Article Highlights:

  • Advance Premium Tax Credit (APTC)
  • Premium Tax Credit (PTC)
  • Reconciling the Credit
  • Responsibility to File and Reconcile
  • Losing Eligibility for APTC

Individuals who procure their health insurance through a government marketplace may qualify for the advance premium tax credit (APTC), which is used to reduce the cost of their insurance premiums. The reason it is called an “advance” premium tax credit is because the marketplace estimates the amount of the premium tax credit (PTC) that individuals will ultimately qualify for when they file their tax returns for the year. The estimation is based on information the individual provides the marketplace as to the amount of anticipated household income and family size. APTC is provided to reduce the financial burden of having to pay the full premium amounts during the year and then receiving the credit after the fact.

However, receiving the APTC comes with a responsibility. Those who receive APTC must file their tax returns and reconcile the amount of APTC received and PTC they are entitled to based on their actual household income and family status. An individual who has received more APTC than they are entitled to must pay back the excess when they file their tax return. If they qualified for more than they received, then they are entitled to the difference as a refundable credit on their return.

But, if an individual does not file a return and reconcile the amount of credit received in advance during 2015 with the amount they are entitled to by the October 17, 2016, extended due date for 2015 returns, they will be disqualified from receiving APTC for 2017. That will mean having to pay the full amount of the insurance premiums during the upcoming year and waiting until the 2017 return is filed in 2018 to receive any PTC to which they are entitled.

The IRS is sending letters to taxpayers who received advance payments of the premium tax credit in 2015 but who have not yet filed their tax returns. If you receive Letter 5858 or 5862, you are being reminded to file your 2015 federal tax return along with Form 8962, the IRS form where the APTC and PTC are reconciled.

If you have not yet filed, we encourage you to call this office so we can quickly file your return to make sure your eligibility for the APTC is not jeopardized.

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