Premium Tax Credit FAQ Update
The IRS has recently made some important updates to the FAQs on the Premium Tax Credit used for buying health insurance through the marketplaces established by the Affordable Care Act, also known as Obamacare.
What is the Premium Tax Credit?
The Premium Tax Credit serves as a refundable tax credit designed to assist eligible individuals and families with low or moderate income in affording health insurance purchased through the Health Insurance Marketplace, also known as the Exchange. The amount of the Premium Tax Credit is determined on a sliding scale, with those having a lower income receiving a larger credit to help offset their insurance costs.
Upon enrolling in Marketplace insurance, individuals have the option to let the Marketplace calculate an estimated credit. This estimated credit is then paid to the insurance company, reducing the monthly premiums (referred to as advance payments of the Premium Tax Credit or APTC). Alternatively, individuals can opt to receive the full benefit of the credit when filing their tax return for the year.
If individuals choose to have advance payments of the Premium Tax Credit made on their behalf, they will need to reconcile the amount paid in advance with the actual credit calculated when filing the tax return for the year. In either case, the completion of Form 8962, Premium Tax Credit (PTC), is required, and it should be attached to the tax return for the year.
These updates cover important information about who is eligible, unemployment compensation for the years 2020 and 2021, and details about reporting, claiming, and reconciling the tax credits. The IRS has also included new information about employer coverage for both employees and their family members.
These changes replace the previous FAQs from February 24, 2022, and include the following:
Updates to Eligibility FAQs (Questions 5, 7, 8, and 9).
Introduction of a new section on the Affordability of Employer Coverage for both Employees and their Family Members.
Revisions to existing FAQs (Questions 11, 15, and 18).
Addition of new FAQs (Questions 12, 13, 14, and 22).
Updates to Reporting, Claiming, and Reconciling FAQs (Question 30).
Revised FAQs on Unemployment Compensation for 2020 and 2021 (Question 45).
For more details, you can refer to the updated FAQs provided by the IRS.
Disclaimer: This article is for informational and educational purposes only and does not constitute legal tax advice. Advanced Tax Solutions is not liable or responsible for any damages resulting from or related to your use of this information. It is your responsibility to refer to official IRS documentation for information regarding any tax laws or tax information shown here.