Thursday, January 30, 2020

Did You Pay an Obamacare Penalty In the Past? There's Hope...

If you paid a penalty for not having health insurance in 2016 or later, there's a glimmer of hope...

In a court case: Texas vs. U.S. the Affordable Care Act individual mandate was ruled unconstitutional. There's a lot more to the decision, and it is far from final, but, if upheld, ACA penalties paid could be gotten back.

Here's the rub: The statute of limitations for claiming a refund for 2016 expires when tax season ends this April. So what do you do? You file a "Protective Claim" for a refund. You should do this for all years you paid the penalty, not just 2016. In Publication 17, the IRS describes how to do this:

"Generally, a protective claim is a formal claim or amended return for credit or refund normally based on current litigation or expected changes in tax law or other legislation. You file a protective claim when your right to a refund is contingent on future events and may not be determinable until after the statute of limitations expires. A valid protective claim doesn't have to list a particular dollar amount or demand an immediate refund. However, a valid protective claim must:
  • Be in writing and signed;
  • Include your name, address, SSN or ITIN, and other contact information;
  • Identify and describe the contingencies affecting the claim;
  • Clearly alert the IRS to the essential nature of the claim; and
  • Identify the specific year(s) for which a refund is sought.
Mail your protective claim for refund to the address listed in the Instructions for Form 1040X under Where To File. Generally, the IRS will delay action on the protective claim until the contingency is resolved."

Basically, file an amended return and write at the top of the front page: "Filing a Protective Claim for ACA penalty refund per Texas vs. U.S., No. 19-10011 (5th Cir. December 18, 2019)"
Mail to the address in the Amended return instructions. Then wait...and wait...If the court case is upheld all the way to the Supreme Court - REFUND!

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