Will the ARPA adjustment for Unemployment apply to the income limits for ACA? Could I end up getting a credit for the "overage" on my income due to the unemployment?

[katfuller84]

Because of the Unemployment credit though the CARES act I exceeded my estimate income for my ACA plan which meant I was penalized significantly in my federal return. Now that up to $10k is non-taxable (and I had taxes taken out of my unemployment) will I receive a refund?

[ColeenD3]

The IRS will work everything out, but it will take time. Yes, the ARPA applies to the PTC.

For the 2020 plan year, the answer is no. This is due to the American Rescue Plan (ARP), which was signed into law by President Biden in March 2021. The ARP provides a one-time relief from excess premium subsidy repayments, but it’s only for the 2020 plan year. It’s challenging to accurately project annual income in a normal year, but the COVID pandemic made it particularly challenging for 2020. To address this, Section 9662 of the ARP clarifies that for 2020 only, people do not have to repay excess premium subsidies. This is true regardless of whether their total household income exceeded 400% of the poverty level, and it’s true regardless of the reason their income ended up being larger than projected.

[katfuller84]

I read you response 3x and still a little confused. So, will I receive a refund of the penalty I was charged for underestimating my income for 2020?
In addition, will I receive a refund for the taxes withheld from my unemployment benefits?

[PattiF · Accepted solution]

This information from the IRS website states that there will be a refund of the excess advance premium tax credit repayment. The details are to be worked out.

Once the details are finalized for unemployment, you will receive a refund of the taxes that were withheld, since that will be excess taxes paid.

If you have already filed your taxes:

As part of the recently passed American Rescue Plan, the first $10,200 worth of unemployment payments are now tax-free for households with annual incomes less than $150,000. This expanded tax relief begins this year, starting for taxpayers filing returns after January 1, 2020.  The IRS will provide additional guidance about what you need to do to take advantage of this relief if you already filed your 2020 tax return. 

If you’d like to be updated when the information becomes available, please sign up here.

[richraz20]

When I filed my taxes March, I had included my unemployment and was taxed. Due to the amount that I owed, I wasn't able to pay it. I have been waiting to see if the amount owed would be adjusted since my unemployment was under the $10,000 and yet I haven't seen any adjustments. I know most were receiving refunds from over payment, however, wouldn't the amount due also be adjusted? I was hoping to owe less from this new law that was passed for 2020 taxes.

[xmasbaby0]

@richraz20

Did you get a letter from the IRS?

We are starting to see a lot of questions like yours.   Since you prepared your tax return and filed before the tax law changed for the tax on unemployment, you owed tax due and then learned you should not owe so much or might even get a refund---so you did not pay your tax due by the May 17 deadline.   Now the IRS computers are churning out notices to people who did not pay their tax due.

Eventually---sometime during the summer--- the IRS will recalculate the amounts of tax due or refunds for people whose returns were filed before the law changed----but it may take a few more months.

Call the number on the notice you received from the IRS----it will probably be hard to get through---but be tenacious.

[richraz20]

Thanks for the response. I did receive the letter but like you stated, I am sure IRS is backed up as well. I will just wait until I hear a response now that I know that it will still get reviewed.