Every year, the IRS sends a large number of reminders in the form of letters (numbered 5591, 5591A, or 5596) to taxpayers who received discounts on their health insurance premiums, but failed to file their tax return along with Form 8962. The purpose of this form is to reconcile the Advance Premium Tax Credit (APTC) with your Premium Tax Credit (PTC). This post is designed to help you understand what APTC and PTC are and why the IRS sends letters 5591, 5591A or 5596.
Premium Tax Credit (PTC)
A PTC is financial assistance given to taxpayers who enroll or whose family members enroll in a qualified health plan offered through the marketplace. They receive it either in the form of a rebate on the amount of tax owed or an increase in the refund amount of taxpayers, thereby reducing their overall tax burden. To get the benefit of PTC on your tax return, you need to file Form 8962.
Advance Payment Premium Tax Credit (APTC)
The advance payments made to a tax payers insurance pays for their individual and/or their family member’s premiums for that year are known as Advance Payment Tax Credit (APTC). These payments may pay the premium amount in part or in full.
If APTC was paid for a taxpayer or one of their family members, they are required to file Form 8962. The purpose of filing this form is to compare APTC paid with the PTC the taxpayer was eligible for, in the financial year. If the APTC is more than PTC, the taxpayer received more than they were eligible for. In some cases, taxpayers must repay the excess amount. If the PTC is more than APTC, the taxpayer received less than what they were eligible for and they can claim the leftover amount as a reduction in the amount of taxes they are supposed to pay, or as an increase in the refund amount that the IRS owes to the taxpayer for the financial year.
This form is needed to complete Form 8962. Health Insurance Marketplace provides this to individuals, to help them claim (PTC) or reconcile it with the advance payment tax credit (APTC) in order to file accurate tax returns.
A Word of Advice
It is essential for you to file Form 8962 to inform the IRS of any advance premium tax credit that you have received. This way the IRS is aware you received an advance credit and not give you further rebate on your taxes or any additional amount on your tax return. If you fail to do so, you may be taking more benefits from the IRS than what you are entitled to, and therefore, you will not be eligible for advance payments of the premium tax credit the following year. In addition, you may also be contacted by the IRS for repayment of advance payments of premium tax credits that you have already received.
Dealing with the IRS is complicated. Let us guide you through the maze. Meet with Nick for your FREE consultation (972) 426-2553.