Home Finance How the COVID Relief Act Marketplace Plan Will Save Buyers

How the COVID Relief Act Marketplace Plan Will Save Buyers

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Edit, April 9, 2021: IRS issued guidance Clarifying how taxpayers should proceed on this issue. Those who must pay off some or all of their advance premium tax credit from 2020 can simply omit Form 8962, and are not required to reconcile their advance premium tax credit. Those who are owed the Additional Premium Tax Credit (ie, the amount paid on their part in 2020 was very small) can still claim it using Form 8962, as they normally would. Those who have already filed 2020 tax return and paid additional advance premium tax credit need not file revised return. Instead, the IRS will refund the money to them automatically.

Stressed about paying some or all of the premium subsidy you paid last year? You’re in luck: under american rescue planning act (HR 1319) — passed by Congress on March 10 and expected to be signed into law by President Biden on March 12 — does not require the Internal Revenue Service to repay additional premium subsidies for 2020.

This is a one-time provision being provided as part of the federal government’s massive COVID relief measure – which Significant increase in premium subsidy for 2021 and 2022 – and it will come as a huge relief to the many Americans who enrolled in individual and family health plans. health insurance market / Exchange last year.

Although the Affordable Care Act premium tax credit (Premium Subsidy) makes health insurance affordable for millions, they can be a bit complicated. Unlike other tax credits, they are available for use up front, paid directly to your health insurance company throughout the year. (This is called APTC – Advance Premium Tax Credit – because it is paid in advance.)

You can always choose to pay the full price for a plan purchased through the exchange and then claim the full premium tax credit on your tax return, but hardly anyone does. Instead, most people provide the market with an estimate of what they think their income will be for the year, and their estimated premium tax credit is sent to their insurer throughout the year, allowing them to pay in premiums. The amount to go is reduced.

The catch is that it has to be reconciled with the IRS when policyholders file their tax return. Depending on the circumstances, the IRS may give you extra money at the time (if your subsidy was too low), or may ask you to pay some or all of the subsidy which was paid on your behalf during the year.

How the law will tackle the tax-time subsidy repayment crisis

it was the issue Shaping to be Particularly Important for 2020 Tax Year. The combination of additional federal unemployment compensation and precarious employment made it more difficult than usual for people to accurately project their income for 2020. And, as is always the case, those whose income has been exhausted by more than 400%. federal poverty level Were facing the prospect of paying their entire premium subsidy to the IRS – repayment that could run into the thousands or tens of thousands of dollars, depending on the circumstances.

An income increase that pushed a family above the 400% federal poverty level limit may have been because a person received more unemployment benefits than they expected, or because they found a new job later in the year that could help them. Keeps the total income above the subsidy eligibility limit. . In normal years, this would mean paying the entire subsidy, irrespective of the policyholders’ income during the months when they were receiving the premium subsidy through the market.

And even for those whose income was below 400 percent of the poverty level, they were likely to repay as much as $2,700 In additional premium subsidy based on actual income and tax filing status.

The provision only applies to the 2020 tax year

But thanks to the American Rescue Plan Act, any market plan buyer won’t have to worry about paying additional premium subsidies for 2020. If your subsidy amount was very small, you can still claim the additional amount that is owed to you at the time of filing your taxes. . But if your subsidy becomes too large—even if your income exceeds 400% of the poverty level—you won’t have to give any of it back to the IRS.

This is a one-time provision for the 2020 tax year only. Therefore it is still important to project your income for this year As accurate as possible, and keep the exchange updated if your earnings change later this year.

How will the provision apply if you have already filed your taxes?

Edit: IRS guidance issued Clarifying in April 2021 that people are not required to file revised returns in this situation. Instead, the IRS will refund the money to them automatically.

It’s not yet clear how the IRS will handle the additional premium tax credit for people who filed their 2020 tax return earlier this year and paid off some or all of their 2020 premium tax credit. An amended tax return can always be used to make changes. , Although The IRS has advised that tax filers put a hold on it for the time being And wait for further instructions from the IRS.

It is still unclear how soon the tax software will reflect the fact that the additional premium subsidy for 2020 is not to be repaid. Karen Politz, senior fellow at the Kaiser Family Foundation, noted that “the forms and tax software already provide for repayment, so it will take some time to straighten it out. And it will probably be very confusing for those who want to be next.” File your tax return in four to five weeks.

You may want to contact your tax preparer or call your tax software company to see if they have any guidance for you. The tax filing deadline has been extended to May 17, 2021, but it is also possible to request an extension if needed, You have been given time till October 15 to file your return.

Disclaimer: The opinions expressed within this article are the personal opinions of the author. The facts and opinions appearing in the article do not reflect the views of knews.uk and knews.uk does not assume any responsibility or liability for the same.

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