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1.8 million must file 1040s ASAP to get ACA APTC benefits

If you thought the Supreme Court's OK back in June of all Obamacare tax subsidies, whether issued by the federal or state insurance marketplaces, settled things as far as the national health care law goes, think again.

The Affordable Care Act, as it's officially named, still poses complications -- or at least some extra tax work -- for folks who are looking to get help from Uncle Sam to pay for their health care coverage.

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Nationally, the ACA financial aid averages $272 a month and takes care of roughly three-fourths of a qualifying taxpayer's premium.

Two credit payment methods: That help is popularly known as a subsidy, but its official title is the Premium Tax Credit, or PTC. It is paid two ways.

The credit amount for which a taxpayer qualifies can go directly to the insurer throughout the year. This is known as the Advance PTC, or APTC, and it helps reduce the monthly health care coverage payments that taxpayers make.

Or a credit-qualifying taxpayer can choose to cover all insurance costs on his or her own and collect any PTC when he or she files a return.

Most people who qualified for the first-ever ACA tax credits last year got the advance version. But if those folks don't file a 2014 tax return, they won't be able to get the APTC in 2016.

The Internal Revenue Service says there are around 1.8 million taxpayers whose future APTC payments are in jeopardy. That's also this week's By the Numbers figure.

Reconciling ACA tax credit amounts: So what's the problem? If you got the APTC, you need to file a 1040 along with Form 8962 to reconcile that payment amount.

If you didn't get all the credit for which you were eligible, you'll get what you missed when you finally file. Conversely, if you got too much APTC, then you must pay back that excess with your tax return.

And yes, even if you're not otherwise required to file a tax return -- say you didn't make enough money to meet the filing threshold -- but got an APTC, you still must file a 1040 and 8962 to settle your ACA APTC amount.

No filing, no 2016 tax credit: If you don't reconcile your APTC situation soon by sending the IRS a Form 1040 and Form 8962 for the 2014 tax year, then you will not be eligible for the advance subsidy next year.

That means you'll be responsible for the full cost of your insurance's monthly premiums and all covered services.

The IRS is sending Letter 5591, Letter 5591A or Letter 5596 to individuals who received 2014 APTC payments, but who have not yet filed a 2014 tax return and Form 8962, to remind them to get the job done ASAP. Doing so will ensure that the taxpayers don't face a gap in receiving APTC payments in 2016.

The Department of Health and Human Services is planning its own outreach campaign in the fall in conjunction with the Nov. 1 start of the 2016 Obamacare enrollment season.

You also can get information on the need to file at the HealthCare.gov website or by calling the federal marketplace toll-free at (800) 318-2596. 

If you got one of the letters, or didn't but got an APTC payment and haven't yet filed a 2014 tax return, get on the stick or get ready to pay more for your health coverage next year.

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Think I just found something that affects my previous question. Looks like if you don't get the 2014 return in first, you aren't eligible for 2016 cost sharing reduction plans, which would otherwise be eligible for those not exceeding 250% of the federal poverty limit. I can't see that part is tracked on taxes at all, so I think for people who would be eligible for cost sharing do wind up with a big net penalty for not getting the 2014 return filed in the next few days.


P.S. Yes, I'm aware of the 3 year statute of limitations on obtaining a refund for tax returns, so I'll make sure I don't let the 2014 return go past that.


Am I correctly understanding that failure to file a 2014 tax return before signing up for a 2016 plan (enrollment ends in next few days) just delays the 2016 PTC to be credited (if eligible) on the 2016 return - and does not actually change the eligibility or amount of the 2016 PTC? Meaning, if I prefer to not file my 2014 tax return in the next few days, can I just pay the full 2016 insurance premiums, and once I file my 2016 return, would its 8962 reconciliation put me at the same net result as if I had obtained advance monthly payments to my insurance carrier? (Ignoring opportunity cost, interest, and present/future values.) I have a lot of business back accounting to do, and am wondering if I need to cram a 2014 tax return in the next few days, or if I can decide to pay the full premiums and know I'd get a big 2016 refund (assuming I was eligible.) Is this like someone who is entitled to 6 exemptions on their paycheck, and instead only uses 1 - so they could have had extra money thorughout the year, but after a return is filed, they're basically at the same net result?

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