Understand ACA: Avoiding Audits for Incorrect Healthcare Coverage Credits

Introduction

Confused about health insurance tax credits under the Affordable Care Act (ACA)? This blog explores a recent post and offers insights into the complexities of claiming these credits, helping you avoid potential IRS audits.

The Case Study

A divorced individual claimed a child as a dependent on their tax return and provided health insurance through their employer. However, the child’s ex-spouse also received a premium tax credit (PTC) for the child’s coverage purchased through healthcare.gov. This triggered an IRS audit.

Understanding Premium Tax Credits

PTC is a government subsidy available to individuals and families with low-to-moderate incomes to make health insurance more affordable. To qualify, you must meet certain income thresholds and enroll in a qualified health plan through a Health Insurance Marketplace.

Key Issues

Exclusive Coverage: You can’t receive PTC if you have access to affordable employer-sponsored health coverage.
Duplicate Coverage: Children can’t receive PTC coverage if their parents provide insurance through their employer.
Amended Returns: Amending a tax return to remove the dependent claim may not resolve the issue if PTC has already been claimed.

Expert Advice

Verify Coverage: Ensure that all family members have valid health insurance coverage and that it aligns with your divorce decree.
Communicate with Ex-Spouse: Discuss health insurance arrangements with your ex-spouse to avoid discrepancies.
Consult a Professional: Seek guidance from a tax advisor or licensed insurance agent to navigate ACA complexities.
Understand Form 8962: This form is only required if you received PTC or are validating APTC. If you didn’t claim PTC, don’t complete this form.
Contact the IRS: Call or write the IRS to clarify the issue promptly and provide the necessary documentation.

Conclusion

Claiming ACA health insurance credits can be complex. By avoiding common pitfalls, such as duplicate or ineligible coverage, you can minimize the risk of IRS audits. Remember, accurate reporting and open communication are key to navigating ACA-related tax issues.

Call to Action

Don’t let ACA-related issues weigh you down. Contact a licensed insurance agent to review your health insurance coverage options and navigate the complexities of the ACA. Protect your finances and stay compliant with tax laws.