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More forgiving IRS to waive some bad 1095-A tax penalties

February 25, 2015

A kinder, gentler Internal Revenue Service was born back in 1998 when the IRS Restructuring & Reform Act was enacted.

Now the Affordable Care Act appears to have given us the forgiving IRS.

Forgive

Premium tax credit considerations: Earlier this month, the IRS announced that it will waive some possible penalty charges in connection with calculations of the advance premium tax credit.

This tax break was created to help Obamacare purchasers cover some of the cost of the required health insurance coverage. Most who are eligible for the credit got it in advance when they bought their policies.

If, however, things changed after that health care marketplace transaction, folks could find themselves having to pay back that credit amount and more. That also, under normal tax circumstances, also would lead to penalties on the on underpayments.

But in this first year of ACA individual tax implications, the IRS won't demand affected taxpayers pay penalties on the tax credit late payments or associated estimated tax payment penalties.

1095-A relief, too: Now, in the wake of a problem with data on 1095-A Obamacare forms, the IRS also is exhibiting its expanded forgiving nature.

The agency says it won't collect any additional taxes from the around 50,000 people filed their tax returns using the incorrect data on their 1095-A forms.

That's only fitting, since the Health and Human Services Department revealed that the wrong form info was the result of "an intermittent defect in the code that was used to create these forms." Instead of listing information about Obamacare benchmark plans for 2014, the forms listed 2015 data.

But there is a limit to the IRS' forgiveness.

Limited to early filers: Although almost a million policy purchasers got error-ridden 1095-A forms, the tax relief only applies to the 50,000 or so who have already filed their taxes using the erroneous 1095-A data.

Corrected documents will be sent to everyone else affected by early March, says the IRS and Healthcare.gov. So wait for that good form before filling out your taxes.

And if you then find that you should have received a smaller tax credit and owe more, you'll have to pay that amount and ask the IRS for its previously announced relief on any associated penalties.

You also might find these items of interest:

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TAX-SAVVY WAYS 
TO WRAP UP 2026

It’s over! With October’s extended filing deadline behind us, it is now time to focus on year-end moves to reduce your 2026 tax bill. 

You’ll find ways to do just that on the Tax Tips page (see the More Tax Posts drop-down menu at the top of the blog), as well as the separate tax tip pages for each month, notably October through December. If you’re on the Tax Tips page, you’ll find a monthly list at the end of this column. If you’re on another blog page, you can head straight to the October tips; at the bottom of that tips page you’ll find links to all the other 11 months’ collections of tax advice.

Not to spoil what you’ll find in that tax advice, but it does cover such things as tax deductions for charitable donations, investment moves that could reduce tax due, and ways to max out your tax-favored retirement savings. 

Finally, as the year winds down, things get hectic. There are lots of other things to occupy our time, like the much more fun upcoming holidays. But don’t lose sight of taxes, since timing is key. To be of use, most tax moves must be made by the end of the tax year. That’s Thursday, Dec. 31, which also is the last business day of the year. 

So that you don’t miss that final tax year deadline, also keep an eye on the countdown clock below. It will keep you on top of just how much time is left to make important, tax-saving moves. (Note: I’m in the Central Time Zone, so adjust accordingly for where you live.)

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