Wednesday, July 13, 2016

Premium Tax Credit: Claiming the Credit and Reconciling Advance Credit Payments

When you apply for assistance to help pay the premiums for health coverage through the Marketplace, the Marketplace will estimate the amount of the premium tax credit that you may be able to claim for the tax year using information you provide about your family composition, your projected household income, whether those that you are enrolling are eligible for other non-Marketplace coverage, and certain other information.
Based on the estimate from the Marketplace, you can choose to have all, some, or none of your estimated credit paid in advance directly to your insurance company on your behalf to lower what you pay out-of-pocket for your monthly premiums. These payments are called advance payments of the premium tax credit or advance credit payments. If you do not get advance credit payments, you will be responsible for paying the full monthly premium.
If you received the benefit of advance credit payments, you must file a tax return to reconcile the amount of advance credit payments made on your behalf with the amount of your actual premium tax credit. You must file an income tax return for this purpose even if you are otherwise not required to file a return.
If you choose not to get advance credit payments, you can claim the full benefit of the premium tax credit that you are allowed when you file your tax return. This will increase your refund or lower the amount of tax that you would otherwise owe.

Reporting Changes in Circumstances 

If you purchased health insurance coverage through the Marketplace and get assistance in paying premiums through advance credit payments made on your behalf, it is important to report life changes to the Marketplace throughout the year.  
Reporting these changes promptly will help you get the proper type and amount of financial assistance. Reporting changes also will help you avoid large differences between the advance credit payments made on your behalf and the amount of the premium tax credit you are allowed when you file your tax return, which may affect your refund or balance due when you file your tax return.
Changes in circumstances that can affect the amount of your actual premium tax credit include:
  • Increases or decreases in your household income including lump sum payments like a lump sum payment of Social Security benefits
  • Marriage
  • Divorce
  • Birth or adoption of a child
  • Other changes affecting the composition of your tax family
  • Gaining or losing eligibility for government sponsored or employer sponsored health care coverage
  • Moving to a different address
For the full list of changes you should report, visit HealthCare.gov.
To estimate the effect that changes in your circumstances may have upon the amount of premium tax credit that you can claim - see this change in circumstances estimator

Filing a Federal Tax Return to Claim and Reconcile the Credit 

If you received the benefit of advance credit payments, you must file a tax return and use a Form 8962, Premium Tax Credit (PTC)  to reconcile the amount of advance credit payments made on your behalf with the amount of your actual premium tax credit. You must file an income tax return for this purpose even if you are otherwise not required to file a return.
You must file a federal income tax return and attach Form 8962, Premium Tax Credit (PTC) to the return if:
  • Advance credit payments were paid to your health insurer for you or another individual in your tax family
  • Advance credit payments  were paid for an individual, including you, for whom you told the Marketplace you would claim a personal exemption and no one, including you, claims a personal exemption for that individual
  • You choose to claim the premium tax credit
For Information about how to fill out this form, see the instructions for Form 8962. See Publication 974 for additional instructions for taxpayers in special situations.
If the premium tax credit computed on your return is more than the advance credit payments made on your behalf during the year, the difference will increase your refund or lower the amount of tax you owe. This will be reported in the ‘Payments’ section of Form 1040.
If the advance credit payments are more than the amount of the premium tax credit you are allowed, you will add all or a portion of the excess advance credit payments made on your behalf to your tax liability by entering it in the ‘Tax and Credits’ section of your tax return. This will result in either a smaller refund or a larger balance due. 
The amount of your excess advance credit payments that you are required to repay may be limited based on your household income and filing status. If your household income is 400 percent or more of the applicable federal poverty line, you will have to repay all of the advance credit payments. The repayment limits are listed in the table below.

