Consider Filing Claims to Protect 2017 Obamacare Tax Refunds Before May 17, 2021

Now is the Time: Consider Filing Claims to Protect 2017 Obamacare Tax Refunds Before May 17, 2021

Update from the notice published in July 2020
Time for a reminder - and update - of our July 2020 blog Looming Deadline for Protecting Obamacare Taxes Refunds regarding an impending U.S. Supreme Court case that may overturn the Patient Protection and Affordable Care Act (PPACA), commonly referred to as Obamacare.

To refresh: As a result of the possible repeal of Obamacare, certain income taxes included in that law would also be repealed and this has created opportunities to file preemptive claims for refund of those applicable taxes.

The July 2020 article focused on applicable taxes for 2016, and outlined a special extended due date of July 15, 2020 for filing the preemptive refund claims for those taxes.

As explained below, the special extended due date for 2017 tax protective claims is May 17, 2021.

Overview of the U.S. Supreme Court Case
The potential for 2016 and 2017 tax returns to result in refunds centers on the agreement by the U.S. Supreme Court to hear a case on whether a part of the PPACA is unconstitutional.

In December 2019, a federal appeals court ruled that the PPACA’s mandate requiring every American to have health insurance was unconstitutional - and in March 2020, the Supreme Court accepted an appeal by 19 state attorneys.

The Supreme Court heard oral arguments in November 2020 and will likely issue a decision this spring. Based on preliminary comments in November by several Justices, including Chief Justice John Roberts, and the intention of the current Department of Justice to not overturn Obamacare, it may be unlikely that the law will be repealed. However, exercising an abundance of caution regarding the related taxes, it may, depending upon the amount of applicable taxes paid in 2017, be worthwhile considering filing a protective refund claim for the 2017 taxes.

Obamacare Taxes
If the PPACA is found to be unconstitutional, that could affect taxes paid by many individual taxpayers including the 3.8% Net Investment Income Tax, the 0.9% Additional Medicare Tax, and the individual shared responsibility payment. It is also possible that the high court could decide that only certain portions of PPACA are invalid and that some tax provisions can continue.

Very Imminent 5/17/2021 Deadline for “Protective” Refund Claims for 2017
Taxpayers who believe they would be subject to a refund if the Supreme Court rules that the PPACA is unconstitutional must act now to be eligible. If taxpayers wait for a decision in 2021, it will be too late to make a claim for PPACA taxes and penalties paid for 2017.

The statute of limitations for a refund claim for 2017 returns would generally be the earliest of three years from either April 15, 2018, the original due date of the return, or the date the return was filed if the return had been extended.

However, based on an IRS notice issued on March 30, 2021, the due date for amended returns and claims for refunds has been extended until May 17, 2021, the extended due date for 2020 federal income tax returns. Therefore, taxpayers who filed their 2017 Form 1040 on or before April 15, 2018, must file the protective refund claim by May 17, 2021 in order to preserve refund opportunities.

Filing a Protective Claim
Herbein + Company, Inc. (Herbein) is available to help taxpayers who believe they might be entitled to a refund if the Court declares PPACA unconstitutional - and want to file a protective claim. Our fee to file a claim will be approximately $1,000 and we have dedicated members of our tax team ready to work with you.  

Please contact the Herbein team at