American Rescue Plan Act: Continued Review of Premium Tax Credit Provisions

Summary

The Treasury Inspector General for Tax Administration (TIGTA) issued a Final Audit Report, Report Number 2023-47-036, assessing IRS processes to ensure expanded Premium Tax Credit eligibility requirements in the American Rescue Plan Act (ARPA) of 2021 are met. TIGTA found that the IRS accurately updated processes and procedures to reflect modified Premium Tax Credit rules for Tax Year 2021 and correctly identified nearly 1.1 million potentially incorrect claims, but does not have adequate resources to address every potentially incorrect claim. TIGTA identified 317,418 taxpayers who either under claimed the Premium Tax Credit or overreported their excess advanced Premium Tax Credit repayment totaling $334.8 million. TIGTA made five recommendations; the IRS agreed with four and partially agreed with one.

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American Rescue Plan Act:
Continued Review of Premium Tax Credit Provisions

June 14, 2023

Report Number:  2023-47-036

This report has cleared the Treasury Inspector General for Tax Administration disclosure review process and information determined
to be restricted from public release has been redacted from this document.
TIGTACommunications@tigta.treas.gov   |   www.treasury.gov/tigta
TREASURY INSPECTOR GENERAL FOR TAX ADMINISTRATION

HIGHLIGHTS:  American Rescue Plan Act:  Continued Review of Premium Tax Credit Provisions
Final Audit Report issued on June 14, 2023
Report Number 2023-47-036

Why TIGTA Did This Audit
This audit was initiated to assess
the IRS’s processes and procedures
to ensure expanded Premium Tax
Credit eligibility requirements in
the American Rescue Plan Act
(ARPA) of 2021 are met prior to
credits being allowed.
Eligible individuals can elect to
have the Premium Tax Credit paid
to their insurance provider in
advance.  Individuals who receive
advance Premium Tax Credit must
reconcile the advance payments on
their tax return with the allowable
Premium Tax Credit amount.
Individuals who received excess
advance Premium Tax Credit must
repay all or some of the excess.
This audit is part of a series of
reviews that TIGTA is conducting
to monitor the IRS’s continued
response to the pandemic.  This
work is to help ensure that eligible
individuals are receiving relief as
intended.
Impact on Tax Administration
The ARPA temporarily expanded
eligibility for the Premium Tax
Credit and increased the amount
of the Credit for individuals and
families in all income brackets
for Tax Years 2021 and 2022.
In addition, under ARPA
Section 9663, taxpayers who
received or were approved to
receive unemployment
compensation in Calendar
Year 2021 are to be treated as
having met the household income
eligibility requirement for Tax
Year 2021 and as having
household income of no more
than 133 percent of the Federal
Poverty Level for their family size
when determining the allowable
amount of Premium Tax Credit.
What TIGTA Found
The IRS accurately updated processes and procedures to reflect
modified Premium Tax Credit rules for Tax Year 2021.  As of
May 5, 2022, 5.3 million taxpayers received the Premium Tax Credit to
which they were entitled or repaid the correct excess advance
Premium Tax Credit as required.
The IRS’s processes also correctly identified nearly 1.1 million
potentially incorrect claims.  However, the IRS does not have
adequate resources to address every potentially incorrect claim.  To
mitigate this, the IRS uses dollar thresholds to prioritize the returns it
reviews.  Tax returns below the dollar threshold are processed as filed
by the taxpayer.  Of the 801,941 tax returns TIGTA identified where
the taxpayer received incorrect Premium Tax Credit benefits,
707,906 (88 percent) were below the dollar tolerance.
The IRS implemented a post-processing compliance filter to address
the potential risk of improper payments associated with the
unemployment rules.  However, a programming error resulted in
4,308 tax returns incorrectly being considered for selection and
excluded 15,124 tax returns from post-processing compliance review.
In response to our concerns, IRS management stated that the
potential examination listings will be adjusted to remove the returns
TIGTA identified that did not meet the selection criteria and add the
potentially erroneous tax returns that the filter did not identify.
Finally, the IRS has no processes to proactively assist taxpayers it
identifies who are entitled to additional Premium Tax Credit or repaid
more excess advanced Premium Tax Credit than required.  TIGTA
identified 317,418 taxpayers who either under claimed the Premium
Tax Credit or overreported their excess advanced Premium Tax Credit
repayment totaling $334.8 million.  TIGTA also identified
10,069 taxpayers who received unemployment compensation during
Calendar Year 2021 but did not check the unemployment box on
Form 8962, Premium Tax Credit.  These taxpayers either under
claimed the Premium Tax Credit or overreported their excess
advanced Premium Tax Credit repayment totaling $20.1 million.
What TIGTA Recommended
TIGTA made five recommendations to the IRS.  These include
expanding the use of soft notices to address potentially erroneous
Premium Tax Credit claims and developing processes to proactively
assist taxpayers who may be eligible for additional Premium Tax
Credit or who repaid more excess advance Premium Tax Credit than
required.
The IRS agreed with four recommendations and partially agreed with
one recommendation.  While the IRS did not agree to review the
317,418 taxpayers TIGTA identified who are potentially entitled to
additional Premium Tax Credit or repaid more advance credit than
required, the IRS is evaluating forming a dedicated team to assist
taxpayers it identifies in the future.

