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IRS letters ask some taxpayers to send their health care Form 1095-A

IRS has begun sending letters to certain taxpayers that claimed the premium tax credit on their 2014 tax return and sought a tax refund; the letters ask the taxpayers for more information and/or a copy of the taxpayer’s Form 1095-A, Health Insurance Marketplace Statement. Here’s what IRS’s website says about those letters.

Background. Under Code Sec. 36B(a), certain taxpayers are allowed a refundable premium tax credit to help afford health insurance purchased through a Health Insurance Marketplace (also called an Exchange). A taxpayer’s premium tax credit is the lesser of: a) the premiums for the plan or plans in which the taxpayer or one or more members of the taxpayer’s family enroll or b) the excess of the premiums for the applicable second lowest cost Silver plan covering the taxpayer’s family over the taxpayer’s “contribution amount.” (Code Sec. 36B(b)(2))

Eligible individuals and families can choose to have advance credit payments paid directly to their insurance company to lower what they pay out-of-pocket for their monthly premiums.

Form 1095-A, Health Insurance Marketplace Statement, a new form for 2014, is used to report certain information to IRS about family members who enroll in a qualified health plan through the Marketplace. Form 1095-A also is furnished to individuals to allow them to reconcile the credit that they actually earned with advance payments of the premium tax credit and then report any difference between those two amounts on their tax return. One piece of information included in Form 1095-A is the premium amount for the second lowest cost Silver plan in the taxpayer’s geographical area.

Persons who signed up for coverage through the Marketplace in 2014 should have received their Form 1095-A statement in the mail in February 2015. (Fact Sheet 2015-9, February 2015; Weekly Alert ¶  30  02/19/2015)

Taxpayers who receive Form 1095-A use it to complete Form 8962, Premium Tax Credit; Form 8962 is used to reconcile advance payments of the premium tax credit and to claim this credit on the recipient’s tax return.

IRS requests some taxpayers’ copies of Form 1095-A. IRS has recently begun to send letters to some taxpayers who claimed the premium tax credit on their 2014 tax returns in which IRS asks the taxpayer for more information and/or asks that the taxpayer send IRS a copy of Form 1095-A.

Here’s what IRS says on its website about those letters: “In some situations, before we can send your refund, IRS may send you a letter asking you to clarify or verify information that you entered on your income tax return. The letter may ask for a copy of your Form 1095-A.”

On its website, IRS also provided a list of some common examples of issues or questions that may arise, including that:

…a taxpayer failed to submit a Form 8962, or submitted an incomplete form;
…based on the income reported, it appears that the taxpayer is not eligible for the credit;
…the income or other entries on the taxpayer’s Form 8962 are inconsistent with information on his tax return;
…the premium entered on the taxpayer’s Form 8962 appears to be an annual amount, rather than monthly;
…there are questions about entries on the taxpayer’s Form 8962 that may be clarified by a review of his 1095-A; and
…IRS needs to review the taxpayer’s Form 1095-A to verify her Marketplace coverage.

References: For the premium tax credit, see FTC 2d/FIN ¶  A-4241; United States Tax Reporter ¶  36B4; TaxDesk ¶  138,700; TG ¶  1381.

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