Form 1099-H: Health Coverage Tax Credit (HCTC) Advance Payments – 2020 Summary Guide

What the Form Is For

Form 1099-H is an information return used to report Health Coverage Tax Credit (HCTC) advance payments made on behalf of eligible individuals during the 2020 calendar year. If you received this form, it means the IRS paid a portion of your health insurance premiums directly to your insurance provider through the HCTC advance payment program.

The HCTC was a federal tax credit designed to help specific groups of Americans afford health insurance by covering 72.5% of qualified health insurance premiums. The remaining 27.5% was paid by the participant. The program specifically assisted eligible Trade Adjustment Assistance (TAA) recipients, Alternative TAA (ATAA) recipients, Reemployment TAA (RTAA) recipients, and Pension Benefit Guaranty Corporation (PBGC) pension payees, along with their qualifying family members.

Your Form 1099-H shows the total advance payments made throughout the year and breaks down the monthly amounts. This information is crucial for completing your tax return, specifically Form 8885 (Health Coverage Tax Credit), which you'll need to file to properly account for these advance payments. Even if you don't owe additional taxes, you must file Form 8885 to elect the HCTC for the months you participated in the program—failure to do so could result in having to repay the advance payments as additional tax.

Important Note: The HCTC program expired on December 31, 2020, making 2020 the final year for this credit.

When You’d Use This Form (Late/Amended Filing)

You would receive Form 1099-H from either your health insurance provider or the IRS HCTC Program after the end of the tax year. The form is typically issued by January 31 of the following year. If you haven't received your Form 1099-H but participated in the HCTC advance payment program during 2020, contact the IRS HCTC Program or your insurance provider.

Late Filing Situations

If you didn't file Form 8885 with your original 2020 tax return, you should file an amended return using Form 1040-X as soon as possible. This is critical because failing to elect the HCTC for months when you received advance payments means those payments could be treated as taxable income or result in additional tax owed.

Amended Return Scenarios

You might need to file an amended return if you:

Received a corrected Form 1099-H showing different payment amounts
Initially forgot to include Form 8885 with your return
Made errors in calculating your HCTC on Form 8885
Received additional documentation showing you were eligible for months you didn't originally claim
Need to repay excess advance payments due to ineligibility for certain months

The deadline for filing an amended return is generally three years from the original filing deadline or two years from when you paid the tax, whichever is later.

Key Rules for 2020

Eligibility Requirements

To qualify for HCTC in 2020, you must have been an eligible TAA, ATAA, or RTAA recipient, or PBGC payee. Specifically, PBGC payees had to be between ages 55 and 65 and not enrolled in Medicare. Qualifying family members (spouses and dependents) could also receive coverage under the credit.

Coverage Percentage

The HCTC covered exactly 72.5% of qualified health insurance premiums, with participants responsible for the remaining 27.5%. Box 1 of Form 1099-H shows the total advance payments made on your behalf—this amount cannot exceed 72.5% of your total health insurance premiums for the year.

Qualified Insurance Types

Not all health insurance qualified for HCTC. Qualified coverage included:

Group health plans through a spouse's employer (with restrictions)
COBRA continuation coverage
Certain state-based coverage programs
Coverage through voluntary employees' beneficiary associations (VEBAs) established through bankruptcy

Marketplace plans, Medicare, Medicaid, CHIP, FEHBP, and TRICARE were not qualified coverage for HCTC purposes.

Employer Coverage Restrictions

You were ineligible for HCTC in any month where you or your spouse had employer-sponsored coverage and the employer paid 50% or more of the premiums. For ATAA and RTAA recipients, the rules were even stricter—any month with employer-sponsored coverage where the employer contributed to premiums made you ineligible.

Monthly Tracking

Eligibility was determined on a month-by-month basis as of the first day of each month. Boxes 3 through 14 on Form 1099-H show the breakdown of payments for each calendar month, allowing you to track exactly which months you received benefits.

Final Year

The HCTC program expired on December 31, 2020, and could not be claimed for coverage months beginning in 2021 or later. The advance monthly payment program also ended in December 2020.

Step-by-Step (High Level)

Step 1: Receive Your Form 1099-H

Your health insurance provider or the IRS HCTC Program will send you Form 1099-H by late January or early February. Review it carefully to ensure the amounts match your records. The form shows your total advance payments in Box 1, the number of months you received payments in Box 2, and monthly breakdowns in Boxes 3–14.

Step 2: Gather Supporting Documentation

Collect all health insurance bills, COBRA payment coupons, proof of payment (canceled checks, bank statements, credit card statements), and eligibility letters from the Department of Labor or PBGC. You'll need these to complete Form 8885 if you're claiming additional credit beyond the advance payments.