U.S. DEPARTMENT OF THE TREASURY
WASHINGTON, D.C.  20024
TREASURY INSPECTOR GENERAL
FOR TAX ADMINISTRATION

June 14, 2023

MEMORANDUM FOR: COMMISSIONER OF INTERNAL REVENUE

FROM:
Heather M. Hill

Deputy Inspector General for Audit

SUBJECT:
Final Audit Report – American Rescue Plan Act:  Continued Review of
Premium Tax Credit Provisions (Audit # 202240720)

This report presents the results of our review to assess the adequacy of processes and
procedures to ensure expanded Premium Tax Credit eligibility requirements are met prior to
credits being allowed.  This review is part of our Fiscal Year 2023 Annual Audit Plan and
addresses the major management and performance challenge of Administering Tax Law
Changes.
Management’s complete response to the draft audit report is included as Appendix III.  If you
have any questions, please contact me or Diana Tengesdal, Acting Assistant Inspector General
for Audit (Returns Processing and Account Services).

American Rescue Plan Act:  Continued Review of Premium Tax Credit Provisions
Table of Contents
Background .....................................................................................................................................Page 1
Results of Review .......................................................................................................................Page 4
Processes and Procedures Were Accurately Updated to
Reflect Modified Premium Tax Credit Rules ..............................................................Page 4
Limited Resources Affect the Internal Revenue Service’s
Ability to Address Incorrect Premium Tax Credit Claims ......................................Page 5
Recommendation 1: ...................................................................Page 6
Recommendations 2 Through 4: .............................................Page 8
Processes Ensure Victims of Domestic Violence or
Spousal Abandonment Who File As Married Filing
Separately Can Claim the Premium Tax Credit .........................................................Page 9
Recommendation 5: ...................................................................Page 9
Appendices
Appendix I – Detailed Objective, Scope, and Methodology ................................Page 10
Appendix II – Outcome Measures .................................................................................Page 12
Appendix III – Management’s Response to the Draft Report .............................Page 14
Appendix IV – Abbreviations ...........................................................................................Page. 19

