ARPA and Excess Premium Tax Credits - advice needed

[Willers]

My apologies in advance for the long post:

Unfortunately I filed my federal taxes before the Turbotax update regarding the suspension of "the requirement that taxpayers increase their tax liability by all or a portion of their excess advance payments of the Premium Tax Credit".

I found out about this provision after I filed. When I recently updated Turbotax, the excess PTC was removed (corrected) and the payment turned into a refund.

I checked the IRS site for guidance and found the following on their fact sheet that provides guidance on this issue:
"If a taxpayer has excess APTC, filed their return with Form 8962 and it's still being processed: The IRS will reduce the excess advance Premium Tax Credit repayment amount the taxpayer reported on their 2020 Form 1040 or Form 1040-SR, Schedule 2, Line 2, and Line 29 of Form 8962 to zero and process their return. There is no need to contact the IRS. If a taxpayer receives a IRS letter about excess APTC for tax year 2020, they should disregard the letter."

My return was still "processing" so I hoped all would be OK. Well...this morning I logged into my bank and found a debit for the original return payment. They did not zero out line 2 and adjust the taxes due, as they said they would.

Further down in the document it says that if an excess PTC has already been paid, an amended return should not be filed and that the IRS "will provide more details soon."

So the question is: do I actually trust that these details will come soon or do I file an amended return anyway and attempt to use that process to reconcile the change? It is a 5 figure change so it is not insignificant.

Anyone else dealing with this?

Thanks!

[PaunchyPirate]

I suspect that while your bank account has been debited for the original amount, you will find that your return is still being "processed" by the IRS. They seem to view the payment and the processing of your return as 2 separate events. Even if they have processed your return, I suspect they have not started the process to recalculate the APTC refund situation yet. They will likely send you a check/refund at a later date for the difference. But this is mostly my guess at this point.

If you haven't already, I would create an account on the IRS.gov website and then review your return details there. You can order a transcript of your return and account from there.

I certainly wouldn't recommend filing an amendment until several months have passed in this situation. They are literally many months or more than a year behind in doing much of their processing.

[RunningBum]

I would wait as the IRS says. Give them a chance to work it out. I understand it is significant money, but it wasn't money you were counting on so it shouldn't be critical. They should be able to do this by program and not a manual process so it shouldn't take too long.

[cathy63]

I agree with PaunchyPirate on this. It may be many months before you get the refund, but filing an amended return now will not speed that timeline up and may actually slow it down. If you haven't got the refund by the end of the year, and you don't see any useful info on irs.gov or in your irs account, then that's when I'd file an amended return.

[Willers]

Thanks for the advice. Patience is a virtue, right?

I think I'm more frustrated with myself on this one. I've always waited to the last possible time when I've had taxes due and this is the one time, after finishing a complicated return, that I filed to get it off my list. Lesson learned I guess.

[RunningBum]

Not directed at you specifically, but it's a little hard to feel sorry for people who went over the subsidy cliff but because they underestimated their income, they are still getting subsidized. Compare that to someone who accurately predicted they would not have low enough income for the subsidy, and got none even if they made the same as you. This decision was made after last year closed so there was no way anyone could manipulate the system, so I'll just call you very lucky, even if it does take a few months to get your money back.

[Willers]

Quote:

Originally Posted by RunningBum Not directed at you specifically, but it's a little hard to feel sorry for people who went over the subsidy cliff but because they underestimated their income, they are still getting subsidized. Compare that to someone who accurately predicted they would not have low enough income for the subsidy, and got none even if they made the same as you. This decision was made after last year closed so there was no way anyone could manipulate the system, so I'll just call you very lucky, even if it does take a few months to get your money back.

I can only speak to my case and defend it since moral judgements were expressed. I had a relatively low income until an unplanned increase occurred in Q4. I followed the rules exactly and reported the income change immediately. I did not receive any subsidies for the last three months of 2020. The suggestion that I underestimated my income is simply incorrect.

This is exactly the way that Congress wrote the rules. If you want to debate who is “lucky” I could go on for pages detailing special tax laws written to benefit a wide variety of preferred groups, including many on this board. Unless you disavow all deductions, you are in one of those groups.

Finally, I did not ask anyone to feel sorry for me. I simply was asking for advice on a tax question that is 100% within the rules. My apologies that this seems to push a morality button for you.

[jpeter1093]

Quote:

Originally Posted by Willers I can only speak to my case and defend it since moral judgements were expressed. I had a relatively low income until an unplanned increase occurred in Q4. I followed the rules exactly and reported the income change immediately. I did not receive any subsidies for the last three months of 2020. The suggestion that I underestimated my income is simply incorrect. This is exactly the way that Congress wrote the rules. If you want to debate who is “lucky” I could go on for pages detailing special tax laws written to benefit a wide variety of preferred groups, including many on this board. Unless you disavow all deductions, you are in one of those groups. Finally, I did not ask anyone to feel sorry for me. I simply was asking for advice on a tax question that is 100% within the rules. My apologies that this seems to push a morality button for you.

Hear hear! Don't project your guilt onto others.

[RunningBum]

Quote:

Originally Posted by Willers I can only speak to my case and defend it since moral judgements were expressed. I had a relatively low income until an unplanned increase occurred in Q4. I followed the rules exactly and reported the income change immediately. I did not receive any subsidies for the last three months of 2020. The suggestion that I underestimated my income is simply incorrect. This is exactly the way that Congress wrote the rules. If you want to debate who is “lucky” I could go on for pages detailing special tax laws written to benefit a wide variety of preferred groups, including many on this board. Unless you disavow all deductions, you are in one of those groups. Finally, I did not ask anyone to feel sorry for me. I simply was asking for advice on a tax question that is 100% within the rules. My apologies that this seems to push a morality button for you.

I did not intend to make a morality statement or pass judgement on you or anyone. I even pointed out that there was no way to manipulate this since the law was passed after the end of the year, and I never said you intentionally underestimated what your final income would be. I'm sorry that I worded my post in a way that made you misinterpret my intention. I'll just stop right here.