What to Do if You Get a Letter about the Premium Tax Credit

More IRS tax tips-

Some taxpayers will be receiving an IRS letter about the premium tax credit; this letter is also known as a 12C letter. Be sure to read your letter carefully and respond timely. Here are answers to questions you may have about this letter.

Why am I getting this letter?

The IRS sent you this letter because the Marketplace notified us that they made advance payments of the premium tax credit on your behalf to your or your family’s insurance company last year.

  • You also received this letter because – when you filed your individual 2015 tax return – you didn’t reconcile the advance payments of the premium tax credit. To reconcile, you use Form 8962, Premium Tax Credit, to compare the advance payments with the amount of your credit. Filing your tax return without including Form 8962 will delay your refund and prevent you from receiving advance credit payments in future years.

What do I need to do now?

  • You must respond to the letter, even if you disagree with the information in it. If you disagree, send the IRS a letter explaining what you think is in error.
  • If you received this letter, but didn’t enroll in health insurance through the Marketplace, you must let the IRS know.
  • The letter outlines the information you should provide in your response, which includes:
    • A copy of the Form 1095-A, Health Insurance Marketplace Statement, that your Marketplace sent earlier this year
    • A completed Form 8962
    • The second page of your tax return, which includes the “Tax and Credits” and “Payments” sections, showing the necessary corrections and your signature. You must complete either the line for “excess advance premium tax credit repayment” or the line for “net premium tax credit.”
  • If you originally filed a Form 1040EZ tax return, you must transfer the information from your Form 1040EZ to a Form 1040A and include it with your response to the 12C letter.

Is there anything else I need to know?

  • If you need your Form 1095-A, you should contact your Marketplacedirectly. The IRS does not issue and cannot provide that information to you.
  • Do not file a Form 1040X, Amended U.S. Individual Income Tax Return. Once you respond to the letter, the IRS uses the information you provide to process your tax return.
  • You can mail or fax your response. Be sure to include a copy of the letter with your response. Use the mailing address and fax number in the letter to respond.
  • For more information about the health care law and the premium tax credit, visit IRS.gov/aca for more information.

Health Care Law: Tax Considerations for Employers with Fewer than 50 Employees

Some of the tax provisions of the Affordable Care Act apply only to employers with fewer than 50 full-time or full-time equivalent employees.

Employers with fewer than 50 employees should take note of these tax considerations:

  • More than 95 percent of employers have fewer than 50 full-time employees or equivalents and are not subject to the employer shared responsibility provision.
  • Calculating the number of employees is especially important for employers that have close to 50 employees or whose workforce fluctuates throughout the year.
  • If an employer has 50 or fewer employees, it can purchase health insurance coverage for its employees through the Small Business Health Options Program.
  • Employers that have fewer than 25 full-time equivalent employees with average annual wages of less than $50,000 may be eligible for the small business health care tax credit. These employers are eligible for this credit if they cover at least 50 percent of their full-time employees’ premium costs, and the coverage is purchased through the SHOP.

All employers, regardless of size, that provide self-insured health coverage must annually file information returns for individuals they cover. The first returns are due to be filed in 2016 for the year 2015.

The cost of these health care benefits will be reported in box 12 of the Form W-2, with Code DD to identify the amount. In general, the amount reported should include both the portion paid by the employer and the portion paid by the employee. In the case of a health FSA, the amount reported should not include the amount of any salary reduction contributions.

For more information, see the Affordable Care Act Tax Provisions for Small Employers page on IRS.gov/aca.