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Dear Friends & Colleagues: 

Re: ACA, Tax Credits, and Domestic Violence
 

Several tax firms and advocacy groups have raised the issue about innocent/injured spouses
in the context of the premium assistance tax credits and related filing requirements.  As you know, recipients of the final tax credit rule must file joint returns for the tax year for which they claim the credit.  IRC § 36B(c)(1)(C); 26 CFR § 1.36B–2(b)(2).  This may prove particularly challenging for victims of domestic violence, who may face understandable difficulties in filing joint returns.  However, the final rules and filing requirements do not currently offer an accommodation to these individuals.

The IRS acknowledged this concern in the interim file rule (pertinent part pasted below) and has invited additional feedback from all stakeholders.  Interested parties may still submit comments to the address below as well as to the authors of the regulations (also listed below):

Internal Revenue Service,
CC:PA:LPD:PR (REG–131491–10), Room 5203, P.O. Box 7604
Ben Franklin Station, Washington, DC 20044
or electronically to www.regulations.gov 
(IRS REG–131491–10)

You may also direct correspondence to the primary authors of the final tax credit rule, which include Shareen S. Pflanz, Frank W. Dunham III, Andrew S. Braden, and Stephen J. Toomey of the Office of Associate Chief Counsel (Income Tax and Accounting).

One or two suggestions may merit particular mention.  An unnamed stakeholder recently suggested that the IRS grant filing latitude to individuals who are eligible for the domestic violence hardship exemption to the § 5000A penalties.   This individual suggested that the IRS could perhaps even using that HHS process as a way to adjudicate these issues.  Such an approach may help cut down on the fact-specific determinations that the IRS might understandably wish to avoid.  This seems to make a lot of sense, and I wish that I remember whom to credit as the originator of this idea.  Alternatively, observers have noted that the IRS already has procedures for assisting innocent/injured spouses (see
http://www.irs.gov/uac/Injured-or-Innocent-Spouse-Tax-Relief), which the IRS may be able to adapt for purposes of the tax credit and associated filing requirement.

We wanted you to be aware of this and the opportunity to provide input as to the optimal way to address.  Please feel free to contact me at
brian.haile@jtax.com or 615-761-6929 if I can be helpful in any way.

Sincerely,
Brian

PS: Thank you to my tax colleagues at CERCA for their individual efforts to raise awareness about this issue.

Brian Haile
Senior Vice President for Health Policy
Jackson Hewitt Tax Service Inc. 
Cell: (615) 761-6929
Email:brian.haile@jtax.com 
Twitter: @haile_brian

 
From the preamble to the interim final rule for the § 36B premium assistance tax credits: 

“The proposed regulations requested comments on special rules for taxpayers who receive advance payments but face challenges in meeting the joint return requirement, for example because of the incarceration of a spouse, domestic abuse, or a pending divorce. 

“Numerous commentators stated that the final regulations should provide special rules allowing these spouses to file separate returns and claim the premium tax credit. Commentators suggested that abandoned spouses also warrant an exception.  Other commentators noted that other married taxpayers may face challenges in filing a joint return and asked for a hardship exemption from the joint filing requirement. 

“Commentators suggested that taxpayers should be able to certify on the premium tax credit form that they meet the criteria for an exemption from the joint filing requirement. One commentator suggested granting an exception in case of domestic violence for a taxpayer who has or during the taxable year had an order of protection. 

“Some commentators, noting that many of these situations are not resolved in a single taxable year, requested a three-year exception to the joint filing requirement. 

“The final regulations do not provide special rules allowing married taxpayers to claim the premium tax credit on separate returns. However, the IRS and the Treasury Department intend to propose additional regulations regarding eligibility for the premium tax credit to address circumstances in which domestic abuse, abandonment, or similar circumstances create obstacles to the ability of taxpayers to file joint returns. Comments are requested on the documentation that a taxpayer could provide to establish that he or she cannot file a joint return because of the domestic abuse, abandonment, or other similar circumstances, on what treatment should be accorded the other spouse if he or she does not file with documentation supporting an exception, and the need for anti-abuse rules.”

77 Fed. Reg. 30377, 30384-85 (May 23, 2012).