The implementation of the Affordable Care Act (ACA, also known as PPACA and Obamacare) has helped millions of Americans receive healthcare, despite the surrounding debate. One way that the ACA has helped people to afford health insurance is through the premium tax credit. This is the amount applied each month to reduce the cost of the health insurance premium for each individual or family, reducing the impact of paying for health insurance and other healthcare costs.
The amount for which you qualify for the advanced payment on your premium depends largely on your tax filing form the previous year. Therefore, if you have not yet filed your annual income tax return, then you risk losing your eligibility for the advanced payments on the tax credit. With the start of open enrollment, it is important that you have your latest income on file with the government, which is done by filing a tax return.
What Does Filing Have to Do With the Advanced Payment?
When you file your tax return, part of the process is reconciling the advanced tax payments from the previous year, resulting in either reducing your overall tax liability or increasing it. This depends on whether or not your advanced payments were accurate to your income. This could also affect your premium tax credit for the next year or act as proof of your income when applying for your insurance through the Marketplace.
Additionally, in order to continue to receive your eligibility for advance payments on your premium tax credit, you need to remain up to date on your tax returns. Even if you normally do not have to file a return, it is important that you do so with your Form 8962 if you plan on continuing your assistance to pay your health insurance. Not filing may lead to a gap in receiving any assistance in paying for your health insurance through the Marketplace. You will still be able to keep your insurance plan, but you will not receive any federal assistance in paying your premium every month. This could cause an increased financial burden, making it difficult to pay for your healthcare.
What if You File an Extension?
Even if you have filed for an extension on your tax return, which gives you until October 15 to file, you still need to get your return in as soon as possible if you have received a 5596 letter from the IRS. Although you may not receive any penalties for a late filing, you still may lose your eligibility for a premium tax credit. Additionally, if you have not already paid an estimate of your tax liability, you are subject to penalties and interest on your tax debt.
If you are unsure whether or not late filing may affect your premium tax credit, then you should look for a letter from the IRS. They have sent out a reminder letter to file your return along with the Form 8962, which is the Premium Tax Credit. The letter is 5591, 5591A, or 5596. If you receive one of these letters, you should work on getting your tax return filed as soon as possible, at least within 30 days of receipt. You should read the letter fully and ensure that the information is correct. If anything is wrong, then contact the IRS about the mistake. Then, complete your tax return using Form 1095-A, which you should have received. If not, you can get it from the Marketplace or Healthcare.gov.
If you have a significant tax bill that you find difficulty paying, contact Fidelity Tax Relief at 877-372-2520 to speak with our expert tax professionals. We can help you find the right tax resolution for your situation.