ACA Tax Credit Case Likely Just the Beginning, Practitioners Say, Tax Notes

Tax Notes reports, in an article captioned “ACA Tax Credit Case Likely Just the Beginning, Practitioners Say,” that (a) couple required to pay back nearly $13,000 in advance premium tax credits may just be the tip of the iceberg in cases involving health insurance exchanges.

The article begins as follows:

Joe Kristan of Roth & Co. PC said Walker v. Commissioner, T.C. Summ. Op. 2017-50 (2017 TNT 133-29), is the first of these cases he’s seen, but that it’s inevitable there will be many more like it.

“We’re starting to see these cases work through the system where people find that their income is higher than they expected, or someone messes up the estimate computation upfront on their eligibility for the credit, and all of a sudden someone that’s a middle-income taxpayer finds that they have to send $ 13,000 to the IRS,” Kristan said, adding that cases like this could add fuel to the fire for efforts to repeal or modify the Affordable Care Act.

In Walker, the taxpayers enrolled in health insurance in 2014 through a health insurance exchange called Covered California. They received a monthly APTC of $ 1,077, which covered about 80 percent of their monthly premium. The Walkers’ modified adjusted gross income for 2014 was $ 75,199, which exceeded 400 percent of the federal poverty line for that year. Generally, taxpayers are only eligible for the premium tax credits if their household income is at least 100 percent but not greater than 400 percent of the federal poverty line.

The IRS issued a deficiency for the full $ 12,924 in APTCs that the Walkers received, which the tax court upheld.

“We note that it appears that Covered California may have incorrectly informed petitioners that they were eligible for the APTC for 2014,” the court said. “We are not unsympathetic to petitioners’ plight; however, we are bound by the statute as written and the accompanying regulations when consistent therewith.”

See full article at Tax Notes Today (Subscription Required). 

Posted by Lewis J. Saret, Co-General Editor, Wealth Strategies Journal.