Health Reform WK-EDGE Parents financially ineligible for son’s tax credit, have refund reduced
Tuesday, October 3, 2017

Parents financially ineligible for son’s tax credit, have refund reduced

By Harold Bishop, J.D.

The parents of a dependent child who were unaware that he obtained a health insurance policy through the Health Insurance Marketplace in 2014, and received a premium assistance tax credit (PATC) for the full amount of his premiums, had their 2014 federal tax increased and their claimed refund reduced. The 2014 reported income of the parents made them ineligible for the PATC (Gibson v. Commissioner of Internal Revenue, September 25, 2017, Pugh, C.).

Background. During 2014 and 2015, the parents’ adult son worked and during 2014 used an address which was not the parents’ address. Humana Employers Health Plan of Georgia, Inc. (Humana), provided a health insurance policy to their son for 11 months in 2014. Computer records maintained by the Health Insurance Marketplace, administered by HHS, show their son’s application for insurance through the Health Insurance Marketplace. A total of $4,628.80 in premiums on the Humana policy was paid through the mechanism of advance payments of the PATC under Internal Revenue Code (IRC) section 36B. Copies of invoices from September through December 2014 that Humana sent to their son at his address each showed a payment due of zero, a monthly premium owed of $420.80, and an offsetting "Advance Premium Tax Credit" of an equal amount. On or about January 17, 2015, a Form 1095-A, Health Insurance Marketplace Statement, showing the advance payments of the PATC made to Humana in 2014 was sent to their son at his address.

2014 tax return. The parents claimed their son as a dependent on their joint tax return for 2014. The Internal Revenue Service (IRS) did not dispute his status as a dependent. The parents claimed a refund of $6,880. They did not report the advance payments of the PATC on their return. The IRS determined that parents’ tax should be increased to reflect the advance payments of the PATC to Humana on their son’s behalf during 2014, which resulted in a deficiency of tax that reduced their claimed refund.

Premium assistance tax credit. Section 36B of the IRC establishes a PATC to subsidize the cost of health insurance purchased through a Health Insurance Marketplace by taxpayers meeting certain statutory requirements (26 C.F.R. sec. 1-36B-2(a)). That section was created by the Patient Protection and Affordable Care Act (P.L. 111-148), secs. 1401 and 10105(a), and the Health Care and Education Reconciliation Act of 2010 (P.L. 111-152), sec. 1001(a)(1)(A) and (B), together commonly referred to as the Affordable Care Act (ACA). The PATC is available to households with incomes between 100 percent and 400 percent of the federal poverty line (Sec. 36B(c)(1)(A)). The parents were ineligible under this criteria.

Decision. Because the parents were not entitled to any amount of PATC, the entire amount of the advance payments of the PATC on their son’s behalf to Humana by the Health Insurance Marketplace during 2014 increased the parents’ tax owed and reduced their claimed refund. The IRS correctly determined a $4,629 tax deficiency for 2014 on that basis.

The case is Docket No. 22121-15.

Attorneys: Benjamin J. Gibson, Sr., pro se. Jason P. Oppenheim (Jason P. Oppenheim, Attorney at Law) for Commissioner of Internal Revenue.

Companies: Humana Employers Health Plan of Georgia, Inc.

Cases: CaseDecisions NewsFeed PremiumTaxNews HealthInsuranceExchangeNews IndividualMandateNews InsurerNews

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