When you apply for the premium tax credit, you will be asked to estimate your expected income for the upcoming year. Often a good place to start is to consider what your income is this year, or what income you reported on your tax return last year. However, if your circumstances have changed since then, for example, if you recently lost your job, you should make your best estimate of what your income will be next year. The health insurance Marketplace will compare your income estimates against records at the Internal Revenue Service, Social Security Administration, and other sources (however, if the Marketplace cannot verify income through the IRS, and (in applicable states) if alternative sources also fail to furnish this income information, the Marketplace will accept an attestation of the consumer’s income). If official data sources are used to verify your income, and your estimate and official records don’t match but you meet all other eligibility requirements, you will be asked to provide documentation to support your income projections.
If you don’t have that documentation handy, the Marketplace will provide premium tax credits for up to 150 days while you gather and submit your documentation for verification. It is very important that you provide any documentation requested by the Marketplace in a timely manner; if you don’t, your premium tax credits might be reduced or terminated. If you are having problems getting the documentation, you can request an extension from the Marketplace.
If you estimate your income incorrectly and end up claiming more help than you are eligible for, you may have to pay back some or all of the premium tax credit you received. If you do not file a tax return and reconcile the premium tax credits for two consecutive years, you will not be eligible for premium tax credits in the future. Note, however, that this rule has been suspended until the IRS builds the systems necessary to enforce the requirement. Therefore, you won’t be denied premium tax credits if you failed to file taxes and reconcile your premium tax credits for coverage you had in 2022 or a prior year.
If you overestimate your income and end up claiming less help than you are entitled to, the difference will be refunded to you when you file your income taxes the following year.
(CMS, Guidance on Annual Redetermination and Re-enrollment for Marketplace Coverage for 2024 and Later Years; 45 C.F.R. §§ 155.305(f); 155.310(k), 155.315(f), 155.320(c); 26 C.F.R. §§ 1.36B-2, 1.36B-4; IRS, Questions and Answers on the Premium Tax Credit.)