If you did not pay all of the tax that you owed on your 2014 return by April 15, 2015, you may be subject to a penalty for failure to pay. Even if you paid all of the tax you owed by April 15, 2015, but you did not pay enough tax during the year through withholding from your paychecks or estimated tax payments, you may be subject to a penalty for under-payment of estimated tax.
For the 2014 taxable year, to help smooth the process for the first year of the Affordable Care Act, the IRS provided relief from these penalties under certain circumstances. The relief provided is found in Notice 2015-9 (PDF) and Notice 2015-30 (PDF) and is limited to the penalty relief described in those notices. The penalty relief provided in the notices did not apply to the increase in the amount of tax you owed because the advance credit payments that were made on your behalf were more than your premium tax credit.
2014 Penalty Relief under Notice 2015-9 and actions to take to qualify for the 2014 penalty relief:
Notice 2015-9 (PDF) provides limited penalty relief for taxpayers who have a balance due on their 2014 income tax return as a result of reconciling advance payments of the premium tax credit against the premium tax credit allowed on the tax return. Specifically, Notice 2015-9 provides relief from the penalty under section 6651(a)(2) for late payment of a balance due and the penalty under section 6654(a) for underpayment of estimated tax. The relief applies only for the 2014 taxable year.
Taxpayers will need to take the following simple actions to qualify for penalty relief related to repayment of excess advance payments of the premium tax credit:
- Failure to Pay: Taxpayers who are subject to a “failure to pay” penalty will receive a notice and demand for payment in the mail that will include an address for responses. Taxpayers should submit a letter to this address that contains the statement: “I am eligible for the relief granted under Notice 2015-09 because I received excess advance payment of the premium tax credit.”
- Penalty for Underpayment of Estimated Taxes: Taxpayers should check box A in Part II of Form 2210, Underpayment of Estimated Tax by Individuals, Estates and Trusts, complete page 1 of the form, and include the form with their return, along with the statement: “Received excess advance payment of the premium tax credit.” No further action is required.
2014 Penalty Relief under Notice 2015-30:
Notice 2015-30 (PDF) provides penalty relief for taxpayers who received a Form 1095-A, Health Insurance Marketplace Statement, that was delayed or believed to be incorrect and who timely file their 2014 income tax return, including extensions. This relief applies to the following:
- Penalty for late payment of a balance due (section 6651(a)(2))
- Penalty for failure to pay an amount due upon notice and demand (section 6651(a)(3))
- Penalty for underpayment of estimated tax (section 6654(a))
- Accuracy-related penalty (section 6662)
This relief applies only for the 2014 taxable year. For more information see the FAQs about incorrect Forms 1095-A.
Publication 974, Premium Tax Credit (PDF) has more information for taxpayers who must repay excess advance payments of the premium tax credit and want to determine their eligibility for penalty relief.
This relief does not extend the April 15, 2015 due date. However, to obtain an extension, individuals were able to file Form 4868, Application for Automatic Extension of Time to File U.S. Individual Income Tax Return (PDF), on or before April 15, 2015. An extension of time to file a tax return does not extend the time to pay taxes—even if a taxpayer is granted an extension to file their return, their tax payment is still due by April 15, 2015.