What is an Excess Premium Tax Credit?
Under the American Cares Act (ACA), people would estimate their income for the coming year and the marketplace would estimate how much premium tax credit could be advanced to the individual per month. When the individual filed their return, they would reconcile their actual income with the amount they received and pay back any excess credit they received.
Do I need to repay excess Premium Tax Credit in 2021?
Yes, taxpayers with excess Premium Tax Credit will have to repay the amounts on their 2021 returns subject to the previous repayment limitations.
Excess Premium Tax Credit information for 2020 only:
Under the new COVID-19 relief bill (American Rescue Plan), the requirement to pay back the excess has been eliminated for 2020. Because of the timing of the bill, tax forms and some software programs are not reflecting these changes.
What if I already filed?
Taxpayers who filed a 2020 tax return and reported an excess advance premium tax credit repayment on Line 29 of Form 8962, Premium Tax Credit, should not file an amended tax return only to get a refund of this amount.
The IRS has announced the following guidance "Taxpayers who have already filed their 2020 tax return and who have excess APTC for 2020 do not need to file an amended tax return or contact the IRS. The IRS will reduce the excess APTC repayment amount to zero with no further action needed by the taxpayer. The IRS will reimburse people who have already repaid any excess advance Premium Tax Credit on their 2020 tax return. Taxpayers who received a letter about a missing Form 8962 should disregard the letter if they have excess APTC for 2020. The IRS will process tax returns without Form 8962 for tax year 2020 by reducing the excess advance premium tax credit repayment amount to zero." Please note that the refund for the Excess Premium Tax Credit may be issued as a separate refund from the IRS and not included in your original refund.
How do I know if my original return included the repayment?
On the original accepted return, check line 17 of the 1040 Form for an amount carried from Schedule 2 , Line 3.
On Schedule 2, the Excess Premium Tax Credit is listed on line 2.
If you have an amount on these lines, your refund in the account would differ by this same amount if you filed before the IRS made the changes.