Information For...

For you and your family
Standard mileage and other information

Forms and Instructions

Individual Tax Return
Instructions for Form 1040
Request for Taxpayer Identification Number (TIN) and Certification
Request for Transcript of Tax Return

 

Employee's Withholding Allowance Certificate
Employer's Quarterly Federal Tax Return
Employers engaged in a trade or business who pay compensation
Installment Agreement Request

Popular For Tax Pros

Amend/Fix Return
Apply for Power of Attorney
Apply for an ITIN
Rules Governing Practice before IRS

Health Coverage Tax Credit: Information for Health Plan Administrators or Third Party Administrators

The Trade Preferences Extension Act of 2015 (Public Law 114-27), enacted June 29, 2015, extended and modified the expired Health Coverage Tax Credit (HCTC).

The Department of the Treasury has directed the Internal Revenue Service to implement and administer the Health Coverage Tax Credit Program. This program allows individuals adversely affected by the Federal Trade Act of 2002, or individuals who are receiving benefit payments from the Pension Benefit Guaranty Corporation, to receive an advance tax credit on a monthly basis in the form of a payment to their insurance providers.

The credit is 72.5 percent of an individual’s qualified monthly health insurance premium, and can make the difference between an individual retaining and losing health care coverage.

Only those eligible for the HCTC and enrolled in qualified health insurance can receive this tax credit.  

Individuals are considered eligible if they are:

  • An eligible trade adjustment assistance (TAA) recipient, alternative TAA (ATAA) recipient, or reemployment TAA (RTAA) recipient
  • An eligible Pension Benefit Guaranty Corporation payee
  • The family member of an eligible TAA, ATAA, or RTAA recipient or PBGC pension payee who is Medicare eligible, deceased, or who finalized a divorce with you.

Not eligible for the HCTC if they:

  • Can be claimed as a dependent on another person’s federal income tax return; or,
  • Are enrolled in benefits under Medicare, Medicaid, the Children’s Health Insurance Program, the Federal Employees Health Benefits Program or eligible to receive benefits under the U.S. military health system

Qualifying Health Insurance Coverage

The HCTC can only be used to cover the cost of qualified health coverage. The following types of health coverage are the only ones qualified for the HCTC:

  • COBRA as provided under the federal Consolidated Omnibus Budget Reconciliation Act (COBRA) of 1985. COBRA HPAs are required to accept payments from the HCTC program for eligible COBRA enrollees who wish to participate in the monthly HCTC program. Internal Revenue Service Regulations 64 Fed. Reg. 5169-5170 (February 3, 1999) requires COBRA administrators to accept payments from third parties on behalf of their qualified enrollees.
  • Non-group/individual health plans purchased directly through the insurance provider or broker. A qualified health plan offered through a Health Insurance Marketplace is not qualified coverage for the HCTC after December 31, 2015.
  • Spousal coverage under a group plan available through the employer of an eligible individual’s spouse, and where the employer, or former employer, did not pay 50 percent or more of the cost of coverage. This type of coverage, although allowable under the HCTC legislation, may not qualify for participation in the advance monthly HCTC program unless it is also COBRA, or if your HPA or TPA agrees to receive payments from a third party.

How the Advanced Monthly Payment Program Works

Claiming the Tax Credit

Eligible individuals can receive the monthly HCTC to help pay for qualified health plan premiums as they become due or the yearly HCTC on their federal tax return. The monthly HCTC option enables more affordable and accessible health coverage for eligible individuals who might not otherwise be able to obtain health coverage.

As a participant in the advance monthly HCTC program, an individual remits payment to the HCTC program through the US Bank Lockbox system equal to 27.5 percent of their qualified heath plan premium. The HCTC program then includes a proportionate 72.5 percent amount and forwards the total amount to you as the HPA, or TPA.

In order to administer Advance Monthly Payment program of the HCTC, the IRS requests the cooperation of an administrator to provide key information. This information allows us to make timely premium payments directly to the administrator, on behalf of HCTC eligible individuals. In order for your member to take advantage of the Advance Monthly Payment program of the HCTC, you must be enrolled to receive payments from our program. Enrolling in the monthly HCTC program is easy. Follow the instructions below to begin receiving HCTC payments on behalf of your members.

Requirements for HPA/TPA to Participate in the Program

Review the requirements for participation in the 2018 Advance Monthly Payment program.

HPAs and TPAs must complete  new IRS Form 3881-A, ACH Vendor/Miscellaneous Payment Enrollment, to enroll and begin receiving HCTC payments. The form must be filled out completely and signed by the appropriate person at your company.

Administrators must be enrolled in the EFT program to receive premium payments for your customers who are participants in the HCTC program.  Receiving electronic payments ensures timely, accurate payments and reduces the risk of payments being misdirected within the HPA’s organization.

ACH Enrollment for HPAs and TPAs

HPAs and TPAs must complete new IRS Form 3881-A, ACH Vendor/Miscellaneous Payment Enrollment, to enroll and begin receiving HCTC payments. The form must be filled out completely and signed by the appropriate person at your company.

