Has the Repayment of Advanced Premium Tax Credit in 2020 Been Suspended?

Yes. Repayment of Advanced Premium Tax Credit (APTC) in 2020 was suspended by the American Rescue Plan Act of 2021. Prior to the act, depending on the taxpayer’s excess APTC, the taxpayer was required to increase their tax liability.

Excess APTC is the difference between the taxpayer's APTC and PTC whereby the APTC is more than the PTC.

The IRS informed taxpayers that it is no longer necessary to file Premium Tax Credit, Form 8962 or report excess APTC on their Form 1040-SR, Schedule 2, Line 2 or Form 1040.

A taxpayer with Health Insurance Cover that is bought from a Health Insurance Marketplace has the right to claim a Premium Tax Credit. The taxpayer has to reconcile their PTC with their APTC. To know the amount of their PTC, a taxpayer will need to use Form 8962, Premium Tax Credit.

The computation that results from the reconciliation process helps the taxpayer determine whether to increase their tax liability wholly or by a portion of their excess APTC or claim a net PTC.

Using the Statement from the Health Insurance Marketplace and information on Form 1095-A, a taxpayer can be able to know the amount of allowable PTC then use to reconcile the APTC.

Taxpayers who claim a net PTC for the year 2020 are required to file Form 8962 while filing their 2020 tax return. The instructions for Form 8962 provide more information.

If a taxpayer claims a net PTC they must provide all the information required of them by the IRS before completing their tax return processing.

How do you prepare Form 8962 for 2020 returns?

In the ProWeb, follow the instructions below to prepare Form 8962 for 2020 returns:

Go to the return’s Main Menu
Proceed to the Health Insurance area
Provide responses to the Health Insurance Questionnaire. Yes is for taxpayers who bought marketplace health insurance.
Ensure that the Household Members covered by the insurance plan are the correct ones
Using the taxpayer’s Form 1095-A, enter the APTC information
If it is required, adjust the Dependant’s Modified AGI
Go to the Summary/Print section. Alternatively, you can print the return to PDF by selecting Preview Return that is at the top of the page.
On Part III line 27 of Form 8962, the calculated amount of excess APTC is shown while on line 29, the repayment is suspended and replaced with a zero amount.

If a Taxpayer either has an excess APTC for 2020 or they have filed their 2020 tax return, they won’t be required to contact the IRS or file amended tax return. This will have the following effects:

The IRS will completely cancel out the repayment amount so that it reads zero. The taxpayer won’t be required to do anything. The IRS will not require Form 8962 to process tax returns.
Those taxpayers who had paid their excess APTC on their 2020 return will get reimbursed that amount by the IRS.
Taxpayers should pay no attention and totally disregard any letter sent to them concerning a missing Form 8962.

Take note that it is only the tax year 2020 APTC that is affected by this change. Previous years are to be treated normal and without the special treatment accorded to tax year 2020. It therefore goes without saying that any taxpayer who had, in a previous tax year, enjoyed the benefit of APTC must file Form 8962. This is necessary so as to reconcile their APTC with their PTC for the years before 2020.

Processing of previous year’s taxes are still undertaken by the IRS. Should there be any missing information required by the IRS for processing of a return, they will send a letter about 2019 Form 8962 to the concerned taxpayer. Upon receiving the Form 8962, a taxpayer should fill in the required information to help the IRS finish processing the tax return.

The IRS also issues refunds to the taxpayers should they be eligible for it.

Check out Form 8962, Premium Tax Credit and FactSheet 2021-08.

Click here for more information on 2020 APTC.