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IRS Finalizes Rules for ACA’s Premium Tax Credit, Self-Employed Taxpayers

Aug 21st 2017
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The IRS has finalized regulations, issued temporarily in 2014, that govern the insurance premium tax credits under the Affordable Care Act for victims of domestic abuse and self-employed taxpayers.

The new rules went into effect on July 24.

Domestic Abuse Victims

Taxpayers who seek eligibility for a premium tax credit under Internal Revenue Code Section 36B must meet criteria under Section 36B(A), which state that the person who is filing must be an “applicable taxpayer.”

Under Section 36B(c)(1), that means the taxpayer must have a household income for the tax year that equals or exceeds 100 percent but doesn’t exceed 400 percent of the poverty line for the taxpayer’s family size, can’t be claimed as a dependent by another taxpayer, and who files a joint return if married.

The new regulations allow an abused or abandoned married taxpayer to satisfy the Section 36B(c)(1) joint filing requirement if the taxpayer files as married.

But at the same time a married taxpayer qualifies in satisfying the joint filing requirement if the taxpayer is not living with the spouse when the tax return was filed, the taxpayer can’t file a return because the taxpayer is a victim of abuse or abandonment, and the taxpayer certifies that he or she meets the requirements for claiming premium tax credits under the “married filing separately” status.

The final rules, though, don’t offer a definition of “reasonable diligence” in trying to locate a spouse. A “one size fits all” definition is not appropriate for situations involving spousal abandonment because the facts of each situation are unique,” according to the regulations.

Trying to define “reasonable diligence” could inadvertently prevent a taxpayer — who would warrant such relief — from meeting that requirement “solely because the definition did not contemplate the taxpayer’s particular circumstances,” the IRS states.

The regulations also don’t broaden the “unable to locate” rule to include situations in which a spouse poses a threat to a spouse claiming relief. That’s because the definition of domestic abuse, which includes psychological or emotional abuse and efforts to intimidate the victim, already addresses that.

Taxpayers won’t be able to avoid the joint filing requirement for more than three consecutive years.

Self-Employed Taxpayers

The temporary regulations from 2014 (Section 1.36B-4T(a)(3)(iii)(C) included a particular formula for calculating the income of self-employed taxpayers who take a deduction for paid health insurance premiums.

But that calculation omitted a rule governing situations in which the Section 162(1) deduction should be limited to the taxpayer’s income earned from the business that is the basis for the health insurance coverage.

The final rules corrected that.


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