Premium Tax Credit: Upcoming Tax Surprise?

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Here is a quick quiz to see if you are at risk Category: Deductions

Based upon a recent report given to the Federal government evaluating data inconsistencies with the new health insurance market exchanges, over a million taxpayers could owe the government money at tax time. Here is a quick quiz to see if this risk applies to you. Q1. Did you apply for health care insurance on either the new Federal Marketplace or a state run insurance exchange? If no. STOP. The tax surprise with the Premium Tax Credit does not apply to you. If yes. Continue. Q2. Did you reduce your health insurance premium by applying the new Premium Tax Credit towards your health insurance premium's monthly bill? If no, congratulations, there is no tax credit to pay back. Even better, please make a note to review the possibility of receiving the Premium Tax Credit when you file next year’s income tax return. If yes. Continue. Result: You may be subject to a tax bill when you file next year’s tax return. This could happen if you are one of the millions receiving a reduced health insurance premium because a monthly amount is being sent by the Federal Government to your health insurance company to pay part of your insurance premium. A government report in June, 2014 suggests that over half of those who claimed eligibility to receive the tax credit have data inconsistencies with information in government databases. Next Steps If you have been using the health insurance Premium Tax Credit, conduct a review of your enrollment form. If it is not accurate, make the necessary corrections as soon as possible. This will help your potential repayment problem from getting any bigger. Finally, conduct a tax review to determine if you will owe money as a possible payback of this credit at the end of the year.