Originally published in Forbes.com.
Another odd Obamacare decision hit the Tax Court yesterday (See my Obamacare Travesty In Tax Court earlier this month). The Tax Court gave Benjamin and Delores Gibson the bad news that they would have to pay back a premium credit of $4,628.80 that went to Benjamin Jr.
The Gibsons filed their 2014 return claiming Junior as a dependent even though he had not been living with them for much of the year. (A footnote indicates that the IRS was not disputing the dependency claim. There is not enough detail to be certain, but the premium credit charge-back is probably more of a gotcha than disallowing dependency would be.) They denied that he had received a premium credit. Junior provided an affidavit to that effect also noting that he had not received Form 1095-A. The IRS had more:
….the reliable evidence establishes that Junior’s recollection about his insurance coverage was mistaken. The business records from Junior’s employer, from Humana, and from the Health Insurance Marketplace establish that Junior’s Blue Cross coverage did not commence until 2015, that he was covered by the Humana policy in 2014, and that Humana received advance payments of premium assistance tax credits to offset Junior’s insurance premiums. These supporting documents are sufficient to satisfy respondent’s burden of production under section 6201(d) (requiring the Commissioner to produce information supporting an information return if the taxpayer asserts a reasonable dispute with respect to the information return and has cooperated with the Commissioner).
The Tax Court does not doubt the sincerity of the Gibsons, but that is no help.
We do not doubt petitioners’ testimony that they believed that Junior did not have an insurance policy from Humana. Junior did not reside with petitioners [*7] during this period, and we believe their testimony that they were unaware of the insurance coverage and any confirming information that was mailed to him. Because petitioners do not dispute that their reported income level makes them ineligible for the premium assistance tax credit, their tax must be increased, and their refund must be reduced, by the amounts prepaid to Humana on Junior’s behalf during 2014.
There is an interesting practice question here. Dependency is a matter of fact, not an election, but when it comes to older kids not living at home, it can be treated as, in effect, an election. Preparers need to be alert to the health care credit implications of claiming a dependent and weigh that against other benefits.
Other Coverage
Lew Taishoff covered the decision in a post titled Junior. Mr. Taishoff almost slips from his resolution to have a non-political blog with the comment:
I understand Congress has this in hand to remedy. Cain’t hardly wait.