Repayment Limitation Table for 2015
Household Income Percentage of Federal Poverty LineLimitation Amount for SingleLimitation Amount for all other filing statuses
Less than 200%$300$600
At least 200%, but less than 300%$750$1,500
At least 300%, but less than 400%$1,250$2,500
400% or moreNo limitNo limit

If your filing status is Married Filing Separately, the repayment limitation above applies to both spouses separately based on the household income reported on each return.
The Marketplace will send you, by January 31 of the year following the year of coverage, a Health Insurance Marketplace statement, Form 1095-A This form shows the amount of the premiums for the health care plan or plans you and your family members enrolled in and certain other information you will need to compute your premium tax credit. Form 1095-A also reports any advance credit payments made on your behalf. You use this information to compute your premium tax credit and to compare any advance credit payments made on your behalf with the amount of your actual premium tax credit. For more information about Form 1095-A see Health Insurance Marketplace Statements.
If you also receive Form 1095-B or 1095-C, which are unrelated to the Marketplace, see ourquestions and answers for information about how these forms affect your tax return.
Whether you are reconciling advance credit payments with the credit you are allowed, or are claiming the credit, you should consider e-filing your tax return, because using tax preparation software is the best way to file a complete and accurate tax return.
For the 2014 taxable year, the IRS provided penalty relief from the failure to pay penalty and the under-payment of the estimated tax penalty under certain circumstances.

Corrected, Incorrect or Voided Forms 1095-A for Tax Years 2014 and 2015

Some taxpayers may receive a corrected or voided Form 1095-A because the information on the initial form was incorrect or incomplete. For more information on what you need to do with a corrected or voided Form 1095-A, see Corrected, Incorrect or Voided Forms 1095-A for Tax Years 2014 and 2015. This information can help you assess whether you should file an amended tax return.

Failing to file your tax return may prevent future advance credit payments 

If you choose to get the benefit of advance credit payments, you must file your tax return as soon as possible to ensure you can get advance credit payments made on your behalf from your Marketplace in future years. If you miss the April filing deadline or receive an extension to file until October, you should file your return as soon as possible. You should not wait to file. File as soon as possible to reconcile any advance credit payments made on your behalf and to maintain your eligibility for future premium assistance.
If advance credit payments are made on behalf of you or an individual in your family, and you do not file a tax return, you will not be eligible for advance credit payments or cost-sharing reductions to help pay for your Marketplace health insurance coverage in future years. This means you will be responsible for the full cost of your monthly premiums and all covered services. In addition, we may contact you to pay back some or all of the advance credit payments that are made on behalf of you or an individual in your family.
If advance credit payments were made on behalf of you or an individual in your family, and you did not file a tax return to reconcile those payments, you will not be eligible for advance credit payments or cost-sharing reductions to help pay for your Marketplace health insurance coverage the next year.

Owe Taxes? These Tips Can Help

IRS Summertime Tax Tip 2016-03, July 8, 2016
The IRS offers many safe and easy ways to pay your taxes. These tips explain many of them:
  • Mailed tax bills. The IRS sends bills in the U. S. mail. Try to pay soon and in full to avoid any extra charges. If you can’t pay in full, you’ll save if you pay as much as you can. The more you can pay the less interest and penalties you will owe for late payment. The IRS offers severalpayment options on IRS.gov.
  • Use IRS Direct Pay. The best way to pay your taxes is with IRS Direct Pay. It’s the safe, easy and free way to pay from your checking or savings account. You can pay your tax in just five simple steps in one online session. Just click on the “Payment” tab on IRS.gov. You can now use Direct Pay with the IRS2Go mobile app.
  • Get a short-term payment plan. If you owe more tax than you can pay, you may qualify for more time- up to 120 days- to pay in full. You do not have to pay a user fee to set up a short-termfull payment agreement. However, the IRS will charge interest and penalties until you pay in full. It’s easy to apply online at IRS.gov. If you have questions about a bill from the IRS, you may call the phone number listed on it.
  • Apply for an installment agreement. Most people who need more time to pay can apply for anOnline Payment Agreement on IRS.gov. A direct debit payment plan is the hassle-free way to pay. The setup fee is much less than other plans and you won’t miss a payment. If you can’t apply online, or prefer to do so in writing, use Form 9465, Installment Agreement Request. Individuals can use Direct Pay to make their installment payments. For more about payment plan options, visit IRS.gov.
  • Check out an offer in compromise. An offer in compromise or OIC may let you settle your tax debt for less than the full amount you owe. An OIC may also be helpful if full payment may cause you financial hardship. Not everyone qualifies, however, so make sure you explore all other ways to pay your tax before you submit one to the IRS. Use the OIC Pre-Qualifier tool to see if you qualify.
  • Avoid tax surprises. If you are an employee, you can avoid a tax bill by having more taxes withheld from your pay. To do this, file a new Form W-4, Employee’s Withholding Allowance Certificate, with your employer. Use the IRS Withholding Calculator tool on IRS.gov to see if you’re having the right amount withheld. If you are self-employed, you may need to make or change your estimated tax payments. See Form 1040-ES, Estimated Tax for Individuals to learn more.
To find out more see Publication 594, The IRS Collection Process.

