The IRS announced relief for certain taxpayers who end up having to repay amounts related to advance payment of the premium tax credit in Notice 2015-9. The IRS announced that the relief will apply to liabilities under IRC §6651(a)(2) for late payment of a balance due for taxpayers unable to pay the balance due and under IRC §6654(a) for underpayment of estimated taxes. The relief will only apply to 2014 taxes.
The relief from the late payment penalty under §6651(a)(2) is granted to taxpayers who meet the following criteria:
- The taxpayer(s) are otherwise current with their filing and payment obligations;
- The taxpayer(s) have a balance due for the 2014 taxable year due to excess advance payments of the premium tax credit; and
- The taxpayer(s) report the amount of excess advance credit payments on their 2014 tax return timely filed, including extensions (Line 46 of Form 1040 or Line 29 of Form 1040A).
Eligibility for relief from the underpayment of estimated penalty under §6654(a) requires:
- The taxpayer(s) are otherwise current with their filing and payment obligations; and
- The taxpayer(s) report the amount of the excess advance credit payments on a 2014 tax return timely filed, including extensions
For purposes of being deemed current on their obligations, the notice provides the following guidance:
...[T]axpayers will be treated as current with their filing and payment obligations if as of the date they file their 2014 income tax returns, they (i) have filed, or filed an extension for, all currently required federal tax returns, and (ii) paid or have entered into an installment agreement (which is not in default), an offer in compromise, or both to satisfy a federal tax liability. If a taxpayer has not paid a tax due because there is a genuine dispute between the taxpayer and the Service that has not been finally determined as to the existence or amount of the correct tax liability under the law, then the amount of tax in dispute will be treated as being current during the pendency of the dispute.
Taxpayers will still need to file for extension of time to file their returns and interest will continue to be charged on any underpayment of taxes that is not paid with the return.
To claim relief from the late payment penalty, taxpayers should respond to the notice demanding payment of the penalty with a letter addressed to the address listed on the demand for payment with the statement: “I am eligible for the relief granted under Notice 2015-9 because I received excess advance payment of the premium tax credit.” If the return is filed before April 15, 2015 the taxpayer is entitled to relief even if the balance of the tax is not paid at the time the taxpayer asks for relief. However, if the taxpayer files the return after April 15, 2015 the taxpayer must fully pay the balance by April 15, 2016 in order to be eligible for relief.
Taxpayers looking for relief from the underpayment of estimated taxes penalty are to check Box A on Form 2210, complete page 1 of the form and include the form with their return along with the statement: “Received excess advance payment of the premium tax credit.” Taxpayers do not need to figure the amount of penalty to be waived.
The relief in this notice does not apply to taxpayers facing a shared responsibility payment because those amounts are not subject to either penalty.