Tag Archives: Premium Tax Credit

The American Rescue Plan has retroactive tax benefits

May 25, 2021

The IRS reminds taxpayers who still haven’t filed, that several provisions of the American Rescue Plan affect their 2020 tax returns.  

One provision excludes up to $10,200 in unemployment compensation from income. Another provision benefits many people who purchased subsidized health coverage through either federal or state Health Insurance Marketplaces. The law also includes a third round of Economic Impact Payments, currently going out to eligible Americans, that are generally equal to $1,400 per person for most people. The IRS will automatically provide these benefits to eligible filers.

Most taxpayers who have already filed their 2020 returns should not file amended returns, file refund claims, or contact the IRS about obtaining these newly enacted tax benefits.  These actions will not speed up a future refund. In fact, they could even slow down an existing refund claim.

Some unemployment compensation not taxed for many
For tax year 2020 only, the first $10,200 of unemployment compensation is not taxable for most households. This tax benefit is available only to those whose modified adjusted gross income is below $150,000 during 2020. The same income cap applies to all filing statuses.

This means that those eligible who haven’t yet filed a 2020 return can exclude the first $10,200 of total unemployment compensation received from their income and pay tax only on the difference. For couples, the $10,200 exclusion applies to each spouse. Taxpayers can visit IRS.gov for details.

For any eligible taxpayer who has already filed a tax return and reported their total unemployment compensation as income, the IRS is automatically adjusting their return and providing them this tax benefit. Refunds, based on this adjustment, are being issued in May and will continue through the summer. Refund amounts will vary and not all adjustments will result in a refund.

Repayment of excess advance premium tax credit suspended
Taxpayers who purchased health insurance through a federal or state Health Insurance Marketplace for insurance in 2020 don’t need to repay their 2020 excess advance payments of the premium tax credit and will need to attach Form 8962, Premium Tax Credit, when they file their 2020 return only to claim an additional credit. They may use Form 8962 to figure the amount of the premium tax credit  they qualify for based on their 2020 tax information and reconcile it with any advance premium tax credit that was paid for them through the Marketplace. If the PTC based on their 2020 tax information is more than the APTC, they can claim a net premium tax credit on Form 8962 and must file Form 8962 when they file their 2020 tax return.

However, if the APTC was more than their allowable PTC based on their 2020 tax information, known as the excess APTC, the new law suspends the requirement to repay excess APTC for 2020. This means that taxpayers with excess APTC for 2020 do not need to report the excess APTC or file Form 8962.

Taxpayers who have already filed should not file an amended tax return. The IRS will automatically reduce the repayment amount to zero for anyone who already reported excess APTC for 2020. In addition, the agency will automatically reimburse anyone who has already repaid their 2020 excess APTC when they filed.

You may contact Tax On Wheels, LLC at 803 732-4288 if we can assist you with this or any other tax matter.

Repeal of Obamacare or the dog that caught the car

November 12, 2016

Much like the dog that spends its existence instinctively chasing cars, not really even understanding why, but doing so just because that is what it does, the republican party has existed, almost to the total exclusion of everything else, to repeal Obamacare.

When I was a much younger man, with way more time on my hands, whenever I found my car being chased by a dog, I would simply stop the car to see what would happen.  Invariably, the answer would always be not much.  The dog would take on a perplexed demeanor, turn around in a circle a few times as if chasing its tail, let out a few half hearted barks, make eye contact with me as if to say “you are not good at this game at all”, and then head on back to the house to await the next participant.

I suspect that something very similar is about to happen with the repeal of Obamacare.

For the record, I think Obamacare has been an excellent addition to the safety net of this country and benefits a great many people for various reasons, including many who are dead set on having it repealed. While I don’t have Obamacare coverage, I benefited from Obamacare by being able to keep my kids insured on my policy while they were in college for a very affordable price.  Thanks Obama!

I also, think Obamacare has been one giant pain in the ass, particularly from a tax standpoint.  Clients typically don’t have the Obamacare form you need to properly complete their tax return so they have to go talk to the HR lady to get the proper form.  She promises to get them the form next week, which doesn’t really help us much since we are doing your tax return this week.  Thanks Obama! Sigh!

