Unemployment and Premium Tax Credit for 2021

[ikram1998]

Hello We have Health insurance thru Obamacare (health care market place). If me or my spouse received unemployment income any time during 2021 and we are filing joint return then what I heard was no matter what the actual income of the couple was they only count 133% of federal poverty line for the calculations of Premium Tax credit eligibility for 2021. If that is true, then all our Premiums we have been paying this year thru market palce should be returned back when we eventually file the 8962 form next year, Correct ?

[JandKit]

Hi IKRAM 1998,

The American Rescue Plan Act of 2021, enacted on March 11, 2021, suspended the requirement to repay excess advance payments of the premium tax credit (excess APTC)  for tax year 2020. 

If you already filed a 2020 return and reported excess APTC or made an excess APTC repayment, you don’t need to file an amended return or take any other action.

If you have not filed your 2020 tax return, here’s what to do:

• If you have excess APTC for 2020, you are not required to report it on your 2020 tax return or file Form 8962, Premium Tax Credit.
• If you’re claiming a net Premium Tax Credit for 2020, you must file Form 8962, Premium Tax Credit 

I was able to find no reference to the Premium Tax Credit for 2021. To date, there is no word as to the treatment of the Premium Tax Credit as related to unemployment received in 2021. I do submit this link for your reference.

It is an excellent questions and certainly worth the time and effort!

https://www.irs.gov/affordable-care-act/individuals-and-families/premium-tax-credit-claiming-the-cre...

JandKit

[CharlesO]

Hi Ikram,

What changed in the Premium Tax Credit for 2020 due to the American Rescue Plan Act is that if you received excess advanced payments (the subsidy to reduce your premium) you will not be required to repay the excess.

IRS Premium Tax Credit 

So you won't get all of your premiums back but you will not be required to pay anything back. If your income was reduced in 2020 vs what you reported when you signed up for the income it is still possible that you paid too much and will get a credit on your return.

I hope this helps.

[ikram1998]

Hello Charles, Your answer was for the year 2020 taxes. But my question was specific to 2021 tax year that we will file in 2022. Can you pls answer that in that context ? 

[AmeliesUncle]

Yes, for 2021 (and ONLY 2021) if you collect unemployment, your income will be considered as 133% of the Federal Poverty Level for purposes of calculation the Premium Tax Credit, regardless of your actual income.

[bestselflife]

@AmeliesUncle do you have a reference for this? Thank you!

[AmeliesUncle]

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@bestselflife wrote:

@AmeliesUncle do you have a reference for this? Thank you!

---

Section 9663 of the American Rescue Act added/changed subsection (g) of Section 36B of the tax code.

[JandKit]

Here is information that may be helpful to you. It was found on the CMS website:

• Consumers who received or were approved to receive UC for any week beginning during 2021 will be treated as if their household income is no greater than 133 percent FPL for purposes of PTCs or CSRs, as applicable.
•  The taxpayer may be eligible for a premium tax credit (PTC) that covers the entire premium cost for the benchmark Marketplace plan for the whole household, regardless of the taxpayer’s actual household income amount.
• Consumers who have received or been approved to receive UC for any week beginning during 2021 should return to HealthCare.gov after July 1 and resubmit their applications. *Please note that these new benefits are only available for 2021. Consumers who re-enroll into 2022 coverage may be determined eligible for less financial assistance due to the expiration of these benefits.

Website: https://www.hhs.gov/guidance/sites/default/files/hhs-guidance-documents/UC%2C%20APTC%2C%20and%20CSRs...

@bestselflife 

[Avaldrummer]

Hello, 

Per the message below regarding individuals that received unemployment compensation for 2021:

•  The taxpayer may be eligible for a premium tax credit (PTC) that covers the entire premium cost for the benchmark Marketplace plan for the whole household, regardless of the taxpayer’s actual household income amount.

Does this mean that the there will be no payback requirement of the PTC if the actual household income is substantially increased by the end of 2021?  I understand the PTC will be figured on no more than 133% of the FPL...but I am trying to understand if a payback of the subsidy will be required if the income increases to over 400% of the FPL.  

Thank you! 

