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H&R Block warns of PPACA tax filing danger

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The public exchange plan users who are getting advance premium tax credit (APTC) help have to file tax returns to keep their APTC subsidies.

Health care tax service marketers at H&R Block (NYSE:HRB), a tax preparation firm, are wondering whether APTC users understand the return filing requirement.

Drafters of the Patient Protection and Affordable Care Act (PPACA) created the premium tax credit system to help people with income under 400 percent of the federal poverty level, and too high for Medicaid, pay for private exchange plan coverage.

Exchange plan users can choose between waiting to get the tax credit for a year when they file their tax returns for that year, or getting the tax credit in advance, while the year is still under way, based on estimates of how much they might earn.

When exchange plan users get the tax credit in advance, they are supposed to file a new tax return, Form 8962, to reconcile the APTC payments made based on the income estimates with the amounts justified by the recipients’ actual income.

In the past, some of the consumers now getting the APTC subsidy may have skipped filing tax returns because they earned too little to have to file tax returns, or because they were bad at paperwork and assumed they owed too little in taxes to have to worry about filing returns.

The Internal Revenue Service (IRS) has already told exchange plan users who get inaccurate Form 1095-A coverage notices from their exchanges, or who get the notices late, to put off filing tax returns until they have accurate 1095-A forms in hand.

But consumers who have accurate 1095-A forms and fail to file returns, or who fail to file 8962s once they have their 1095-As, could end up losing their subsidies, H&R Block says.

H&R Block and other tax preparation firms have reported seeing a surprisingly small number of exchange plan users come in for help with their taxes so far this tax season.

“There still could be a large segment of taxpayers, in the millions, who received an APTC and have yet to file,” the company says.