If an individual benefitted from the advance premium tax credits to help him/her pay for health coverage for the year 2016 and possibly he/she applied for an extension of time to file 2015 federal taxes, then, to continue to receive the advance payments for the next open enrollment period for 2017 health coverage, he/she must file his/her tax returns as soon as possible.
The Health Insurance Marketplace reviews the advance payments of the premium tax credit for the next calendar year during their annual re-enrollment and income verification process. If an individual fails to file returns or reconcile, then he/she might not become eligible for advance payments for 2017.
Here are a few questions answered for individuals on why and what they need to file tax returns and reconcile the advanced payment for premium tax credits:
#1. If the extension is filed, why you need to file the taxes before October 17 deadline?
You must file your 2015 taxes as soon as possible even if you received a 6-month extension of time in order to report advance premium tax credits you received for 2016 and maintain eligibility for future premium assistance. This will help you pay for your insurance since marketplace will not review you eligibility unless the taxes are filed.
On the basis of the actual income and size of the family, your eligibility will be determined. An individual may receive a big amount as tax credit or need to pay back some when the withholdings are compared to their tax liability.
#2. How the Advanced Premium Tax Credit can be reported?
If you have received APTC, Form 8962 will be used to reconcile the difference between the advance payments made to pay for health coverage and the actual amount claimed on the returns. When the insurance is purchased from the Marketplace, the purchaser receives a Form 1095-A (Health Insurance marketplace Statement) that carries all the information such as date of coverage, insurance premium amount and APTC applied to the insurance. This information will help in completing Form 8962.
#3. How APTC can be reconciled with actual premium tax credit?
When an individual completes the process of filing tax returns, he/she will figure out the credit amount and compare it to the amount of APTC on Form 8962. If the APTC amount exceeds the actual allowable credit on the returns, then the difference will be deducted from the refund or added to due balance and vice versa in case allowable credit exceeds APTC amount.
Apart from filing the returns, individuals must also take into account about reporting any changes that might have occurred during the year so that APTC amount could be revised. These changes could also make you eligible for any possible tax penalty exemptions. Therefore, in order to continue to take the benefit of APTC to pay for health coverage for future years, individuals must file their 2015 tax returns as soon as possible.