What Happens If You Receive Excess Tax Refund From Premium Tax Credits?

Receiving a tax refund is usually good news, but it can be a bit concerning if the amount seems more than what you expected. If you’ve recently filed your taxes and received a refund that includes excess Premium Tax Credits (PTC), here’s what you need to know:

Understanding Premium Tax Credits

The Affordable Care Act (ACA) provides financial assistance to individuals and families who purchase health insurance through the Health Insurance Marketplace. This assistance is known as Premium Tax Credits (PTC) and is designed to make health insurance coverage more affordable.

When you file your taxes, you must report the amount of PTC you received throughout the year. If you received more PTC than you were eligible for, the IRS will adjust your tax refund accordingly. This can result in a lower refund or even a balance due.

What to Do If You Receive Excess Refund

If you received a larger tax refund than you were due because of excess PTC, it’s important to take the following steps:

– Contact the IRS: Inform the IRS that you received an overpayment. You can do this by calling the IRS at 1-800-829-1040.
– Explain the Situation: Explain to the IRS representative how the overpayment occurred. You may need to provide documentation, such as your 1095-A form or proof of when you enrolled in or canceled your health insurance.
– Follow the IRS Instructions: The IRS will provide instructions on how to repay the overpayment. Typically, you will need to send a check or money order to the IRS.

Consequences of Not Repaying

If you do not repay the excess refund, the IRS may take steps to collect the money. This could include:

– Offsetting future refunds: The IRS may use any future tax refunds you receive to offset the overpayment.
– Levy on assets: The IRS may seize your property, such as your bank accounts or wages, to collect the debt.
– Penalty: The IRS may charge you a penalty for not repaying the overpayment.

Seeking Professional Assistance

If you are unsure about how to handle an overpayment of PTC, it’s advisable to seek professional assistance from a tax professional or a licensed insurance agent. They can help you navigate the process and ensure that you fulfill your obligations to the IRS.