Repayment of the Advance Premium Tax Credit for Tax Year 2020 Has Been Suspended

by   Barry L Weller, EA

The Premium Tax Credit (PTC) is a refundable credit claimed on your federal income tax return.  This credit is for individuals and families who purchase a qualified health plan through the Marketplace and have household income of at least 100% but no more than 400% of the federal poverty line.  These “premium tax credits” are available immediately upon enrollment in an insurance plan so that families can receive help when they need it rather than having to wait until they file taxes.  This is known as an Advance Premium Tax Credit and is paid in directly to a healthcare insurance company to offset the cost of the monthly health insurance premium.  Each year, individuals use form 8962 to figure their Premium Tax Credit.  This form is also used to reconcile any advance payments to determine if additional credits are available or if any of the advance payments must be repaid.  Additional credits may be available when the actual income for the tax year is less than what was estimated at the time of purchasing the health insurance policy.  Repayment of excess advance premium tax credits can occur when actual income for the tax year is more than what was estimated when the health insurance policy was purchased.

On April 9, 2021, The American Rescue Plan Act of 2021 suspended the requirement that taxpayers increase their tax liability for excess advance premium tax credits (APTC’s) for tax year 2020.  Taxpayers who have already filed their 2020 tax return and who have excess APTC for 2020 do not need to file an amended tax return or contact the IRS. The IRS will reduce the excess APTC repayment amount to zero and will reimburse people who have already repaid any excess advance Premium Tax Credit on their 2020 tax return.  If you are due a refund, the IRS will increase the refund for the excess APTC calculated on form 8962.

This suspension of repayment change applies only to reconciling tax year 2020 Advance Premium Tax Credits.  Taxpayers who received the benefit of APTC’s for tax years 2019 and earlier still had to reconcile the advance payments on form 8962.  The IRS is sending letters to taxpayers who failed to reconcile these tax payments for tax years prior to 2020.
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Barry L Weller, EA is the president of Barry Weller & Associates, Inc. with offices at 19 N Reading Ave, Boyertown, PA 19512   Phone (610) 367-8280    He is an enrolled agent, licensed to represent taxpayers before the IRS.    (updated 5/24/2021)