The continuing saga of the erroneous Forms 1099-A received official IRS guidance in the form of Notice 2015-30. While the IRS had previously announced they would grant various forms of relief, this notice provides specifics on relief in a standard (and binding on the IRS) form.
There were numerous errors found on Forms 1099-A issued to taxpayers this year, an issue widely reported upon in the general press. As the IRS notes:
On February 20, 2015, the Centers for Medicare and Medicaid Services (CMS) announced that about 800,000 tax filers who purchased health insurance from the Federally-facilitated Marketplace during 2014 received a Form 1095-A that contained an error related to the premium for the second lowest cost Silver plan (often referred to as the benchmark plan). On March 20, 2015, CMS further announced additional issues with the data used to populate the Form 1095-A that could result in incorrect information on and delays in additional Forms1095-A. The Service is also aware that some state-based Marketplaces had issues with the generation of the Forms 1095-A.
The notice addresses various penalties that a taxpayer might be subject to due to being unable to properly compute the tax due given the errors on the Form 1099-A. The penalties impacted by this notice are:
- Penalty under section 6651(a)(2) of the Internal Revenue Code for late payment of a balance due,
- Penalty under section 6651(a)(3) for failure to pay an amount due upon notice and demand,
- Penalty under section 6654(a) for underpayment of estimated tax, and
- Accuracy-related penalty under section 6662
The notice provides that, so long as the taxpayer timely files a return for 2014 (including extensions), no penalty will be imposed for late payment of a balance due, failure to pay an amount due on notice or underpayment of estimated tax if the taxpayer either received a delayed Form 1095-A or one that the taxpayer believes to be incorrect. Thus, as the notice points out, the taxpayer must either:
- Have filed a return by April 15 or
- Requested an extension by April 15 and file their return by October 15.
The IRS will also provide limited relief from the accuracy related penalty for any underpayment resulting from the receipt of an incorrect or delayed Form 1095-A. However the penalty may apply to any understatement not related to the receipt of an incorrect or delayed Form 1095-A.
The IRS also noted that some of the erroneous Form 1095-A were issued to taxpayer who were not enrolled in a qualifying health care plan and, thus, were not eligible to receive a premium tax credit. The IRS will not penalize those who erroneously claimed such a credit in those situations if they amend their 2014 return by April 15, 2016 to reflect they were not eligible to claim the credit and pay any tax due.
The notice also reminds taxpayers that while penalty relief is offered under this notice, any interest due on extended returns for taxes not paid as of April 15 will not be waived under this notice. As well this relief only applies to the 2014 tax year.
The IRS provides the following procedures to obtain relief:
- The IRS will end up automatically assessing the failure to pay penalties under §§6651(a)(2) and (3) and, therefore, issue a notice to the taxpayer. If a taxpayer is eligible for relief the taxpayer should respond to the notice by submitting a letter to the address listed in the notice with the statement “I am eligible for the relief granted under Notice 2015-30 because I received an incorrect or delayed Form 1095-A.”
- Relief from the underpayment of estimated tax penalty should be requested by checking box A in Part II of Form 2210, complete page 1 of that form and include the form with their return along with the statement “Received an incorrect or delayed Form 1095-A.” Taxpayers do not
- Need to attach any documentation from the marketplace,
- Explain the circumstances under which they received the incorrect or delayed notice; or
- Complete any page other than page 1 of Form 2210
- Relief from the accuracy related penalty under §6662 normally will be granted automatically to taxpayers eligible for this relief. However should the taxpayer find a penalty under §6662 is proposed against the taxpayer on exam for a liability arising from the receipt of a delayed or incorrect Form 1095-A, the taxpayer should inform the agent of the taxpayer’s eligibility for this relief. If the taxpayer receives a letter asserting a penalty under §6662 on a liability arising from the receipt of an incorrect or delayed Form 1095-A, the taxpayer should submit a letter to the address listed in the notice stating “I am eligible for the relief granted under Notice 2015-30 because I received an incorrect or delayed Form 1095-A.”