Step 3: Complete Form 8885

Form 8885 is where you officially elect the HCTC and calculate your total credit. You must check boxes on Line 1 for each eligible coverage month. Enter the premiums you paid directly (not through advance payments) on Line 2. The form will calculate whether you're entitled to additional credit or if you received excess advance payments that must be repaid.

Step 4: Reconcile Advance Payments

Compare the amounts on Form 1099-H with the months you're claiming on Form 8885. If you received advance payments for months when you weren't actually eligible, you'll need to complete the Excess Advance HCTC Repayment Worksheet to calculate the repayment amount.

Step 5: Include Form 8885 with Your Tax Return

Attach Form 8885 to your Form 1040, 1040-SR, 1040-NR, 1040-SS, or 1040-PR. Any additional credit from Line 5 of Form 8885 will be added to your refund or reduce your tax owed. If you must repay excess advance payments, this will increase your tax liability.

Step 6: Attach Required Documentation

If you're claiming HCTC beyond the advance payments (Line 2 of Form 8885), you must attach proof of eligibility, insurance bills, and payment documentation to your return. E-filers can attach PDFs if their software supports it, or mail documents using Form 8453.

Common Mistakes and How to Avoid Them

Mistake #1: Not Filing Form 8885

Solution: Always file Form 8885 with your tax return if you received Form 1099-H, even if Line 5 shows zero or a negative amount.

Mistake #2: Double-Counting Premium Payments

Solution: Only enter premiums you paid directly to your insurance company or to “US Treasury-HCTC” (your 27.5% share). Never include the 72.5% advance payment amounts shown on Form 1099-H.

Mistake #3: Including Ineligible Coverage or Family Members

Solution: Carefully review the qualified coverage rules. If your monthly bill includes both eligible and ineligible coverage, calculate only the eligible portion. Keep detailed documentation separating qualified from non-qualified expenses.

Mistake #4: Incorrect Employer Coverage Calculations

Solution: Obtain a letter from your employer (or your spouse's employer) stating the exact percentage of premium costs paid by the employer. Include all pre-tax contributions in the employer's percentage.

Mistake #5: Missing Documentation

Solution: Create a complete documentation packet before filing. Include eligibility letters, all insurance bills showing coverage dates and amounts, and payment proof (bank statements, canceled checks, credit card statements).

Mistake #6: Ignoring the Interaction with Premium Tax Credits

Solution: Follow the special instructions in the Form 8885 instructions under “Participants in a Health Insurance Marketplace.” Complete Form 8962 for non-HCTC months and carefully coordinate the two forms.

What Happens After You File

IRS Processing

The IRS will match the information on your Form 8885 against the Form 1099-H filed by your insurance provider or the HCTC Program.

Additional Credit

If Line 5 of Form 8885 shows a positive number, this additional credit will be included in your total tax refund or applied to reduce any tax you owe.

Repayment of Excess Advance Payments

If you received advance payments for months you weren't eligible, this amount will be added to your total tax liability.

Documentation Review

The IRS may request additional documentation if your claim appears inconsistent or if you're claiming substantial additional credit beyond advance payments.

Audit Potential

Returns with large credits or missing documentation may receive additional scrutiny. Keep all supporting documents for at least three years from the filing date.

No Future HCTC

Because the program ended December 31, 2020, you will not receive Form 1099-H or file Form 8885 for subsequent years.

FAQs

Q1: I received Form 1099-H but didn't think I was eligible for HCTC. What should I do?

You must still file Form 8885 with your tax return. If you believe you received advance payments in error, complete Form 8885 checking only the boxes for months you were truly eligible.

Q2: Can I claim HCTC for 2020 if I didn't participate in the advance payment program during the year?

Yes. If you paid 100% of your qualified health insurance premiums yourself during 2020 and were eligible for HCTC, you can claim the full 72.5% credit by filing Form 8885.

Q3: The amounts on my Form 1099-H don't match my records. What should I do?

Contact your insurance provider or the IRS HCTC Program immediately. They can issue a corrected Form 1099-H if there was an error.

Q4: I was divorced in 2020 and my former spouse was the eligible TAA recipient. Can I still get HCTC?

Yes. Qualifying family members after life events (like divorce) can receive HCTC for up to 24 months or until 2021 coverage months, whichever comes first.

Q5: I had both COBRA coverage (HCTC-qualified) and a Marketplace plan in 2020. Can I claim both credits?

You cannot claim both HCTC and Premium Tax Credit (PTC) for the same coverage in the same month, but you can claim them for different months or people.

Q6: What happens if I can't pay the excess advance payment repayment shown on my Form 8885?

The excess advance payment amount becomes part of your total tax liability for 2020. If you can't pay in full, contact the IRS to set up a payment plan.

Q7: Since HCTC ended in 2020, what health insurance options do former HCTC participants have?

Former HCTC participants should explore Marketplace coverage, COBRA (without HCTC assistance), Medicaid, or employer-sponsored coverage.

‍