IRS Offers Tips on Filing an Amended Tax Return

IRS Summertime Tax Tip 2016-02, July 6, 2016
You may discover you made a mistake on your tax return. You can file an amended return if you need to fix an error. You can also amend your tax return to claim a tax credit or deduction. Here are 10 tips from the IRS on amending your return:
  1. When to amend. You should amend your tax return if you need to correct filing status, the number of dependents or total income. You should also amend your return to claim tax deductions or tax credits that you did not claim when you filed your original return. The instructions for Form 1040X, Amended U.S. Individual Income Tax Return, list more reasons to amend a return.
  2. When NOT to amend. In some cases, you don’t need to amend your tax return. The IRS will make corrections, such as math errors, for you. If you didn’t include a required form or schedule, for example, the IRS will mail you a notice about the missing item.
  3. Form 1040X.  Use Form 1040X to amend a federal income tax return that you filed before. You must file it by paper; you cannot file it electronically. Make sure you check the box at the top of the form that shows which year you are amending. Form 1040X has three columns. Column A shows amounts from the original return. Column B shows the net increase or decrease for the amounts you are changing. Column C shows the corrected amounts. You should explain what you are changing and the reasons why on the back of the form.
  4. More than one tax year.  If you file an amended return for more than one year, use a separate 1040X for each tax year. Mail them in separate envelopes to the IRS. See "Where to File" in theinstructions for Form 1040X for the address you should use.
  5. Other forms or schedules. If your changes have to do with other tax forms or schedules, make sure you attach them to Form 1040X when you file the form. If you don’t, this will cause a delay in processing.
  6. Amending to claim an additional refund. If you are waiting for a refund from your original tax return, don’t file your amended return until after you receive the refund. You may cash the refund check from your original return. Amended returns take up to 16 weeks to process. You will receive any additional refund you are owed.
  7. Amending to pay additional tax. If you’re filing an amended tax return because you owe more tax, you should file Form 1040X and pay the tax as soon as possible. This will limit interest and penalty charges.
  8. Reconciling the Premium Tax Credit. You may also want to file an amended return if:
  9. When to file. To claim a refund file Form 1040X no more than three years from the date you filed your original tax return. You can also file it no more than two years from the date you paid the tax, if that date is later than the three-year rule.
  10. Track your return. You can track the status of your amended tax return three weeks after you file with “Where’s My Amended Return?” This tool is available on IRS.gov or by phone at 866-464-2050.
You can get Form 1040X on IRS.gov/forms at any time.

