Implementing Health Reform. In order to qualify for advance premium tax credits (APTC) for 2016, enrollees who received APTC during 2014 must file income taxes for 2014 and reconcile the APTC they received in 2014 with the premium tax credits to which they were actually entitled given their actual 2014 income.

Individuals who received APTC in 2014 received early in 2015 a form 1095-A from the marketplace informing them as to the APTC they received. They should have used this information to complete a form 8962, the form used to reconcile APTC received with the premium tax credits to which the individual are. Form 8962 is to be filed with an individual’s tax forms.

Most individuals who received APTC in 2014 completed this form and filed it on time. Many individuals who received APTC, however, have not filed taxes in the past and are unfamiliar with tax filing procedures. As of mid-July 2015, 340,000 of the 4.5 million taxpayers who had received APTC had requested an extension for filing their tax returns. About 710,000 had not yet filed a tax return, while approximately 760,000 had filed a tax return but had not filed a form 8962. If these individuals do not file their taxes and reconcile APTC and premium tax credits due by the end of 2014 they will not be able to receive APTC for 2016 until they do so.

The IRS sent out reminders in mid-July 2015 to individuals who had received 2014 APTC but had not yet filed their 2014 taxes. It also sent reminders to individuals who had received APTC and had filed for an extension urging them to file their taxes as soon as possible. The IRS will notify the marketplaces as to individuals who received APTC in 2014 but failed to file their taxes, but it takes the IRS three to ten weeks to process a tax return, and it only updates the marketplace on a monthly basis.

Marketplace Open Enrollment Notices

The federally facilitated marketplaces are currently sending out Marketplace Open Enrollment Notices (MOENs) to individuals who received APTC in 2014 but did not file taxes.

This form will tell consumers that they may lose their APTC eligibility for 2016 because of one of three reasons:

  • they failed to file their 2014 taxes,
  • did not authorize the marketplace to obtain their tax information,
  • or their tax information indicates their income is too high to qualify for APTC.

It will not explicitly tell consumers that they have not yet filed because that would illegally disclose tax information. Enrollees who are unsure whether they have filed or not can check their filing status at www.irs.gov/uac/Interactive-Tax-Assistant-(ITA)-1 or by calling the IRS at 1-800-829-1040. They cannot find out from the marketplace whether they have filed, however, because the marketplace is prohibited by law from disclosing tax information.

Enrollees who receive a MOEN may still file and reconcile and then return to the marketplace to enroll for 2016 if they do so by December 15, 2015. There will be a question on the 2016 application where a consumer can attest under penalty of perjury that he or she has in fact filed 2014 taxes and reconciled. The marketplace will also re-check IRS filing data in mid-December. If consumers either come to the marketplace and attest that they have filed and reconciled or are identified as having filed their taxes for 2014 through the mid-December recheck, they will be re-enrolled for 2016 without a gap in coverage.

Failure To File And Reconcile For 2014

Consumers who fail to file and reconcile for 2014 by December 15, 2015 may do so by January 15, 2016 and be covered beginning in February 2016, and those who fail to file and reconcile by January 15 may do so by January 31, 2016 and begin coverage on March 1. Consumers who fail to file by January 31 will be precluded from receiving APTC for 2016 unless they subsequently qualify for an open enrollment period.

In the end it is likely that a significant number of consumers will lose coverage because of failure to file their taxes. The ACA requires the reconciliation of APTC received with tax credits actually due a taxpayer. For this reconciliation to occur, it is necessary for enrollees to file their taxes. The ACA does not, however, explicitly require that taxpayers themselves perform the reconciliation calculation or that they file a form documenting the reconciliation.

The IRS has available to it through the 1095-A that it receives from the marketplace and the 1040 or other tax filings that it receives from a taxpayer the same information that a taxpayer has. The IRS could easily perform the calculation that the taxpayer carries out in filling out a form 8962 and notify the taxpayer of its calculations and of any additional money that the taxpayer owes or is entitled to, just as the IRS does when it calculates late filing penalties for taxpayers. In some complex situations, for example involving shared policies or marriages part way through a year, the taxpayer may need to provide additional information to ensure an accurate reconciliation. But in these situations the taxpayer could respond to the IRS notice and request a correction.

Consumers should not be disqualified from receiving APTC, and thus be left uninsured, simply because they failed to file form 8962 when in most instances the IRS already has all of the information that it needs to carry out the reconciliation calculation without that form.