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American Rescue Plan Act:  Continued Review of Premium Tax Credit Provisions
Background
Under the Affordable Care Act, an individual who enrolls, or enrolls a tax dependent, in a
qualified health plan may be eligible for a Premium Tax Credit (PTC).1  The PTC reduces the cost
of the qualified health plan’s premium and is claimed on the individual’s Federal tax return for
the year of coverage.  Individuals may also be eligible for advance payments of the PTC (APTC).
The amount of the APTC for which an individual is eligible is determined when the individual
signs up for health insurance coverage through the HealthCare.gov marketplace (also known as
the Exchange) or the individual’s State Exchange.  The amount of an individual’s APTC is based
on the estimated income the individual expects to earn that year as well as other qualifying
factors.
Taxpayers who receive the APTC must file a Federal tax return and reconcile the amount of their
APTC with the amount of PTC they are allowed for the year.  The amount of the allowed PTC is
based on the taxpayer’s actual income for the year and other factors.  This reconciliation is
completed on Form 8962, Premium Tax Credit.  If the APTC is more than the allowable PTC, the
taxpayer has excess APTC and must repay the excess subject to certain limitations.  If the APTC is
less than the allowable PTC, the taxpayer can get a credit for the difference, which reduces their
tax payment or increases their refund.
The American Rescue Plan Act of 2021 (ARPA), enacted on March 11, 2021, includes several
provisions that temporarily enhanced benefits and expanded the eligibility for the PTC.2  These
changes temporarily expanded eligibility for the PTC and increased the PTC for individuals and
families in all income brackets for Tax Years 2021 and 2022.  In addition, under ARPA
Section 9663, a taxpayer who received or was approved to receive unemployment compensation
for as little as one week during Calendar Year 2021 qualified for special PTC rules for the entire
year.  Figure 1 provides a comparison of the pre-ARPA PTC rules to the modified rules for
Tax Years 2021 and 2022.

1 Patient Protection and Affordable Care Act (Affordable Care Act), Pub. L. No. 111-148, 124 Stat. 119 (2010) (codified
as amended in scattered sections of 26 and 42 U.S.C.), as amended by the Health Care and Education Reconciliation
Act of 2010, Pub. L. No. 111-152, 124 Stat. 1029.
2 Pub. L. No. 117-2, 135 Stat. 4 (codified in scattered sections of 7, 12, 15, 19, 20, 26, 29, 42, and 45 U.S.C.).

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American Rescue Plan Act:  Continued Review of Premium Tax Credit Provisions
Figure 1:  Changes to the PTC for Tax Years 2020 through 2022

Prior to ARPA
ARPA
Payment
Amount
The maximum PTC is the lesser of the total
premium amount or the Second Lowest Cost Silver
Plan premium amount minus the individual’s
contribution amount.  The contribution amount is
dependent on the individual’s household income
and is not less than 2.06 percent and not more
than 9.78 percent of the individual’s household
income.
Individuals must reconcile the APTC paid on their
behalf with the PTC they are allowed on their
annual tax return.  Individuals who have excess
APTC must repay all or a portion of the excess
APTC.  The amount that must be repaid is
dependent on the individual’s household income.
Effective for Tax Years 2021 and 2022, the
contribution amount is not less than 0 percent
and not more than 8.5 percent.
For Tax Year 2020 only, individuals with excess
APTC do not have to pay back the excess.
Phase-Out
PTC is generally allowed only for individuals with
household income of at least 100 percent of the
Federal Poverty Level (FPL) and not above
400 percent of the FPL for their family size.
For Tax Years 2021 and 2022,
removes the household income cap
of 400 percent of the FPL.
Allows individuals who receive or were
approved to receive unemployment
compensation during Calendar Year 2021 to
be treated as having met the household
income eligibility requirement.  In addition,
their household income is treated as no more
than 133 percent of the FPL for their family
size when determining the amount of PTC.
Eligibility
An individual or a family member must enroll in
health insurance coverage through the
Marketplace.
An individual and their family members must not
be eligible for coverage from an employer or
government plan.
Household income (modified Adjusted Gross
Income) is at least 100 percent but not more than
400 percent of the FPL for the individual’s family
size (with exceptions).  Referred to as an
applicable taxpayer.
An individual cannot be claimed as someone
else’s dependent.
Do not file Married Filing Separate (with
exceptions for victims of domestic violence and
spousal abandonment).3
All of the individual’s health insurance premiums
were paid (by the APTC, the individual, or someone
else).
No change with the exception of:
For Tax Years 2021 and 2022,
removing the household income cap
of 400 percent of the FPL.
Allowing individuals who receive or were
approved to receive unemployment
compensation during Calendar Year 2021 to
be treated as having met the household
income eligibility requirement.
Source:  Treasury Inspector General for Tax Administration’s (TIGTA) review of the ARPA and the Internal
Revenue Code § 36B.

