The ACA and Premium Tax Credits

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Matthew L. Roberts

Matthew L. Roberts

Principal

469.998.8482
mroberts@freemanlaw.com

Mr. Roberts is a Principal of the firm. He devotes a substantial portion of his legal practice to helping his clients successfully navigate and resolve their federal tax disputes, either administratively, or, if necessary, through litigation. As a trusted advisor he has provided legal advice and counsel to hundreds of clients, including individuals and entrepreneurs, non-profits, trusts and estates, partnerships, and corporations.

Having served nearly three years as an attorney-advisor to the Chief Judge of the United States Tax Court in Washington, D.C., Mr. Roberts leverages his unique insight into government processes to offer his clients creative, innovative, and cost-effective solutions to their tax problems. In private practice, he has successfully represented clients in all phases of a federal tax dispute, including IRS audits, appeals, litigation, and collection matters. He also has significant experience representing clients in employment tax audits, voluntary disclosures, FBAR penalties and litigation, trust fund penalties, penalty abatement and waiver requests, and criminal tax matters.

Often times, Mr. Roberts has been engaged to utilize his extensive knowledge of tax controversy matters to assist clients in their transactional matters. For example, he has provided tax advice to businesses on complex tax matters related to domestic and international transactions, formations, acquisitions, dispositions, mergers, spin-offs, liquidations, and partnership divisions.

In addition to federal tax disputes, Mr. Roberts has represented clients in matters relating to white-collar crimes, estate and probate disputes, fiduciary disputes, complex contractual and settlement disputes, business disparagement and defamation claims, and other complex civil litigation matters.

The ACA and Premium Tax Credits

Abrego v. Comm’r, T.C. Memo. 2020-87 | June 16, 2020 | Copeland, J. | Dkt. No. 23713-17

Short SummaryDuring 2015, Mr. Abrego was a driver and, in his spare time, ran a small business preparing tax returns, mostly for friends and family members.  Mrs. Abrego was a housekeeper.  Although Mr. Abrego was eligible for Medicare during 2015, the Abregos nevertheless purchased private health insurance because they expected to receive the premium assistance tax credit (PTC) under the Patient Protection and Affordable Care Act (ACA).  The health plan the Abregos enrolled in required them to pay monthly premiums of $1,029.01.

Under the ACA, the U.S. Department of Treasury offset the cost of the Abregos’ plan premiums by making monthly advance PTC payments to the plan on the Abregos’ behalf.  Thus, Treasury paid the plan 10 monthly installments of $921 for a total of $9,210 during 2015.  During those 10 months, the Abregos paid the difference, or $108.01 per month.

The Abregos filed their 2015 tax return on January 24, 2017.  They did not request an extension of time to file because they expected to receive a refund.  On their return, the Abregos left blank Line 69, Net Premium Tax Credit.  The Abregos also failed to attach to their return Form 8962, Premium Tax Credit, which is used to reconcile the amount of the advanced PTC a taxpayer receives with the amount of the PTC to which the taxpayer is ultimately entitled.

The IRS issued the Abregos a notice of deficiency determining that the Abregos:  (1) received advanced PTC payments of $9,210, but (2) were not entitled to any PTC for 2015, and (3) were responsible for repaying the excess of advanced PTC paid on their behalf for 2015, $9,210, over the PTC to which they were entitled, zero.  Moreover, the IRS determined that the Abregos were ineligible for the PTC because their income exceeded 400% of the federal poverty line for a family of two in California, where they resided.

Key Issue:  Whether the Abregos:  (1) received excess advance payments of the premium assistance tax credit (commonly known as the premium tax credit or PTC) allowed under section 1412 of the ACA, which in turn increased their tax due by the amount of the excess, subject to the limitations set forth in Section 36B(f)(2)(B); and (2) are liable for the addition to tax under Section 6651(a)(1) for filing their 2015 tax return late.

Primary Holdings

Key Points of Law:

Insight The Abregos case shows the difficulty of determining with specificity, at least in some cases, whether a taxpayer qualifies for the advanced PTC and PTC.  In addition, it stands for the position that it may difficult to support a reasonable cause defense for abatement or waiver of penalties where the taxpayer anticipated a refund but that belief later turns out to be untrue.

Representation in Tax Audits & Appeals

Need assistance in managing the audit process? Freeman Law’s team of attorneys and dual-credentialed attorney-CPAs regularly represents taxpayers before the IRS and Texas Comptroller. Our team also provides tax return-related representations and helps taxpayers navigate state tax laws. Our Firm offers value-driven services and provides practical solutions to complex issues. Schedule a consultation or call (214) 984-3410 to discuss our tax representation services.

 

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