Form 1099-H: Health Coverage Tax Credit (HCTC) Advance Payments – 2014 Guide

Understanding Form 1099-H can seem complicated, but this guide breaks down everything you need to know about this tax form related to the Health Coverage Tax Credit for 2014—a unique year when the credit initially expired but was later retroactively reinstated.

What Form 1099-H Is For

Form 1099-H reports advance payments of the Health Coverage Tax Credit (HCTC) that were made directly to your health insurance company on your behalf during a calendar year. Think of it as a receipt showing how much the federal government paid toward your health insurance premiums.

The HCTC was a federal program designed to help specific groups of displaced workers and retirees afford health insurance by covering 72.5% of qualified health insurance premiums. If you participated in the monthly advance payment program, you received this tax credit upfront—meaning the government sent payments directly to your insurance provider each month, and you only paid 27.5% of your premium.

The form is issued by your health insurance provider, not by you, and you'll receive it if you had HCTC advance payments made on your behalf. You need this form to accurately complete your tax return, particularly Form 8885 (Health Coverage Tax Credit), because it shows how much credit you already received throughout the year.

According to the IRS, health insurance providers must file Form 1099-H if they received any advance payments during the calendar year of qualified health insurance payments for the benefit of eligible trade adjustment assistance (TAA), Reemployment TAA, or Pension Benefit Guaranty Corporation (PBGC) pension recipients and their qualifying family members.

When You’d Use Form 1099-H (Late/Amended Returns)

Why 2014 Was Unusual

The 2014 tax year was particularly unusual for Form 1099-H. The HCTC program expired on December 31, 2013, and was not accepting new registrations after October 1, 2013. This meant that during 2014, the credit appeared to be unavailable, and most taxpayers filed their 2014 returns without claiming it.

Retroactive Reinstatement

However, Congress retroactively reinstated the HCTC in June 2015 through the Trade Preferences Extension Act of 2015, covering the period from 2014 through 2019. This created a situation where eligible taxpayers needed to amend their already-filed 2014 returns to claim the credit they were entitled to.

How to Claim the HCTC for 2014

If you need to claim the HCTC for 2014:

• You must file an amended return using Form 1040X (Amended U.S. Individual Income Tax Return). According to IRS Notice 2016-02, even if you haven't filed your original 2014 return yet, you must file it first without the HCTC, then file an amended return to claim the credit.
• The deadline for amending is generally three years from the date you filed your original return. For example, if you filed your 2014 return on April 15, 2015, you had until April 17, 2018, to file an amended return claiming the HCTC.
• You can also use Form 1099-H for late filing situations where you receive forms from prior years that need to be reported.

Key Rules or Details for 2014

Several important rules governed the HCTC and Form 1099-H for 2014, according to IRS Notice 2016-02:

Eligibility Requirements

You qualified for the HCTC in 2014 if you were in one of three categories: (1) an eligible Trade Adjustment Assistance (TAA) recipient receiving Trade Readjustment Allowance or unemployment insurance while eligible for TRA, (2) an eligible Alternative TAA (ATAA) or Reemployment TAA (RTAA) recipient, or (3) a Pension Benefit Guaranty Corporation (PBGC) pension recipient age 55 or older receiving benefits paid at least partially by the PBGC.

The Credit Amount

The HCTC covered 72.5% of qualified health insurance premiums for eligible individuals and their qualifying family members. This meant if your monthly premium was $400, the government paid $290, and you paid $110.

Election Requirement

For coverage months in 2014, you must make an annual election to claim the HCTC. This election is irrevocable and applies to all subsequent coverage months in the taxable year for which you remain eligible.

Qualified Health Coverage

Not all insurance qualified. Acceptable coverage types included COBRA continuation coverage, coverage through a spouse's employer (where you pay more than 50% of the premium), state-qualified health plans, individual market insurance, and—unique to 2014 and 2015—coverage through the Health Insurance Marketplace (Exchange).

Disqualifying Coverage

You could not receive the HCTC if you were enrolled in or eligible for Medicare Part A, B, or C; Medicaid; CHIP (Children's Health Insurance Program); Federal Employees Health Benefits Program (FEHBP); or TRICARE. You were also disqualified if you had employer-subsidized coverage where the employer paid 50% or more of the cost, or if you were imprisoned.

Interaction with Premium Tax Credit

A unique situation arose in 2014 because Marketplace coverage qualified for both the HCTC and the Premium Tax Credit (PTC) under the Affordable Care Act. You had to choose one or the other for any given coverage month—you couldn't claim both credits for the same coverage in the same month. However, you could claim the HCTC for some months and the PTC for other months in the same year. If you elected the HCTC for any month and received Advance Premium Tax Credits (APTC), you had to repay all excess APTC without the benefit of the normal repayment cap that protects lower-income households.