IRS Says be Alert for Tax Scams

IRS Summertime Tax Tip 2016-01, July 1, 2016
Tax scammers work year-round; they don’t take the summer off. The IRS urges you to stay vigilant against calls from scammers impersonating the IRS. Here are several tips from the IRS to help you avoid being a victim:
  • Scams use scare tactics. These aggressive and sophisticated scammers try to scare people into making an immediate payment. They make threats, often threaten arrest or deportation, or they say they’ll take away your driver’s or professional license if you don’t pay. They may also leave “urgent” callback requests, sometimes through “robo-calls.” Emails will often contain a fake IRS document with a phone number or an email address for you to reply.
  • Scams spoof caller ID. Scammers often alter caller ID to make it look like the IRS or another agency is calling. The callers use IRS titles and fake badge numbers to appear legit. They may use online resources to get your name, address and other details about your life to make the call sound official.
  • Scams use phishing email and regular mail. Scammers copy official IRS letterhead to use in email or regular mail they send to victims. In another new variation, schemers provide an actual IRS address where they tell the victim to mail a receipt for the payment they make. This makes the scheme look official.
  • Scams cost victims over $38 million. The Treasury Inspector General for Tax Administration, or TIGTA, has received reports of more than one million contacts since October 2013. TIGTA is also aware of more than 6,700 victims who have collectively reported over $38 million in financial losses as a result of tax scams.
The real IRS will not:
  • The IRS will not call you about your tax bill without first sending you a bill in the mail.
  • Demand that you pay taxes and not allow you to question or appeal the amount that you owe.
  • Require that you pay your taxes a certain way. For instance, require that you pay with a prepaid debit card or any specific type of tender.
  • Ask for credit or debit card numbers over the phone.
  • Threaten to bring in police or other agencies to arrest you for not paying.
  • Threaten you with a lawsuit.
If you don’t owe taxes or have no reason to think that you do:
  • Do not provide any information to the caller. Hang up immediately.
  • Contact the Treasury Inspector General for Tax Administration. Use TIGTA’s “IRS Impersonation Scam Reporting” web page to report the incident.
  • You should also report it to the Federal Trade Commission. Use the “FTC Complaint Assistant” on FTC.gov. Please add "IRS Telephone Scam" in the notes.
If you know you owe, or think you may owe taxes call the IRS at 800-829-1040. IRS employees can help you if you do owe taxes.

Click on Over to IRS.gov this Summer

IRS Summertime Tax Tip 2016-04, July 11, 2016                                                       EspaƱol
Summertime is a great time to get the tax help and information you need on IRS.gov. Our many online tools and services make it easy for you to interact with the IRS. Here are the top reasons to visit IRS.gov this summer:
  • Use IRS Free File. If you still need to file your 2015 tax return, you can use IRS Free File to e-file for free. Free File is available through Oct. 17. If you earned $62,000 or less you can prepare and e-file your taxes with free tax software. If you made more, use Free File Fillable Forms. This option is the electronic version of IRS paper forms.
  • Check on your refund. The Where’s My Refund? tool is a fast and easy way to check on your tax refund. Use the IRS2Go mobile app to access it or click on the “Refunds” tab on IRS.gov.
  • Try IRS Direct Pay. If you owe taxes, pay them with IRS Direct Pay. It’s the safe, easy and free way to pay from your checking or savings account. Just click on the “Pay Your Tax Bill” link on the IRS home page.
  • Apply to make payments. If you are not able to pay your tax in full, you may apply for anOnline Payment Agreement. Check out the direct debit payment plan. It has a lower set-up fee and you will not miss a payment. With a direct debit plan the IRS will not send you a monthly reminder to send your check.
  • Correct your tax withholding. Did you get a big refund or owe more tax than expected when you filed your tax return? If so, you may want to change your tax withholding. To make a change, complete and give your employer a new Form W-4, Employee's Withholding Allowance Certificate. The IRS Withholding Calculator tool can help you fill out a new Form W-4.
  • Get health care coverage tax information. The IRS website also has information about the Affordable Care Act tax provisions at IRS.gov/aca. You can visit this site for educational material that describes how the health care law tax provisions affect individuals and businesses. There you will find information about the law and its provisions, legal guidance, frequently asked questions and links to additional resources.
  • Check out a charity. If you donate to a charity, the value of your gift may be deductible. Use theSelect Check tool to see if your charity qualifies.
  • Get answers to tax questions. The Interactive Tax Assistant covers many common tax topics. Type in your question or search terms and it can lead you step-by-step to the answer. The IRS Tax Map gives you a single point of access to tax law information by subject. It integrates search results from web links, tax topics, forms, instructions and publications all with one search.
  • Get forms and publications. View, download and print federal tax forms and publications onIRS.gov/forms at any time.
IRS Tax Tips provide valuable information throughout the year. IRS.gov offers tax help and info on various topics including common tax scamstaxpayer rights and more.

