Excess health insurance premium assistance credit | KPMG | GLOBAL

Excess health insurance premium assistance credit, increase in tax

Excess health insurance premium assistance credit

The U.S. Tax Court today issued an opinion finding that individual taxpayers who received an excess advance premium tax credit—a credit that they ultimately were not entitled to receive—for assistance in obtaining health insurance realized an increase in their tax liability, in the amount of the later disallowed credit.

1000

Related content

The case is: McGuire v. Commissioner, 149 T.C. No. 9 (August 28, 2017). Read the Tax Court’s opinion [PDF 92 KB]

Summary

  • The taxpayers (a married couple) in 2014 received an advance premium tax credit under the Affordable Care Act. The credit was paid directly to a health insurance provider, to reduce the amount of the premium to be paid by the taxpayers.
  • Because of a change in financial circumstances (when the wife started to work), the taxpayers ultimately were not entitled to the premium tax credit because their household income exceeded the federal poverty line.
  • After the close of the tax year, the taxpayers did not receive a Form 1095-A, Health Insurance Marketplace Statement
  • The taxpayers did not report the excess tax credit as an increase to tax on their return.

The Tax Court today found that the excess premium assistance credit was an increase in the tax imposed, and that in this case, the taxpayers received an advance of a credit to which they ultimately were not entitled. As the court held, excess advance premium tax credits are to be treated as an increase in the tax imposed. The court, nevertheless, found that the taxpayers were are not liable for an accuracy-related penalty.

© 2017 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

The KPMG logo and name are trademarks of KPMG International. KPMG International is a Swiss cooperative that serves as a coordinating entity for a network of independent member firms. KPMG International provides no audit or other client services. Such services are provided solely by member firms in their respective geographic areas. KPMG International and its member firms are legally distinct and separate entities. They are not and nothing contained herein shall be construed to place these entities in the relationship of parents, subsidiaries, agents, partners, or joint venturers. No member firm has any authority (actual, apparent, implied or otherwise) to obligate or bind KPMG International or any member firm in any manner whatsoever. The information contained in herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG's Federal Tax Legislative and Regulatory Services Group at: + 1 202 533 4366, 1801 K Street NW, Washington, DC 20006.

Connect with us

 

Request for proposal

 

Submit