But I understand that Obamacare is the way it is, because that is the way it has to be in order to work, anything less is useless, unless you intend to have a medicare style system for everyone.  There have to be mandates and subsidies and penalties otherwise everyone will try to game the system even more than they do now.  Repealing Obamacare root and branch will throw millions of people to the wolves and not just the poor people on medicaid.  People with pre existing conditions will once again be unable to purchase private health insurance at any price.  Talk about your job killing turmoil.

I have no inside knowledge or contacts, but I suspect that we are about to see what we should have seen all along, new tweaking legislation that fixes the problems that everybody knows should be fixed in the Affordable Care Act.  Perhaps we will see  the launching of “Obamacare lite”.  It will have a great new bell and a shiny new whistle and of course we will have to change the name, Trumpcare comes to mind.  But underneath the hood, it will look pretty much the same as classic Obamacare or it will be a complete waste of time and resources.  Obamacare is a giant Jenga board and if you pull the wrong pieces from the structure the whole thing comes tumbling down.  We may find that those who hate Obamacare with a passion will look back with fondness on the good old days when we had Obamacare.  Let’s hope the new regime knows what they are doing.

So now it appears the driver of the Obamacare car has just stopped and the Obamacare chasing GOP has finally caught the car.  Now what?

As we say in the south, “We fixin to find out”.

Be careful what you wish for, you just might get it.

Six Tips on Who Should File a 2014 Tax Return

January 22, 2015

Most people file their tax return because they have to, but even if you don’t, there are times when you should. You may be eligible for a tax refund and not know it. This year, there are a few new rules for some who must file. Here are six tax tips to help you find out if you should file a tax return:

1. General Filing Rules.  Whether you need to file a tax return depends on a few factors. In most cases, the amount of your income, your filing status and your age determine if you must file a tax return. For example, if you’re single and 28 years old you must file if your income was at least $10,150. Other rules may apply if you’re self-employed or if you’re a dependent of another person. There are also other cases when you must file. Go to IRS.gov/filing to find out if you need to file.

2. New for 2014: Premium Tax Credit.  If you bought health insurance through the Health Insurance Marketplace in 2014, you may be eligible for the new Premium Tax Credit. You will need to file a return to claim the credit. If you purchased coverage from the Marketplace in 2014 and chose to have advance payments of the premium tax credit sent directly to your insurer during the year you must file a federal tax return. You will reconcile any advance payments with the allowable Premium Tax Credit. Your Marketplace will provide Form 1095-A, Health Insurance Marketplace Statement, to you by Jan. 31, 2015, containing information that will help you file your tax return.

3. Tax Withheld or Paid.  Did your employer withhold federal income tax from your pay? Did you make estimated tax payments? Did you overpay last year and have it applied to this year’s tax? If you answered “yes” to any of these questions, you could be due a refund. But you have to file a tax return to get it.

4. Earned Income Tax Credit.  Did you work and earn less than $52,427 last year? You could receive EITC as a tax refund if you qualify with or without a qualifying child. You may be eligible for up to $6,143. Use the 2014 EITC Assistant tool on IRS.gov to find out if you qualify. If you do, file a tax return to claim it.

5. Additional Child Tax Credit.  Do you have at least one child that qualifies for the Child Tax Credit? If you don’t get the full credit amount, you may qualify for the Additional Child Tax Credit.

6. American Opportunity Credit.  The AOTC is available for four years of post secondary education and can be up to $2,500 per eligible student.  You or your dependent must have been a student enrolled at least half time for at least one academic period. Even if you don’t owe any taxes, you still may qualify. However, you must complete Form 8863, Education Credits, and file a return to claim the credit. Use the Interactive Tax Assistant tool on IRS.gov to see if you can claim the credit. Learn more by visiting the IRS’ Education Credits Web page.

The instructions for Forms 1040, 1040A or 1040EZ list income tax filing requirements. You can also use the Interactive Tax Assistant tool on IRS.gov to see if you need to file. The tool is available 24/7 to answer many tax questions.

As always, Tax On Wheels, LLC is available to assist you with all of your tax filing needs.  We can be reached at 803 732-4288.