Send the completed form to the IRS by email to wi.hctc.stakehldr.en@irs.gov.

If the form is not complete, you will be notified, through email, of missing required fields.  Once the forms are complete, you can resubmit by email to wi.hctc.stakehldr.en@irs.gov.

 

Enrolling to receive HCTC payments is a one-time process. You will not need to enroll each time one of your members applies for the Advance Monthly Payment program of the HCTC.

Once an HPA/TPA has sent the Form 3881-A, and is established to receive payments and has a vendor number, they do NOT need to submit another Form 3881-A if additional individuals want to participate after the HPA/TPA is established.

However, an HPA/TPA must recertify each year.

HCTC payee information relevant to financial transactions are revalidated on an annual basis.  You will need to provide a new Form 3881-A each year for renewal.  Your renewal date will be 365 days from the date of your vendor account was established.  If renewals are not received, your vendor account may be deactivated.

You will be informed if you have additional steps to complete for your HCTC enrollment.

Report Administrative and Banking Changes to IRS

It is the administrator’s responsibility to keep this information current with the HCTC program at all times. Keeping current will help the HCTC program minimize delays when issuing payments, reduce the number of payments sent to incorrect remit to addresses and/or banks, and ensure all other communications are forwarded to the correct contact and/or address.

When an administrator changes banks or updates existing banking information, it must follow the steps below to ensure the HCTC program has the most current information:

  • Contact IRS to notify the HCTC program of the changes.
  • Send IRS an updated Form 3881-A, ACH Vendor/Miscellaneous Payment Enrollment Form, with corrections at least 30 days prior to the effective date of the changes, to the Internal Revenue Service by email to: wi.hctc.stakehldr.en@irs.gov.

The HPA must contact IRS immediately if any of the following administrative changes occur:

  • Payment Detail Report (PDR) recipient name and/or address
  • Contact information for the HCTC program
  • HPA/TPA "remit to" address
  • HPA/TPA  name change

Returning an Overpayment to IRS?

Use Form 13560, Health Plan Administrator (HPA) Return of Funds, to return the Government’s portion of the insurance premium ONLY. The participant’s portion must be returned directly to the participant.

Complete the form, and include it with your payment. The form must have the breakdown of funds by participant and reason for return. This form MUST accompany all returned funds, in order to ensure proper handling. If your organization uses a similar form that provides ALL information requested below, submission of your internal document in lieu of this form is acceptable.

Return funds using one of the following applicable options:

  • Send an HPA check (with company name and address): Make check payable to US Treasury - HCTC.
  • Complete this form, attach check, and mail to:
            Internal Revenue Service
            Beckley Finance Center
            PO Box 9002
            Beckley WV 25802-9002
  • Reversal of an EFT transaction: Notify your bank that you want to reject the EFT, and request that they reverse the transaction back to the US Department of Treasury. Complete this form and FAX to: Internal Revenue Service - HCTC FAX #: 855-780-9044
  • Return an uncashed US Treasury check: Complete this form, attach check, and mail to:
            Internal Revenue Service
            Beckley Finance Center
            PO Box 9002
            Beckley WV 25802-9002

You can return funds for multiple individuals by using one of the following options:

  • Send a separate check and separate Form 13560, Health Plan Administrator (HPA) Return of Funds, or an internal document for each individual
  • Send one check as a bulk payment and attach a detailed list that defines how the bulk payment should be allocated. This list must include all information that is required on the HPA Return of Funds form for each individual for whom you are returning funds.

Form 1099-H “Health Coverage Tax Credit (HCTC) Advance Payments”

IRS will issue Form 1099-H.Health Coverage Tax Credit (HCTC) Advance Payments to all 2017 participants that received Advance Monthly Payments. 

Notice 2004-47, 2004-29 I.R.B. 48 provides that the IRS as an administrator of the HCTC, will file the required returns and furnish statements to the recipients unless you elect to file and furnish information returns and statements on your own. Contact the HCTC Program for this purpose by emailing the HCTC Program at wi.hctc.stakeholdr.en@irs.gov. Unless you notify the HCTC Program of your intent to file information returns and furnish statements, you will be considered to have elected to have the HCTC Program file Forms 1099-H and furnish statements to recipients in satisfying Section 6050T filing and furnishing requirements.

Waiver of penalties. Section 6724(a) authorizes the IRS to waive any penalties under Sections 6721 and 6722 for failure to comply with the reporting requirements of Section 6050T if such failures resulted from reasonable cause and not willful neglect. The HCTC Program will furnish a copy of Form 1099-H or an acceptable substitute statement to each recipient on your behalf, unless you elect to file Form 1099-H and furnish the copy or substitute statement yourself. The IRS will not assert the penalties imposed by Sections 6721 and 6722 for information returns and statements required to be filed and furnished under Section 6050T against you if you allow the HCTC Program to file and furnish Forms 1099-H. If you elect not to allow the HCTC Program to file and furnish Forms 1099-H, the general rules for seeking a penalty waiver under Section 6724(a) apply. See Regulations Section 301.6724-1.