Step-by-Step (High Level)

Understanding how Form 1099-H fits into your tax filing process helps demystify the paperwork:

Step 1: Receive Your Form 1099-H

Your qualified health insurance provider will send you Form 1099-H by January 31 following the year you received advance payments. The form shows the total amount of HCTC advance payments in Box 1, the number of months payments were received in Box 2, and the monthly breakdown in Boxes 3 through 14.

Step 2: Gather Supporting Documentation

Collect all related documents including Form 1095-A (if you had Marketplace coverage), Form 8962 (if claiming the Premium Tax Credit for any months), proof of your eligibility status (TAA certification letters or PBGC benefit statements), and records of all insurance premium payments you made directly.

Step 3: Determine Your Election

Decide whether to claim the HCTC for 2014 coverage months. Calculate whether the HCTC provides more benefit than the Premium Tax Credit if you had Marketplace coverage. The HCTC generally offers larger benefits at 72.5% of premiums versus the PTC's sliding scale based on income.

Step 4: Complete Form 8885

Use Form 8885 (Health Coverage Tax Credit) to make your HCTC election and calculate your credit. Check the box on line 1 for the first coverage month you're electing to claim the HCTC. Report the information from your Form 1099-H, including the advance payments you received.

Step 5: Address Premium Tax Credit Reconciliation

If you received Advance Premium Tax Credits and are electing the HCTC for any months in 2014, complete Form 8962 to reconcile the APTC. Remember: the repayment limitation does not apply when you elect the HCTC, so you may need to repay all excess APTC for those months.

Step 6: File or Amend Your Return

If filing an amended 2014 return, use Form 1040X and attach both Form 8885 and Form 8962 (if applicable). Follow the special instructions in the Form 1040X instructions under "Health coverage tax credit (HCTC) for 2014."

Step 7: Keep Records

Maintain copies of all forms, payment records, and eligibility documentation for at least three years after filing your return, or four years if backup withholding was involved.

Common Mistakes and How to Avoid Them

Several pitfalls can trip up taxpayers dealing with Form 1099-H and the HCTC:

Mistake #1: Claiming Both HCTC and Full PTC for the Same Coverage

Many taxpayers with Marketplace coverage mistakenly try to claim both credits for identical coverage in the same month. Remember: once you elect the HCTC for a coverage month, you cannot claim the PTC for that same coverage in that month or any subsequent month in the taxable year where you remain HCTC-eligible. You must complete both Form 8885 and Form 8962 correctly to avoid this error.

Mistake #2: Forgetting the APTC Repayment Limitation Doesn't Apply

If you elect the HCTC for any month in 2014 and received APTC, you must repay all excess APTC without the protection of the normal repayment cap. This can result in an unexpected tax bill, so calculate carefully before making your election.

Mistake #3: Including Non-Qualifying Family Members

Qualifying family members for the HCTC are limited to your spouse and tax dependents. A common error involves trying to claim the credit for someone who isn't your dependent, such as a child claimed by an ex-spouse under divorce agreements. In such cases, special allocation rules apply.

Mistake #4: Not Reporting Correct Premium Amounts

When calculating your HCTC, you must include both the amount you paid directly plus any APTC payments. APTC counts as amounts you paid for HCTC purposes. Failing to include APTC in your calculation underestimates your allowable credit.

Mistake #5: Missing the Amendment Deadline

Since the HCTC was retroactively reinstated for 2014, many eligible taxpayers needed to amend returns. Missing the three-year deadline means forfeiting potentially thousands of dollars in tax credits.

Mistake #6: Incorrect Month-by-Month Eligibility

HCTC eligibility is determined monthly. Some taxpayers apply the credit to months when they didn't meet all requirements (such as being enrolled in disqualifying coverage or not yet receiving qualifying benefits). Carefully review each month's eligibility before checking boxes on Form 8885.

How to Avoid These Mistakes

Review IRS Notice 2016-02 carefully, use the worksheets provided in Form 8885 instructions, consider consulting a tax professional for complex situations involving both HCTC and PTC, and maintain detailed monthly records of coverage and eligibility status.

What Happens After You File

Once you file your return or amended return with Form 1099-H information:

IRS Processing

The IRS will process your Form 8885 along with your Form 1040 or 1040X. They'll verify the advance payments reported on your Form 1099-H against their records from the HCTC program administrator and your health insurance provider.

Reconciliation

The IRS will reconcile the advance HCTC payments you received (shown on Form 1099-H) with your total eligible credit calculated on Form 8885. If the advance payments were less than your total eligible credit, you'll receive the difference as a refund or credit against other taxes owed. If the advance payments exceeded your eligible credit (unusual, but possible if eligibility changed mid-year), you would owe the excess back.

