Limited penalty relief for those that owe taxes caused by subsidy repayment

[jklcpa]

I received this email message today:

 

The IRS recently issued Notice 2015-9, providing limited penalty relief for qualified tax returns which have a repayment of the advanced premium tax credit.

Generally, taxpayers who do not pay their entire tax liability by the return due date would be penalized under §6651(a)(2); however, taxpayers who have a balance due attributable to the reconciliation of the premium tax credit could have these penalties abated for the 2014 tax year. 

Additionally, taxpayers with an underpayment of estimated tax penalty under §6654 (a) might have this penalty waived if a repayment of the advance premium assistance credit is present on the return.

Relief is only available for the 2014 tax year.

 

 

[Margaret CPA in OH]

Thanks, Judy. This will be helpful to my client for sure. Her actual penalty is only $58 but the repayment of the premium credit is a swing from $1300 refund to $4000 owed. Maybe she won't beat me up too much now!

[Abby Normal]

Had my first ACA today. They recieved 1700 credit but had to pay back 1500. The 1700 was for 8 months. If they keep getting subsidy for 12 months in 2015 they'll get over 2,500 and pay back 1,500. Why wouldn't they do that? They get to keep paying 130/mo for health insurance and use their child tax credits to repay the 1,500. Improved cash flow and a $1,000 bonus is hard to pass on.

 

[jklcpa]

Had my first ACA today. They recieved 1700 credit but had to pay back 1500. The 1700 was for 8 months. If they keep getting subsidy for 12 months in 2015 they'll get over 2,500 and pay back 1,500. Why wouldn't they do that? They get to keep paying 130/mo for health insurance and use their child tax credits to repay the 1,500. Improved cash flow and a $1,000 bonus is hard to pass on.

 

 

Right, I've been wondering if we'll see some adjustment to the payback caps because situations like this one.

[Terry D EA]

For those that have to payback the credits I hope there is a cap in the future. Who does the estimating anyway? Does the taxpayer or is there a calculator to be used on the market place? Just wondering that s all.

[Lion EA]

The taxpayer during 2014 guestimates their 2015 income with their most recent full year of 2013.  For my self-employed clients, it's guaranteed to be wrong!

[joanmcq]

I bought for 2015 through the marketplace but am not taking any advance credit. If my income goes down I figure it's a bonus to help,with SE tax!

[Jack from Ohio]

This act only applies to:

 

Specifically, this Notice provides relief from the penalty under § 6651(a)(2) of the Internal Revenue Code for late payment of a balance due and the penalty under § 6654(a) for underpayment of estimated tax.

 

This does NOT give relief from repayment of the excess advance payment of PTC.