Things You Should Know about Filing Late and Paying Penalties

IRS Tax Tip 2016-66, April 20, 2016
April 18 was this year’s deadline for most people to file their federal tax return and pay any tax they owe. If you are due a refund there is no penalty if you file a late tax return. If you owe tax, and you failed to file and pay on time, you will most likely owe interest and penalties on the tax you pay late. To keep interest and penalties to a minimum, you should file your tax return and pay the tax as soon as possible. Here are some facts that you should know.  
  1. Two penalties may apply. One penalty is for filing late and one is for paying late. They can add up fast. Interest accrues on top of the penalties.
  2. Penalty for late filing. If you file your 2015 tax return more than 60 days after the due date or extended due date, the minimum penalty is $205 or, if you owe less than $205, 100 percent of the unpaid tax. Otherwise, the penalty can be as much as five percent of your unpaid taxes each month up to a maximum of 25 percent.
  3. Penalty for late payment. The penalty is generally 0.5 percent of your unpaid taxes per month. It can build up to as much as 25 percent of your unpaid taxes.
  4. Combined penalty per month. If both the late filing and late payment penalties apply, the maximum amount charged for the two penalties is 5 percent per month.
  5. File even if you can’t pay. Filing on time and paying as much as you can will keep your interest and penalties to a minimum. If you can’t pay in full, getting a loan or paying by debit or credit card may be less expensive than owing the IRS. If you do owe the IRS, the sooner you pay your bill the less you will owe.
  6. Payment Options. Explore your payment options on our website at IRS.gov/payments. For individuals, IRS Direct Pay is a fast and free way to pay directly from your checking or savings account. The IRS will work with you to help you resolve your tax debt. Most people can set up a payment plan using the Online Payment Agreement tool on IRS.gov.
  7. Late payment penalty may not apply. If you requested an extension of time to file your income tax return by the tax due date and paid at least 90 percent of the taxes you owe, you may not face a failure-to-pay penalty. However, you must pay the remaining balance by the extended due date. You will owe interest on any taxes you pay after the April 18 due date.

What You Need to Know if You Get a Letter in the Mail from the IRS

IRS Tax Tip 2016-65, April 19, 2016
Each year, the IRS mails millions of notices and letters to taxpayers for a variety of reasons. If you receive correspondence from us:
  1. Don’t panic. You can usually deal with a notice simply by responding to it.
  2. Most IRS notices are about federal tax returns or tax accounts. Each notice has specific instructions, so read your notice carefully because it will tell you what you need to do.
  3. Your notice will likely be about changes to your account, taxes you owe or a payment request. However, your notice may ask you for more information about a specific issue.
  4. If your notice says that the IRS changed or corrected your tax return, review the information and compare it with your original return.
  5. If you agree with the notice, you usually don’t need to reply unless it gives you other instructions or you need to make a payment.
  6. If you don’t agree with the notice, you need to respond. Write a letter that explains why you disagree, and include information and documents you want the IRS to consider. Mail your response with the contact stub at the bottom of the notice to the address on the contact stub. Allow at least 30 days for a response.
  7. For most notices, you won’t need to call or visit a walk-in center. If you have questions, call the phone number in the upper right-hand corner of the notice. Be sure to have a copy of your tax return and the notice with you when you call.
  8. Always keep copies of any notices you receive with your tax records.
  9. Be alert for tax scams. The IRS sends letters and notices by mail. We don’t contact people by email or social media to ask for personal or financial information. If you owe tax, you have severalpayment options. The IRS won’t demand that you pay a certain way, such as prepaid debit or credit card.
  10. For more on this topic, visit IRS.gov. Click on the link ‘Responding to a Notice’ at the bottom center of the home page. Also, see Publication 594, The IRS Collection Process. You can get it on IRS.gov/forms at any time.
If you need to make a payment visit IRS.gov/payments or use the IRS2Go app to make payment with Direct Pay for free, or by debit or credit card through an approved payment processor for a fee.
Each and every taxpayer has a set of fundamental rights they should be aware of when dealing with the IRS. These are your Taxpayer Bill of Rights. Explore your rights and our obligations to protect them on IRS.gov.