3 A taxpayer is a victim of spousal abandonment for a tax year if, taking into account all other facts and circumstances,
the taxpayer is unable to locate their spouse after reasonable diligence.

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American Rescue Plan Act:  Continued Review of Premium Tax Credit Provisions
The Inflation Reduction Act of 2022, enacted on August 16, 2022, extended the changes
lowering the contribution amounts and eliminating the income cap of 400 percent of the FPL
through tax years beginning before January 1, 2026.4
As of May 5, 2022, the Internal Revenue Service (IRS) processed 6.2 million Tax Year 2021 returns
with $42.5 billion in PTCs that were either received in advance or claimed at the time of filing.  A
total of $3.6 billion in APTC reported by these taxpayers was in excess of the amount to which
they were entitled, of which $2.6 billion must be repaid.  Figure 2 presents PTC statistics for Tax
Years 2020 and 2021.
Figure 2:  PTC Statistics for Tax Years 2020 and 2021

Tax Year 2020
Tax Returns
Processed as of
August 5, 20215
Tax Year 2021
Tax Returns
Processed as of
May 5, 2022
Total Tax Returns
With PTC or APTC
3.8 million
6.2 million
Total APTC Amount
$27.3 billion
$40.1 billion
Total PTC Claimed in Excess of the
APTC
$1.6 billion
$2.4 billion
Sum of APTC and PTC Claimed at
Filing in Excess of the APTC
$29.0 billion
$42.5 billion
Tax Returns With Excess APTC Payments –
(taxpayer receives more APTC payments than the PTC amount to which they
are entitled)
Total Tax Returns
1.4 million
2.0 million
Total PTC Amount
$7.2 billion
$8.6 billion
Total APTC Amount
$9.4 billion
$12.2 billion
Total APTC Reported in Excess of the
PTC
$2.2 billion
$3.6 billion
Total Excess APTC Reported that Must
Be Repaid
$06
$2.6 billion
Source:  TIGTA’s analysis of the Individual Master File.  Totals may not add due
to rounding.
Validation of PTC claims
The IRS developed the following processes to validate PTC claims during tax return processing.
•
Preprocessing error screening.  Prior to the IRS accepting an electronically filed (e-filed)
tax return with a PTC claim, the tax return is screened through PTC reject conditions.  For

4 Pub. L. No. 117-169, 136 Stat. 1818 (2022).
5 Tax Year 2020 returns selected through August 5, 2021, due to the IRS extending the filing season to May 17, 2021.
6 The ARPA temporarily suspended the APTC repayment requirement for Tax Year 2020.

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American Rescue Plan Act:  Continued Review of Premium Tax Credit Provisions
example, one reject condition ensures that a Form 8962 is included if the taxpayer is
required to reconcile the APTC on Form 8962.7
Similar to the validation performed for e-filed tax returns, paper-filed tax returns are
perfected by tax examiners in the IRS’s Code and Edit function before the tax return
information is entered into the IRS’s computer system.  Once perfected by the Code and
Edit function, the information from the paper-filed tax return, along with the perfected
return coding, is entered into the tax return processing system.
•
Real-time error identification.  Once a tax return with a PTC claim is accepted for
processing (e-filed and paper), the Affordable Care Act Verification System compares the
Exchange data and information reported on the return.  A return with a discrepancy
identified during this process is assigned an error code and is sent to the IRS Error
Resolution function for manual review.  Errors that are based on return information (e.g.,
mathematical errors) are usually handled via the Math Error process.8  Depending on the
dollar amount of the discrepancy, the IRS will correspond with the taxpayer for additional
information to support their PTC claim or process the tax return and identify it for
evaluation for post-processing compliance treatment by the Examination function.
•
Prerefund Automated Questionable Credit Program.  In addition to the previously
discussed error screenings, returns may be identified for prerefund treatment by the
IRS’s PTC fraud filters.  If any exceptions are identified, a refund freeze condition is
triggered.  The IRS then determines the correct treatment stream based on the
programming in the filters and available resources.
Results of Review
Processes and Procedures Were Accurately Updated to Reflect Modified
Premium Tax Credit Rules
Our review of 6.4 million Tax Year 2021 returns with a Form 8962 filed as of May 5, 2022, found
that:
•
Programming was updated for the APRA changes, including the unemployment rules,
and correctly calculated taxpayers’ allowable PTC and required excess APTC repayment,
if applicable.
•
Processes were developed to verify the accuracy of PTC claims when unemployment
compensation was reported.
•
Processes correctly identified potentially incorrect PTC claims.  Returns with a
discrepancy between the IRS calculated PTC and the amount claimed by the taxpayer
were identified for additional review.