[AmeliesUncle]

Yes, if you collect unemployment in 2021, that applies (at least according to current law).

[TaxSpec]

The American Rescue Plan Act of 2021 (ARPA) removed the “subsidy cliff” for 2021 and 2022 and allowed income earners above the 400% FPL to qualify for some subsidy assistance. Before the act, there was no assistance provided.

Suspension of repayment of the excess APTC applied to tax year 2020 only and means that taxpayers must repay excess APTC in 2021 after reconciling the payment using Form 8962.

Allowing all persons, regardless of income, to qualify for a PTC for premium amounts in excess of 8.5% means repayment amounts triggered by reconciliation will generally be less.

If the APTC exceeds the PTC, the taxpayer must generally repay the difference, as an additional tax. While the repayment is generally limited for those with income below 400% of the FPL, taxpayers with income at or above 400% of the FPL must repay the entire APTC. This “subsidy cliff” has caused many taxpayers with small amounts of additional income to face large unexpected tax bills. Courts have ruled that the IRS has no discretion to waive this repayment, regardless of circumstance.

Further information can be found here:

https://www.calt.iastate.edu/blogpost/reviewing-new-healthcare-options-2021-and-2022

[jbrooker7071]

Hello All!

CONFIRMATION OF BASELINE KNOWLEDGE: My name is Joshua Brooker. I am a broker and have been since 2011. I hold Insurance, Investment, and Tax licenses. I currently sit in Legislative roles with the National Association of Health Underwriters, and Health Agents for America. As well, I'm in government working groups with CMS(the agency behind Healthcare.gov) and Pennie at the state level. Additionally, we have clients in 11 states and the individual markets are our primary focus.

1. Section 2305 of the American Rescue Plan Act confirms the 133% FPL understanding referenced by the person who posed the question.

Source: https://www.congress.gov/bill/117th-congress/house-bill/1319/text#:~:text=new%20%0Asubsection%3A%0A%...

We actually read ARP cover to cover and expanded on the implications here: https://www.pahealthadvocates.com/post/unpacking-arpa-consumer-edition

2. Both Federal(Healthcare.gov) and State(Pennie, CoveredCalifornia, GetCoveredNJ, beWellNM...etc.) systems implemented this regulation pretty quickly by adding a simple button to their system indicating that so long as you are ELIGIBLE for unemployment income in 2021 that you could receive this benefit. This was exclusively available only if the primary filer and spouse were eligible. For Instance, if you and a spouse were working, but your child who is an adult-dependent received unemployment, this would not apply. But if either you or your spouse were eligible then eligibility would apply. Benefits could be available for as little as 1 week and eligibility spanned the full year. 

3. The Reconcile Process: Unlike the federal and state-based systems that clearly made this benefit available, the IRS was less clear for reporting purposes. There is not a box on a form designated to have a consumer attest they were eligible for unemployment. Instead, on form 8962, the form used to report your tax credits, Line 5 says "(see instructions)" The instructions advise the person preparing the return to MANUALLY override line 5 to 133 IF you were eligible to receive unemployment. We are currently doing a national initiative because this was not clearly articulated in annual continuing education for preparers, and it is tucked away.

Source: https://www.irs.gov/forms-pubs/changes-to-the-instructions-form-8962-2021

When ARP was being finalized in March 2021, the Congressional Budget Office anticipated 1.3 million consumers would benefit from this provision. This is only true if the form is properly filled out and consumers don't wrongfully believe they owe back because this change isn't disclosed to the consumer or their council.

https://www.healthaffairs.org/do/10.1377/forefront.[phone number removed]37/full/

Good luck! 

[riald409]

Did the subsequently enacted (August 2022) Inflation Reduction Act in any way extend the preferential treatment to individuals that receive unemployment benefits in a subsequent year (other than 2021 say, 2022 or 2023) in such that they would also be treated (indifferent to the amount of their actual income) as if their income was 133% of the Federal Poverty Level for purposes of the Premium Tax Credit?

[AmeliesUncle]

No it did not.

It extended some other changes to the Premium Tax Credit, but it did not extend the provision related to collecting Unemployment.