A recent ruling by the United States Court of Appeals for the Fifth Circuit declared the individual mandate of the Affordable Care Act unconstitutional in the case of Texas v. United States. The ruling of the Fifth Circuit was subsequently appealed, and will be heard by the Supreme Court on a writ of certiorari in the Spring of 2021. Given that the individual mandate is central to the operation of the Affordable Care Act, should the Supreme Court uphold the Fifth Circuit’s decision, it is within the realm of possibility that the entire act will be stricken along with the individual mandate.
In the event that the entirety of the Act is stricken, the 0.9% payroll surcharge and the 3.8% tax on net investment income will go with it. This would result in significant refund opportunities for many taxpayers. Given the potential for this tax repeal, taxpayers should evaluate the need to file a “protective claim for refund.” These protective filings allow a taxpayer to keep the statutory window for refund open while we await the Supreme Court’s decision.
In order to preserve this right to claim a refund for the 2016 tax year, any protective claims for refund must be submitted to the IRS within three years of the filing date for your originally-filed 2016 return. Although the outcome of the Supreme Court decision is not known, any opportunity for refund will only be successful if the Supreme Court overturns the entire Affordable Care Act and makes the application of the repeal retroactive to 2016.
For further information and additional details, please call or email a member of your team at Miller Cooper or call (847)205-5000.