Protective Claim Filings for ACA-Related Refunds

I just saw this article from Spidell to consider filing protective claims by 7/15/2020 for the possibility of preserving 2016 ACA-related tax/penalty refunds.

https://www.caltax.com/news/hot-news-an ... ted-taxes/

I hadn't heard of this recommendation until now, so I'm wondering if there's a consensus on whether to recommend protective claims to taxpayers. Many thanks for any input.

Ugh! Is it possible for a preparer to file a protective claim that is inclusive of all 2016 tax returns prepared by that preparer?

If it has to be done on a client-by-client basis, would we, first, be required to get client approval?

Do you charge for the protected claim?

Ugh! Is it possible for a preparer to file a protective claim that is inclusive of all 2016 tax returns prepared by that preparer?

If it has to be done on a client-by-client basis, would we, first, be required to get client approval?

Or you can send the email sample to your clients and let them fill them out and mail to the address for 1040x

We are going to send a letter to the IRS that says "for all of our clients" and include an entire listing of the 2016 tax returns we prepared whether they paid these taxes or not.

We are going to send a letter to the IRS that says "for all of our clients" and include an entire listing of the 2016 tax returns we prepared whether they paid these taxes or not.

I would not have any confidence this would accomplish what you're hoping it will. Why spend any effort on this if this is your approach?

We're going to filter those clients who paid more than ~$10K in NIIT and send in a letter for those folks.

Captain- not sure what NIIT and ACA have in common but wondering about your thoughts. Have you heard something about NIIT and the 10k limit?

We're going to filter those clients who paid more than ~$10K in NIIT and send in a letter for those folks.

Are you sending the letter to the client for them to send themselves?

Are you getting their approval before sending direct?

Never mind, I just read the link.

I'm wondering if any insurance companies have taken a position on this or have any clear recommendations. I haven't found anything so far.

I'm sending the letter to clients to have them fill, sign, and mail. I just called them and gave them a heads up

We have too many to call and too many to take their call when they get this letter from us to be signed. Trying to find what is most efficient....

We filtered our clients and asked if they wanted to file-about a month ago. We are charging. I think the chances are remote of prevailing and told the clients. If 2016 returns were extended, you have until October 15.

sjrcpa - if the 2016 tax returns were extended - you will have until the actual filing date to file this protective claim - not 10/15.

Jessica posted the code sections on another list serve so I am including them for your reference :6513(a) and 301.6513-1(a)

ps - I do believe Jessica is correct.

Wiles - yes - the client MUST sign the protective claim for it to be valid.

Michaelstar I agree. I short cut it-with most of my clients extended means actually filing on October 15.

This is the email that I sent to my clients. Feel free to use any or all, if it is helpful. I did these yesterday. Once I got the system down, it took about 20 minutes per client.

Dear ,

Please let me know that you received this email.

There is a potential refund opportunity involving the Supreme Court’s agreement to hear a case regarding the validity of the Affordable Care Act (ACA) after repeal of the individual mandate. There are two taxes, the Additional Medicare Tax and the Net Investment Income Tax, that were created by the ACA. If the ACA is ruled unconstitutional, you may be entitled to refunds to the extent that you paid these taxes. I believe that if the ACA is ruled unconstitutional, refunds will be available beginning in 2019, the year that the individual mandate was repealed. However, others believe that refunds might be available for all open years, which puts 2016 – 2018 into play. From 2016 through 2019, your total tax burden related to these two taxes was xxx.

We are allowed to file protective claims for refund when there is an unresolved issue that, when resolved, may create a refund opportunity. There are different methods of filing a protective claim for refund. A letter is sufficient if it includes specific detail. We are not required to include the amount of the refund claim in the letter.

The time-sensitive issue relates to the statute of limitations. For taxpayers who filed their 2016 returns by April 15, 2017, the statute of limitations on 2016 closes on July 15, 2020. The letter must be filed by that date. For taxpayers who extended their 2016 returns, the statute of limitations for 2016 expires on date that they filed the return. The safest course of action is to file the refund claim by July 15, 2020.

I have attached a letter for you to file with the IRS to protect your entitlement to a refund if the Supreme Court rules that the ACA is unconstitutional. The password is your SSN, no dashes. I am sending this by email due to the time sensitivity and because this letter does not require my signature. There is no e-file option for refund claims. Please sign and date the letter on page 2. Please mail the letter to:

Department of the Treasury
Internal Revenue Service
xxxxxxxxx

If you send the letter without proof of mailing, you take the chance that refund claim will be lost in the mail or that the IRS will take the position that it was not timely filed. Registered or certified mail is accepted proof of mailing when the documentation is obtained from the Post Office.

I apologize that I am sending this to you so close to the July 15 deadline. For some reason that I cannot fathom, this issue just came to light on Friday in online discussions and alerts issued by the professional research organizations. We are all scrambling.

Please let me know if you have questions.

Regards,

************
There are multiple methods for filing the claim. Another CPA pointed out this letter. I used this method because I could get through it quickly. Also, don't forget about your trusts that paid NIIT

http://www.gouldratner.com/assets/NEW%2 ... 0chart.pdf

So most of my big returns went on extension in 2016, so I don't think we have to file the protective claim until 10-15-20. Agree?

No in the case of extensions my understanding is that it's going to be the day and month in 2017 that you actually filed tax return .

I thought that we resolved this and that the decision of the 5th Circuit (or the U.S. Supreme Court) would only affect the constitutionality of the ACA after 12/31/2018.

viewtopic.php?f=8&t=16646&p=147021

So, could Spidell be wrong in advising that taxpayers file protective claims for 2016?

Spidell is not the only one. I don't think they are actually advising it either; just bringing it to your attention.