7 Taxpayers who do not agree that a Form 8962 is required can submit a statement and continue to e-file.
8 An exception to deficiency procedures that the IRS can use for certain purposes defined in statute, including
correcting calculation errors and checking for other obvious noncompliance, such as claims above income and credit
limits.

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American Rescue Plan Act:  Continued Review of Premium Tax Credit Provisions
As of May 5, 2022, 5.3 million taxpayers received the PTC to which they were entitled or repaid
the correct excess APTC as required.  The IRS’s processes also correctly identified nearly
1.1 million potentially incorrect claims.9
Additional steps were taken to implement the special unemployment rules for
Tax Year 2021
Under ARPA Section 9663, a taxpayer who receives or is approved to receive unemployment
compensation for as little as one week during Calendar Year 2021 qualifies for special PTC rules
for the entire year.  Under this rule, the taxpayer’s household income in excess of 133 percent of
the FPL for the individual’s family size is not taken into account when calculating the PTC.  This
will generally increase a taxpayer’s PTC because a taxpayer with a household income at
133 percent of the FPL does not pay premiums if enrolled in the benchmark plan or one of the
other less expensive options.
The IRS updated Form 8962 instructions and conducted taxpayer outreach, such as posting
information on IRS.gov, issuing news releases, etc.  In addition, the IRS added a check box on
Form 8962 which serves as attestation and documentation of the taxpayer’s receipt or approval
to receive unemployment compensation (see Figure 3).  Our review of Tax Year 2021 tax returns
filed as of May 5, 2022, identified 1.3 million returns that checked the unemployment box on
Form 8962.
Figure 3 – Form 8962, Premium Tax Credit (PTC) – Tax Year 2021

Source:  Excerpt of Tax Year 2021 Form 8962.
Limited Resources Affect the Internal Revenue Service’s Ability to Address
Incorrect Premium Tax Credit Claims
Although the IRS’s processes accurately identified potentially incorrect PTC claims, once
identified, the IRS does not have adequate resources to address every potentially incorrect
claim.  To mitigate this, the IRS uses dollar thresholds to prioritize the returns it reviews.  Tax
returns below the dollar threshold are processed as filed by the taxpayer.  Our review of the
nearly 1.1 million tax returns with potentially incorrect PTC claims identified that taxpayers
associated with 801,941 (76 percent) tax returns had a potential PTC reporting discrepancy of

9 An incorrect PTC claim could constitute an overpayment or an underpayment of the PTC.

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American Rescue Plan Act:  Continued Review of Premium Tax Credit Provisions
more than $100 on their tax return, for a total discrepancy of $741.7 million.10  However,
707,906 (88 percent) of the 801,941 tax returns were below the Error Resolution Program’s dollar
tolerance, and thus were processed as filed by the taxpayer.  These taxpayers received
*******2******* in potentially incorrect PTC benefits.
Once selected for review, the IRS uses its Math Error Authority to correct mathematical errors on
the return that affect the accuracy of the taxpayer’s PTC claim.  However, the IRS does not have
the authority to adjust PTC claims that are not supported by the Exchange data.  Instead, IRS
management stated that the IRS must use its Statutory Notice of Deficiency procedures (e.g., an
audit) to address PTC claims with an Exchange discrepancy.11  In these instances, the IRS
corresponds with the taxpayer for additional support for their PTC claim.  If the taxpayer does
not respond to the IRS notice, the return is processed as filed and considered for potential
Statutory Notice of Deficiency processes by either the Automated Questionable Credit or
Examination Programs.
Similar to the Error Resolution Program, the number of tax returns the IRS can address using
these processes is limited to available program resources.  Our review of the 94,035 tax returns
with potentially incorrect PTC claims above the Error Resolution Program’s dollar threshold
found that 1,194 (1.3 percent) returns were selected for compliance treatment.12  However, the
IRS plans to implement additional post-filing compliance processes to help taxpayers become
compliant and prevent unnecessary audits.  According to the IRS Inflation Reduction Act
Strategic Operating Plan, these processes include options such as a soft notice to encourage
self-correction instead of an audit.
Recommendation 1:  The Commissioner, Wage and Investment Division, and the
Commissioner, Small Business/Self-Employed Division, should consider expanding the use of
soft notices to address potentially erroneous PTC claims.  These notices should provide
individuals with information specific to the eligibility or reporting requirements related to the
potential error the IRS identified and suggest the filing of an amended return, if an error has
occurred.

