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Requirement to Repay Excess Advance Payment of the 2020 Premium Tax Credit is Suspended

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Under the American Rescue Plan Act of 2021, the requirement that taxpayers pay back a portion or all of their excess advance payment of the Premium Tax Credit (excess APTC) for tax year 2020 has been suspended. A taxpayer’s excess APTC is the amount by which the taxpayer’s advance payments of the Premium Tax Credit (APTC) exceed their Premium Tax Credit (PTC).     

The IRS issued further guidance related to the temporary suspension of the requirement to pay back APTC, and TurboTax is here to help you understand what this means for you and your taxes.

If you receive health insurance coverage in a qualified health insurance plan purchased from Healthcare.gov or through a State Marketplace, you may have received an Advanced Premium Tax Credit or subsidy to help you pay for your 2020 health insurance, which was based on your projection of your 2020 household income. 

Typically, under the Affordable Care Act, if your actual income for the tax year is more than what was projected when you applied for health insurance in the Health Insurance Marketplace, then you are required to pay back a portion of the excess Advance Premium Tax Credit or subsidy that you received when you file your taxes. However, due to the challenges Americans faced with fluctuating income in 2020, the American Rescue Plan temporarily waives the requirement for taxpayers to pay back excess Advance Premium Tax Credits and file Form 8962 on their 2020 taxes since taxpayer’s income may be more than the income projected when applying for a subsidy to help pay for Marketplace insurance.  

Don’t worry about knowing this tax rule. When you file your 2020 taxes, TurboTax will be up to date for the new provision suspending the requirement to pay back excess advance premium tax credits if you received too much APTC. TurboTax will also easily figure out if you received too little APTC to help pay for Marketplace coverage and whether you are eligible for a Premium Tax Credit.

What happens if I already filed my 2020 tax return and paid back the excess APTC? 

If you already filed your 2020 tax return and paid back an excess of Advance Premium Tax Credit (APTC) for 2020 due to your actual 2020 income being higher than what was projected, you 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 action needed from the taxpayer. The IRS will then reimburse you if you already repaid any excess premium tax credit on your 2020 tax return. 

If I haven’t filed yet but I was paid an excess APTC, will TurboTax be up to date with the waiver of paying back the excess APTC?

Yes, TurboTax is up to date with the The American Rescue Plan provision that suspends the requirement for taxpayers to repay any excess advance payments of the premium tax credit for tax year 2020.

What if I filed my 2020 taxes or I am going to file, but I am eligible for a Premium Tax Credit?

If you filed your 2020 taxes or you are going to file and your actual income ends up being lower than what you projected, then you may be eligible for a Premium Tax Credit since you may have received a lower Advanced Premium Tax Credit (APTC) or subsidy than you were eligible for to help you pay for health insurance when you applied for 2020 health insurance. 

If this is the case, the Premium Tax Credit is still calculated and reported on IRS Form 8962 which will be filed with your 2020 taxes. You should receive Form 1095-A that reports the information you need about your Marketplace Insurance. 

Don’t worry about knowing the tax form or tax rules. TurboTax will ask simple questions about your health insurance and help you claim the Premium Tax Credit which can increase your tax refund or lower what you owe.

What if I received a letter about a missing Form 8962? 

This IRS provision suspending the pay back of excess APTC only applies to the 2020 tax year (the taxes you file in 2021). 

If you received a letter about a missing Form 8962 for your 2020 tax return, you should disregard the letter if you have an excess of APTC for 2020 since the IRS waives the requirement to pay back excess Advanced Premium Tax Credits and file Form 8962. The IRS will process your tax return without Form 8962 for the tax year 2020. 

If you received a letter about a missing Form 8962 for your 2019 tax return, you should respond to the letter so that the IRS can finish processing that tax return since the temporary suspension was for tax year 2020 only. It is possible the IRS needs with more information from you to finish processing your 2019 tax return. 

TurboTax Has You Covered

Don’t worry about knowing these tax provisions. TurboTax has proactive guidance to help you with events that happened in 2020 and the associated coronavirus relief. TurboTax will ask you simple questions about you and give you the tax deductions and credits you’re eligible for based on your entries 

If you have questions, you can connect live via one-way video to a TurboTax Live tax expert with an average 12 years experience and get your tax questions answered. TurboTax Live tax experts are available in English and Spanish, year round and can also review, sign, and file your tax return or you can fully hand over your taxes to them. All from the comfort of your home.

TurboTax will continue to keep you updated on coronavirus relief as more details and guidance come out. Be sure to check back with the TurboTax Blog and our TurboTax Coronavirus Tax Center for the latest information.

Lisa Greene-Lewis

Lisa has over 20 years of experience in tax preparation. Her success is attributed to being able to interpret tax laws and help clients better understand them. She has held positions as a public auditor, controller, and operations manager. Lisa has appeared on the Steve Harvey Show, the Ellen Show, and major news broadcast to break down tax laws and help taxpayers understand what tax laws mean to them. For Lisa, getting timely and accurate information out to taxpayers to help them keep more of their money is paramount. More from Lisa Greene-Lewis

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