Candace J. Dixon
The premium tax credit helps pay for health insurance coverage bought from the Health Insurance Marketplace. Eligible people can choose to have all, some, or none of the estimated credit paid in advance directly to their insurance company on their behalf. These payments – which are called advance payments of the premium tax credit, advance credit payments, or APTC – lower what taxpayers pay out-of-pocket for their monthly premiums.
Alternatively, people can choose not to get APTC, pay the full amount of their monthly premium, and claim all the benefit of the PTC that they are allowed when they file their tax return. This will increase their refund or lower the amount of tax they owe. Form 8962, Premium Tax Credit is used to figure the amount of their PTC and reconcile it with their APTC.
The American Rescue Plan Act of 2021 suspends the requirement to repay excess advance payments of the premium tax credit for tax year 2020. Excess APTC is the amount by which advance payments of the premium tax credit exceed their premium tax credit.
People who used APTC to help make their monthly payments for their Marketplace plan will need to compare two things to figure out what they need to do:
the amount of premium tax credit paid in 2020 to the Marketplace on their behalf in advance
the actual premium tax credit they qualify for based on their final income for 2020.
The best way to do this is to complete Form 8962, Premium Tax Credit, using the information from Form 1095-A, Health Insurance Marketplace Statement their plan sent to them, as part of their tax preparation.
If APTC was less than the allowable PTC, people can claim the difference on their 2020 tax return as a net PTC by including Form 8962 with their tax return. The IRS needs the information on the form to process the tax return for taxpayers. If they claim a net PTC and receive a letter asking for more information, they should respond to the notice so that the IRS can finish processing their 2020 tax return and, if applicable, issue any refund due.
If people have excess APTC for 2020 that is more than their allowable PTC, they are not required to file Form 8962, Premium Tax Credit, or report an excess advance premium tax credit repayment when they file their 2020 Form 1040 or Form 1040-SR.
The IRS is taking steps to reimburse those who paid the excess advance Premium Tax Credit repayment amount with their 2020 tax return filed before the legislative changes were made. People in this situation should not contact the IRS or file an amended return solely to get a refund of this amount.
This change only applies to 2020 excess APTC repayment. People who received the benefit of APTC before 2020 must file Form 8962 to reconcile their APTC and PTC when they file their federal income tax return. This is true even if they aren't otherwise required to file a tax return for that year. For example, if they receives a letter about a 2019 Form 8962, the IRS needs more information to finish processing their return, and they should respond to the letter.
Additional Resources:
About Form 8962, Premium Tax Credit
Suspension of Repayment of Excess Advance Payment of the PTC