IRS Offers Penalty Relief For Overpayment Of ACA Tax Credits
Michael Cohn |
The
Notice 2015-09 offers limited relief for taxpayers who have a balance due on their 2014 income tax return as a result of reconciling advance payments of the premium tax credit against the premium tax credit allowed on the tax return.
Specifically, the notice provides relief from the penalty under Section 6651(a)(2) of the Tax Code for late payment of a balance due and the penalty under Section 6654(a) for underpayment of estimated tax. To qualify for the relief, however, taxpayers must meet certain requirements. The relief applies only for the 2014 taxable year.
The
Section 6651(a)(2) imposes a penalty on a failure to pay (on or before the due date for payment, including any extension of time for payment) an amount shown as tax on any return. However, the 6651(a)(2) penalty is not imposed if the taxpayer shows that the failure was due to reasonable cause and not willful neglect. Section 6654(a) imposes a penalty in the case of an underpayment of estimated tax by an individual.
Beginning in 2014, an eligible individual who is covered, or whose family member is covered, under a qualified health plan through an Affordable Insurance Exchange, also called a
Taxpayers are required to reconcile, or compare, the amount of premium tax credit allowed on the tax return with advance credit payments. Changes in the circumstances on which the advance credit payments are based could result in a difference between the amount of advance credit payments and the premium tax credit to which the taxpayer is entitled, the
If the advance credit payments are more than the premium tax credit allowed on the return, the difference (that is, the excess advance payments) is treated as additional tax and could result in either a smaller refund or a larger balance due (or, if the premium tax credit allowed is more than the advance credit payments made, the excess credit amount may result in a larger refund or lower balance due). Tax year 2014 is the first year for which taxpayers are required to reconcile advance credit payments with the premium tax credit.
Some taxpayers who have a balance due on their 2014 income tax returns attributable to the reconciliation of their advance credit payments and the premium tax credit calculated on their returns may not be able to pay by the due date for payment, which is generally
Therefore, in consideration of these factors, the
In addition, the
For purposes of the notice, taxpayers will be treated as current with their filing and payment obligations if as of the date they file their 2014 income tax returns, they (i) have filed, or filed an extension for, all currently required federal tax returns, and (ii) paid or have entered into an installment agreement (which is not in default), an offer in compromise, or both to satisfy a federal tax liability.
The
The
Additionally, Section 6601 imposes interest on amounts of tax not paid by the due date, determined without regard to an extension of time for payment. Taxpayers will be required to pay interest on the balance due from the original deadline to pay, which is generally
Generally, the
Taxpayers who file their returns by
To request a waiver of the Section 6654(a) penalty, taxpayers should check box A in Part II of Form 2210, complete page 1 of the form, and include the form with their return, along with the statement: “Received excess advance payment of the premium tax credit.”
Taxpayers do not need to attach documentation from the exchange, explain the circumstances under which they received an excess advance payment, or complete any page other than page 1 of the Form 2210, according to the
Notice 2015-09 will be published in Internal Revenue Bulletin 2015-6 on
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