Premium Tax Credit Repayment

If you're also reconciling APTC on Form 8962, the IRS will process any required repayment of excess APTC. For months where you elected the HCTC, all excess APTC must be repaid in full, which could increase your tax liability or reduce your refund.

Verification and Notices

The IRS may send notices if there are discrepancies between what you reported and what they have on file. Common issues include mismatched advance payment amounts, eligibility questions, or problems with Premium Tax Credit reconciliation. Respond promptly to any IRS correspondence and provide requested documentation.

Future Year Implications

Your 2014 HCTC election doesn't automatically carry forward. For 2015 and subsequent years, you must make new elections annually. However, your experience with the 2014 forms prepares you for future filings.

Timeline

Amended return processing typically takes 8-12 weeks or longer, especially during peak filing season. Electronic filing of original returns is faster, but amendments for 2014 HCTC claims required paper filing.

FAQs

Q1: I didn't receive a Form 1099-H for 2014, but I paid qualified health insurance premiums while eligible for TAA. Can I still claim the HCTC?

Yes. Form 1099-H is only issued if you participated in the monthly advance payment program and advance payments were made to your insurer. If you paid your premiums directly without using the advance payment option, you won't receive Form 1099-H. You can still claim the "yearly" HCTC by filing Form 8885 with your tax return (or amended return) along with documentation of your premium payments, such as insurance bills and payment records. The yearly HCTC allows you to claim the full 72.5% credit when you file your taxes.

Q2: Can I claim both the HCTC and the Premium Tax Credit in the same tax year?

Yes, but only for different coverage months, not the same coverage in the same month. For 2014 and 2015, Marketplace coverage qualified for both credits. You might claim the PTC for January through June when you weren't yet HCTC-eligible, then elect the HCTC for July through December when you became eligible. However, once you elect the HCTC for a month, that election applies to all remaining months in the year that you're HCTC-eligible. You must file both Form 8962 and Form 8885.

Q3: My Form 1099-H shows $3,480 in Box 1, but I think it should be higher. What should I do?

First, review Boxes 3 through 14, which break down the monthly payments. Verify these against your insurance company's records. If there's an error, contact your health insurance provider immediately—they issued the Form 1099-H and must correct it. Request a corrected Form 1099-H (marked "CORRECTED") before filing your tax return. If you've already filed, you may need to amend once you receive the correction.

Q4: I had Marketplace coverage with APTC in 2014 and want to claim the HCTC instead. Will I have to pay back my APTC?

Potentially, yes. If your advance premium tax credits exceeded your allowable Premium Tax Credit (after excluding the months you elect the HCTC), you must repay the full excess without the benefit of the normal repayment cap. Calculate carefully: add your HCTC for the elected months plus your PTC for the remaining months. If this total exceeds what you received in advance payments from both programs, you'll get a refund. If the advance payments exceeded this total, you'll owe the difference. This is one reason to carefully compare whether the HCTC or PTC provides better value.

Q5: What if my HCTC eligibility ended mid-year in 2014—say, in August?

Your HCTC election only applies to months when you were actually eligible. If your Trade Readjustment Allowance ended in August, making you ineligible thereafter, you would check boxes on Form 8885 for January through August only (assuming you were eligible starting in January). For September through December, you couldn't claim the HCTC but could claim the Premium Tax Credit if you had Marketplace coverage and met PTC eligibility requirements.

Q6: I'm confused about allocating premiums when my Marketplace plan covered family members who weren't all eligible for the HCTC. How does this work?

This is complex. If your Marketplace plan covered you (HCTC-eligible) and your child who was claimed as a dependent by your ex-spouse (not your HCTC qualifying family member), you must allocate the premium using the rules under Code Section 36B. Follow the instructions in Form 8962, Part IV for shared policy allocation. You can only claim the HCTC for the portion allocated to yourself and your HCTC-qualifying family members. Your ex-spouse could potentially claim the PTC for the portion allocated to the child.

Q7: Are there any penalties for not reporting Form 1099-H information correctly?

While there's no specific penalty for misreporting Form 1099-H information as a recipient, incorrect reporting can lead to problems. If you underreport the advance payments you received, you might claim more HCTC than you're entitled to, resulting in underpayment of taxes, potential interest charges, and accuracy-related penalties. The IRS receives copies of all Forms 1099-H from insurance providers and will match them to your return. Always report exactly what's shown on your Form 1099-H and contact the issuer immediately if you believe the form contains errors.

Additional Resources

For more information about the Health Coverage Tax Credit and Form 1099-H, visit IRS.gov/HCTC. You can also access IRS Notice 2016-02 for detailed technical guidance on claiming the HCTC for 2014 and 2015. For general information about Form 1099-H, see the IRS Form 1099-H information page.

This guide provides general information based on IRS publications and guidance. Tax situations vary, and complex cases may benefit from consultation with a qualified tax professional.

‍