Update: CMS/IRS confirms federal tax credits won't be stripped due to IRS backlog
A few weeks ago, Amy Lotven of Inside Health Policy reported on a clerical problem caused by a COVID-induced backlog at the IRS:
According to IRS National Taxpayer Advocate Erin Collins, IRS sent 1.8 million letters seeking more information from taxpayers who either failed to reconcile their tax credits or had discrepancies on their forms this year. But staff cuts and other problems stemming from the pandemic have stymied IRS’ work, and the agency still has about 1 million returns waiting to be processed, 3 million pieces of unopened mail and about 6.8 million individual returns still in process. As a result, even if taxpayers provided all requested information, the data that IRS shared with the marketplace might be inaccurate or incomplete, Collins says in a Nov. 25 blog published by the IRS’ Taxpayer Advocacy Service.
The long & short of it is that a bunch of ACA exchange enrollees who are supposed to be eligible for federal tax credits have had the hell scared out of them by notices claiming that they never reconciled their 2019 tax credits even if they did, and thus won't be eligible to keep receiving the financial assistance in 2021.
The solution to the issue turned out to be a pretty simple one: There's a checkbox in the exchange enrollment process where enrollees can attest to having reconciled their 2019 taxes.
Sen. Mark Warner (D-VA) Tuesday (Dec. 15) praised CMS and IRS for agreeing to pause plans to strip Affordable Care Act advance premium tax credits away from consumers who might be victims of an IRS backlog, but he asked the agency to publicize the decision and create a special enrollment period to make sure no consumers fall through the cracks. Democratic Rep. Linda Sanchez (CA) also plans to continue to press CMS to ensure that everyone eligible for financial assistance is receiving it.
...“Today, CMS and IRS informed my office they will temporarily suspend action to take health care benefits away from individuals impacted by tax processing delays until early 2021,” Warner tells Inside Health Policy in an email.
...IHP also asked about the reported delay on Monday, and CMS confirmed its decision in a Tuesday statement.
No consumer will lose access to financial aid due to income tax processing delays resulting from the COVID-19 public health emergency, a spokesperson says.
The agency will defer processing of any failure to file checks until early 2021 for consumers who are automatically enrolled. This means that these consumers will continue to receive their full APTCs into the 2021 plan year, CMS adds.
The spokesperson says all consumers who received a notice that they had not filed and reconciled their income even though they have should attest on their applications. The agency also stresses that the delay doesn’t affect the requirement to reconcile income or any related tax liabilities.
In other words, people still have to reconcile their income and file their taxes properly, it's just that the IRS isn't going to penalize anyone by taking away their 2021 tax credits due to the delay.
Warner and Sanchez are also pressing for CMS to launch a Special Enrollment Period for enrollees who may have been scared off by this issue as well. I don't know if that's strictly necessary, but given the ongoing COVID-19 pandemic and the calls for a COVID SEP anyway, it probably wouldn't be a bad idea to bump out the federal 2021 enrollment deadline by a bit as a bunch of state-based exchanges are already doing.