Some taxpayers will be receiving an IRS letter about the premium tax credit because they failed to properly reconcile the 1095-A information on their tax return; this letter is also known as a 12C letter. Be sure to read your letter carefully and respond timely. Here are answers to questions you may have about this letter. The IRS sent you this letter because the Health Insurance Marketplace notified them that they made advance payments of the premium tax credit on your behalf to you or your family’s insurance company last year.
Locate your 1095-A form or call the Marketplace for a replacement if you lost or misplaced it. Then call us.
Background
Qualifying taxpayers who enroll in health insurance through a Marketplace can receive advance payments of the premium tax credit. The Marketplace makes advance credit payments directly to the health insurance company to reduce the out-of-pocket cost of the taxpayer’s premiums. The Marketplace determines eligibility for advance credit payments when the taxpayer enrolls or enrolls a family member in Marketplace health insurance. The Marketplace estimates the amount of premium tax credit a taxpayer will qualify for using the taxpayer’s estimated household income and family size. The estimated premium tax credit is the maximum amount of advance credit payments for which the taxpayer is eligible. The taxpayer then chooses to have all, some, or none of the advance credit payments paid to the insurance provider.
Taxpayers who receive advance credit payments must compare and reconcile their advance credit payments to the actual premium tax credit they are allowed for the year. They do this reconciliation on Form 8962.
If a taxpayer’s advance credit payments are more than his or her premium tax credit, the taxpayer must repay the excess advance credit payments (the amount of the repayment may be limited for taxpayers with household income of less than 400 percent of the federal poverty line for their family size).
If the taxpayer’s advance credit payments are less that his or her premium tax credit, the taxpayer will get the benefit of the increased tax credit, either as a reduction in the amount of tax owed, or an increased refund.
When the Health Insurance Marketplace pays advance payments of the premium tax credit on your behalf, you must file Form 8962 to reconcile the advance payments to the actual amount of the Premium Tax Credit that you are eligible for based on your actual household income and family size. You must use the Form 1095-A, Health Insurance Marketplace Statement, sent to you from your Health Insurance Marketplace to complete Form 8962.
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