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. If 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 90 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.
Under regular rules, 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. However, due to the impact of the COVID-19 pandemic, for plan years 2021 and 2022, you will not lose eligibility for premium tax credits if you did not reconcile your prior year’s premium tax credits or if there was a delay in the IRS processing your tax return.
If you over-estimate 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. (Questions and Answers on the Premium Tax Credit; CMS, Failure to File and Reconcile (FTR) Operations Flexibilities for Plan Years 2021 and 2022 –Frequently Asked Questions (FAQ); 45 C.F.R. § 155.320(c); 45 C.F.R. § 155.310(k); 26 C.F.R. § 1.36B-4).