Health Law Daily No action will be taken for failure to reconcile premium tax credit
Monday, July 26, 2021

No action will be taken for failure to reconcile premium tax credit

By Susan L. Smith, JD,

CMS will not remove financial help enrollees receive to help pay for health coverage in the Exchanges based on their tax filing status due to the continued impact of COVID-19.

CMS will not act on data from the Internal Revenue Service (IRS) for plan years 2021 and 2022 for consumers who have failed to file tax returns and reconcile a previous year’s advance payments of the premium tax credit (APTC) with the premium tax credit (PTC) allowed for the year due to the impact of the COVID-19 public health emergency on the processing of federal income tax returns. In addition, the IRS announced changes concerning the processing of APTC with PTC for tax year 2020 in response to the American Rescue Plan of 2021. This action will allow APTC to continue for consumers not required to reconcile by attaching a Premium Tax Credit form (Form 8962) to their 2020 tax return as well as consumers who reconciled but whose tax returns have not been processed by the IRS. The guidance also provides additional flexibilities for Failure to File and Reconcile (FTR) operations for state-based Exchanges. (CMS Failure to File and Reconcile (FTR) Operations Flexibilities for Plan Years 2021 and 2022 – Frequently Asked Questions (FAQ), July 23, 2021).

CMS and IRS actions. Enrollees with an FTR status who were previously notified during Open enrollment 2021 that CMS may recheck whether they or the taxpayer filed and reconciled will not have their FTR status rechecked in 2021 or have their APTC ended due to their FTR Recheck process. Enrollees that update their applications in 2021 will be required to attest to having filed and reconciled, if they have checked a box that states they have reconciled premium tax credits for past years. According to CMS, consumers should take this action because they continue to be required to file federal income taxes and reconcile APTC for tax year 2019. This includes enrollees who submit an application update for the payment of additional APTC under the American Action Plan Act. If enrollees do not attest to having filed and reconciled their 2021 application they may lose their eligibility for an APTC to subsidize 2021 coverage.

The IRS will not require taxpayers whose 2020 APTC is more than their PTC allowed for 2020 to reconcile their APTC with their PTC by attaching Form 8962 for their 2020 tax return. Because taxpayers with excess APTC for 2020 are not required to file Form 8962, CMS will not take FTR actions based on 2020 tax returns for plan year 2022 for enrollees in Exchanges using the federal eligibility and enrollment platform.

Steps for enrollees. Certain eligible enrollees will keep their APTC eligibility for the 2021 plan year. Taxpayers for enrollees who may have an FTR status based on their 2019 federal income tax return should file a federal income tax return and reconcile past APTC if they have not done so even though CMS will not recheck FTR statuses and will not end APTC based on having an FTR status in 2021 through FTR Recheck. To keep their eligibility, enrollees who update their application during 2021 who have filed and reconciled should check the box that says the enrollee has reconciled premium tax credit for past years. Generally, taxpayers have a requirement to file a federal income tax return and reconcile APTC for any plan year for which APTC was paid for someone in their household. The IRS requires taxpayers who claim a net PTC that is in excess of the 2020 APTC to file their 2020 federal income tax return and attach Form 8962 to claim the net PTC as soon as possible. Enrollees will not receive warning notices from the Exchange about their FTR status before Open Enrolment 2022 and will not be determined APTC ineligible due to their FTR status during or after Open Enrollment in 2022. In addition, enrollees who may have an FTR status will not receive further communication from CMS about their FTR status for 2021 or 2022 because CMS will not be taking any actions to end APTC.

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