Has anyone filed a protective claim for ACA Penalty relief?

[Terry53029]

There is no longer a penalty for not having health insurance

[ratherfarm]

Penalty Relief Circuit Court’s decision and aftermath In Texas v. U.S., No. 19-10011 (5th Cir. December 18, 2019; REVISED January 9, 2020), the U.S. Court of Appeals for the Fifth Circuit declared the individual mandate portion of the Affordable Care Act (ACA) unconstitutional, based largely on the penalty’s reduction to zero starting in 2019 by the Tax Cuts and Jobs Act (TCJA). This decision affirmed an earlier ruling by the federal District Court in Texas that found the mandate, as well as the rest of the ACA, unconstitutional. In light of the Circuit Court’s recent decision, taxpayers may want to file protective claims for refunds relating to prior assessed penalties. These penalties would include the individual shared responsibility penalty for tax years 2016, 2017, and 2018. While the ruling clearly found the individual mandate unconstitutional, the Fifth Circuit remanded (i.e., sent the case back) to the District Court to determine what other parts, if any, of the ACA were now invalid due to the unconstitutionality of the individual mandate. It is unlikely that the District Court will decide this issue soon, and the U.S. Supreme Court has refused to accept the case for an expedited review. Therefore, the status of the rest of the ACA (including the shared responsibility penalty) could potentially change, and this uncertainty will likely remain until either (1) Congress revises the ACA, or (2) the U.S. Supreme Court takes up the Texas case for its own review. Currently, the ACA is still the law of the land. Filing a protective claim A “protective claim” for a refund is a refund claim that is dependent on potential future action. This later action could be a court decision, new law, or a later acquisition of information that would not be available by the normal deadline for filing a refund claim. A protective claim must: Be in writing and be signed, Include the taxpayer’s name, address, and identifying number (SSN, EIN, or ITIN), Identify and describe the contingencies affecting the claim, Clearly alert the IRS as to the essential nature of the claim, and Identify the specific year(s) for which a refund is sought. Although it is possible to file a protective refund claim using a standard amended return (Form 1040X), the IRS will not immediately send out a refund as a result of this claim. That is because, under current ACA rules, the ACA penalty calculation applied prior to 2019. The protective claim ensures only that the statute of limitations (normally, three years from the filing deadline) will not bar a refund, should the law later change. A protective claim for tax year 2016 must be filed by April 15, 2020. Back to top

This is what my question is about. 

[qbteachmt]

"This is what my question is about."

Your question is how to File the 1040X for 2018, 2017 and 2016?

[skeramidas · Accepted solution]

2016 ACA Penalty refund (?) will expire April 15, 2020. You need to file a protective claim before April 15, 2020 to keep the return from 2016 open.  2017, 2018--maybe they will have determined if it was unconstitutional and you have time to amend.  I would wait a while to file the protective claim from 2016 in case it is resolved, but the supreme court doesn't want to rush on the decision.

[sjrcpa]

Update

US Supreme Court has agreed to hear this case.

We now have until July 15, 2020 no file protective claims for 2106.

[qbteachmt]

"US Supreme Court has agreed to hear this case."

It's alive! They should rename it The Zombie Act, since it won't die.

[MightyMikeMiami]

Doe this extend the statute of limitations for the entire return or just the ACA penalty relief refund request?

[sjrcpa]

IRS gave a blanket extended due date to July 15. It covers everything.

[jimboni26]

Can the claim be filed through Turbo Tax or does it have to be in writing?

[qbteachmt]

@jimboni26 

You seem to be lost on the internet. The programs in use here does not include TurboTax.

You’ve come to a Peer User community for Intuit Tax Preparation products supporting tax preparation professionals, and you may be looking for support as an individual taxpayer. Please visit the TurboTax Help site for support.

Thanks.

[MrMojo]

But what address to send to?

Address for amended returns?

https://www.irs.gov/filing/where-to-file-addresses-for-taxpayers-and-tax-professionals-filing-form-1...

Thanks!

[Just-Lisa-Now-]

Yes, that link you gave has the addresses to use, not the 1040X address, the regular filing center address

[hedgeslaw]

Background. If the Supreme Court finds the ACA to be unconstitutional (decision coming most likely in late Spring - think May - 2021), the taxes, fees, penalties and requirements enacted under the ACA will be nullified and many of my clients will be entitled to refunds for:

(1) Medicare tax on investment income (3.8% over $200,000 for single or $250,000 for married filers)
(2) Medicare Part A tax increase (0.9% for income over $200,000 for single or $250,000 for married filers)

If those ACA taxes were paid on a timely filed 2017 Form 1040 in 2018, the statute of limitations for claiming a refund of those taxes will run out on Apr 15, 2021 ... possibly before the Sup Ct decision in May, 2021. Thus a protective claim for 2017 needs to be prepared and filed before Apr 15, 2021 for the 2017 payment of those taxes. NOTE: July 15, 2020 was the extended due date for filing protective claims for 2016, For 2018 and 2019, amended returns will be needed for the intervening years' refunds if the ACA is found to be unconstitutional.

Note, that about 21 tax, penalties, mandates were in the ACA, including:

Tax on suntan parlors

Penalties for non-compliance of employer-provided health ins if over 50 employees

Enhanced penalties on non-qualified HSA distributions

The protective claim can be filed on a 1040X, Form 843 or on a mere letter and must:

- Be in writing
- Include your name, address, SSN or ITIN and other contact information
- Be signed under penalties of perjury
- Identify and describe the contingencies affecting the claim (name the case or cause of delay)
- Clearly alert the IRS to the essential nature of the claim (name the credit or nature of refund)
- Identify the specific year(s) for which a refund is sought
- A specific dollar amount does not have to be claimed
- On the top margin write something like:
“Protective Claim Under ACA Litigation” or
“Protective Claim Pending a Decision in Smith, et. al. vs California”
- Properly addressed and timely mailed to the address and zip code for filing a 1040X for the taxpayer

Once the contingency has lifted, the claim ripens, the IRS must be notified, generally within 90 days and your claim must be monetized and filed. Check out the Rev. Procs. and IRM for details.

IF THIS ANSWERS YOUR QUESTION, PLEASE MARK IT SOLVED SO OTHER CAN FIND THE ANSWER. THANKS