monthly cost of your insurance.  Having the monthly insurance premiums reduced by the APTC may be the difference between affording insurance or going without insurance for individuals or their families.

By the end of the open enrollment period (typically December 15), the Marketplace needs to know which recipients of the APTC have (1) complied with the requirement to file a tax return and (2) reconciled the APTC they received with what they should have received.  Completion of this two-pronged reconciliation process enables the Marketplace to provide APTC to eligible individuals by January 1 of the following year.

To self-attest, you should log into your Marketplace account and check the box indicating that you’ve reconciled your advance payments of the premium tax credit.

 
Taxpayers use IRS Form 8962, Premium Tax Credit (PTC), to show their APTC reconciliation to the IRS.  If a taxpayer fails to attach Form 8962 to his or her tax return, or if the amounts shown on Form 8962 do not match information the IRS received, the IRS sends the taxpayer a Letter 12C requesting more information.  For tax year 2019, the IRS issued more than 1.8 million such letters, asking taxpayers to respond by mail or by fax.  However, due to challenges imposed by the COVID-19 pandemic (including office closures and reduced staffing), the IRS has fallen behind in processing its correspondence this year, with three million pieces of mail still unopened, approximately one million returns waiting to be processed and approximately 6.8 million individual returns  in process.  As a result, the information the IRS is reporting to the Marketplace may be inaccurate or incomplete because the IRS has not yet processed the taxpayer’s 2019 tax return or taxpayer correspondence replying to Letter 12C.

The consequence of IRS’s failure to report all of the information a taxpayer may have provided to the IRS – the tax return and the response to the Letter 12C – is that the taxpayer may lose the APTC temporarily or for the entirety of 2021, even though the taxpayer did everything the IRS requested.  The IRS Commissioner recently testified (see 1:13:36 mark) that the IRS is aware of the potential impact the backlog in correspondence may have on taxpayers’ ability to continue receiving the APTC and agreed to look into the issue.


What You Can Do to Ensure You Do Not Have a Lapse in Receiving the APTC

Taxpayers who are at risk should act now to prevent any disruption of the APTC.  Taxpayers who have received correspondence warning that they are in jeopardy of losing APTC benefits should self-attest by logging into the Marketplace where they purchased their health insurance coverage (www.healthcare.gov, or a state-run exchange).  To self-attest, taxpayers need to check the box on the online enrollment stating their 2019 income estimate has been reconciled with their filed 2019 tax return — even if the IRS has not processed it yet.

Taxpayers who complete the self-attestation will continue to receive the APTC while the Marketplace verifies the taxpayers’ tax records with the IRS.  Taxpayers who fail to self-attest may lose their APTC benefits and must pay the full premium or lose insurance coverage if they cannot afford it without the subsidy.  Even if taxpayers responded to the IRS Letter 12C, they may have to pay the full health insurance premium until their marketplace receives confirmation from the IRS that the taxpayer is in compliance, at which point the APTC may begin to subsidize insurance costs for the upcoming months.

Timely self-attestation may preserve your APTC subsidy in 2021.

Taxpayer Advocate Service

TAS case receipts are often a good barometer of the impact on taxpayers.  From October 1 through November 14, 2020, TAS received over 3,000 premium tax credit cases, which is 20 times the number of cases we received during the same period last year.  Many of these cases involve taxpayers who have attempted to respond to an IRS letter requesting more information to complete their APTC reconciliation.

TAS has been working with the IRS to explore options to mitigate the impact on taxpayers, but the volume of APTC-related work from TAS has far exceeded the IRS’s capacity to handle it.  As a result, some taxpayers are in jeopardy of losing their health insurance for calendar year 2021 if they are denied APTC and are unable to afford unsubsidized health insurance premiums.

Conclusion

If you are requesting the APTC for your 2021 Marketplace coverage, we strongly encourage you to log onto the Marketplace and self-attest that you’ve filed your tax return and attached Form 8962 to ensure continued APTC benefits.  And an added benefit of logging onto the Marketplace website — you can update your expected 2021 income and personal information.

There is no need to contact the IRS if you have already filed your 2019 tax return, unless you have received a Letter 12C from the IRS asking for information.

 

For additional information and guidance, refer to the following resources:

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The views expressed in this blog are solely those of the National Taxpayer Advocate. The National Taxpayer Advocate presents an independent taxpayer perspective that does not necessarily reflect the position of the IRS, the Treasury Department, or the Office of Management and Budget.

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