Management’s Response:  IRS management agreed with the recommendation and is
evaluating the expanded use of soft notices for the purpose of addressing potentially
erroneous PTC claims.

10 We did not include tax returns with PTC reporting discrepancies of $100 or less in our assessment because it is not
reasonable to expect the IRS to work PTC reporting discrepancies this small with its limited resources.  Of the nearly
1.1 million tax returns with potentially incorrect PTC claims, 254,765 tax returns had a PTC reporting discrepancy of
$100 or less.  For the remaining 801,941 tax returns, we identified 484,523 taxpayers who potentially received more
PTC or repaid less excess APTC than they should have and 317,418 taxpayers who potentially received less PTC or
repaid more excess APTC than they should have.
11 Statutory Notice of Deficiency procedures require the IRS to formally notify the individual by certified or registered
mail of the deficiency, giving the taxpayer the opportunity to appeal the determination before an assessment is made.
12 The IRS selected 1,010 returns for the Automated Questionable Credit Program and 185 returns for the Examination
Program.  ****************************************************1**********************************************************.

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American Rescue Plan Act:  Continued Review of Premium Tax Credit Provisions
A programming error resulted in some tax returns being incorrectly considered for
selection or excluded from post-processing compliance review
The ARPA established special PTC rules for individuals who received or were approved to receive
unemployment for at least one week during Calendar Year 2021.  The IRS receives Form 1099-G,
Certain Government Payments, from State unemployment agencies reporting the amount of
unemployment compensation an individual received during the year.  However, the IRS has no
third-party information regarding individuals who were approved to receive unemployment
benefits but did not use them.
Our analysis of Forms 1099-G filed as of September 1, 2022, identified 91,812 taxpayers who
claimed the unemployment exception on their return, but their unemployment status was not
supported.  By checking the unemployment box on Form 8962, these taxpayers potentially
received $65.4 million more in net PTC than they were entitled or repaid $125.8 million less in
excess APTC than required.
The IRS implemented a post-processing compliance filter to address the potential risk of
improper payments associated with the unemployment rules.  The IRS stated that the filter
identified 9,431 PTC claims for review as of October 31, 2022.  These included 5,123 of the tax
returns we identified with no associated Form 1099-G.  However, we found that 4,308 of the
returns identified by the filter did not meet the filter criteria.  We also identified
15,124 potentially erroneous PTC claims that should have been identified by the filter but were
not.  We shared the results of our analysis with IRS management in November 2022.  IRS
management agreed with our assessment and stated that the returns the IRS identified were
incorrectly identified or excluded from identification because the data on Form 1099-G was
incomplete at the time of their initial analysis.  In addition, the estimate of the potential tax
liability on these returns was based on limited return data and did not properly account for the
additional data elements used by TIGTA in its analysis.
IRS management stated that they will modify the filter’s selection criteria.  In addition,
management stated that the potential examination listings will be adjusted to remove the
returns we identified that did not meet the selection criteria and add the potentially erroneous
tax returns that the filter did not identify.  IRS management noted that none of the cases have
been selected and reiterated that the number of returns selected for post-refund audits is
dependent on available resources.
The IRS has no processes to proactively assist taxpayers who are entitled to additional
PTC or repaid more excess APTC than required
Of the taxpayers associated with 801,941 tax returns who had a potentially incorrect PTC benefit
in excess of $100, 317,418 taxpayers under claimed the PTC or overpaid their excess APTC
repayment.  These taxpayers either under claimed the PTC or overreported their excess APTC
repayment totaling $334.8 million.  In addition, our review of Tax Year 2021 tax returns filed as
of May 5, 2022, identified 10,069 taxpayers who received unemployment compensation during
Calendar Year 2021 but did not check the unemployment box on Form 8962.  These taxpayers
either under claimed the PTC or overreported their excess APTC repayment totaling $20.1
million.
The Affordable Care Act Verification Service identifies taxpayers who potentially under claim the
PTC or overpay excess APTC.  The IRS also has the ability to identify taxpayers who are eligible

