Health care penalty relief may be available

A recent IRS notice explains how to request relief from two penalties connected with advance payments of the premium tax credit in the Affordable Care Act. 

The notice could affect you if you purchased a health insurance policy on the government marketplace during 2014 and qualified for a federal income tax credit to help pay the premium. The "premium tax credit" was based on your estimated income for 2014. You had the option to receive it in advance in the form of payments made by the IRS directly to your insurer. If you chose to do that, you have to reconcile on your 2014 tax return the amount you received with the amount you actually should have received.

That reconciliation may result in having to repay part of the advance credit. What happens if you're unable to pay? Normally you could be subject to two penalties: one for failure to pay the tax due by the due date and one for understating your estimated tax payments.

The new notice abates both of these penalties. To qualify for the relief, you have to meet certain requirements, such as being up-to-date with your tax obligations.

The penalty relief is only available for 2014 federal income tax returns. You're still required to file your return on time, and the IRS will charge interest on the unpaid taxes you owe. In addition, other penalties related to the health insurance laws, such as the penalty for not having health insurance, will still apply.

Please call if you need more details.