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American Rescue Plan Act:  Continued Review of Premium Tax Credit Provisions
for additional PTC or reduced APTC repayments because they received unemployment
compensation.  However, the same resource limitations that prevent the IRS from addressing
erroneous PTC claims also affect the IRS’s ability to proactively assist these taxpayers.
Taxpayers who are entitled to more PTC or repaid too much excess APTC generally must file an
amended tax return to claim the additional credit or request a refund of the overpayment.
However, we question how many of these taxpayers are aware that they may be entitled to
additional PTC or a lower APTC repayment considering their original PTC claim was incorrect.
Recommendation 2:  The Commissioner, Wage and Investment Division, should notify the
317,418 taxpayers we identified, who potentially received less PTC than they were entitled or
repaid more APTC than required, that they may qualify for additional PTC or overpaid APTC and
encourage them to file an amended Tax Year 2021 return, if applicable.

Management’s Response:  IRS management partially agreed with the recommendation.
IRS management is evaluating the formation of a dedicated team that will notify
taxpayers identified in the future, who potentially receive less PTC than entitled or repay
more APTC than required, that they may qualify for additional PTC or overpaid APTC and
encourage them to file an amended return.  IRS management stated that there are
multiple reasons why a taxpayer may appear to have claimed less PTC than the amount
to which they are entitled.  For example, in the case of separated parents who share an
Affordable Care Act Marketplace policy but who file separate returns and split
dependents, one parent might agree to allow the other to claim all of the PTC on their
return.  The parent who does not allocate any of the health coverage premiums to their
return would appear to be claiming less PTC than entitled based on the marketplace data
alone.  Notifying these taxpayers that they should claim additional PTC could cause
confusion and lead to taxpayers filing erroneous claims.

Office of Audit Comment:  While IRS management did not agree to review the
317,418 taxpayers we identified, IRS management’s corrective action, along with
the corrective action to Recommendation 3, satisfies the intent of our
recommendation.
Recommendation 3:  The Commissioner, Wage and Investment Division, should develop
processes, such as the use of courtesy letters to notify individuals of their potential eligibility, to
proactively assist taxpayers who, based on available tax return and Exchange data, potentially
claimed less PTC than entitled or paid more APTC than required.

Management’s Response:  IRS management agreed with the recommendation and will
evaluate potential treatments for notifying taxpayers of potential tax benefits to which
they may be eligible.
Recommendation 4 (E-Mail Alert):  On October 26, 2022, we notified the Director, Submission
Processing, of our concerns regarding taxpayers who are potentially eligible for additional PTC
based on their unemployment status during Tax Year 2021.  We recommended that the Director,
Submission Processing, notify these taxpayers that they may qualify for additional PTC or be
able to reduce the amount of excess APTC they must repay and encourage them to file an
amended Tax Year 2021 return, if they qualify.

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American Rescue Plan Act:  Continued Review of Premium Tax Credit Provisions

Management’s Response to Alert:  IRS management agreed with the recommendation.
IRS management stated they are reviewing the 10,069 taxpayer accounts identified and
are developing a notice to notify impacted taxpayers that they may have under claimed
PTC or overreported excess APTC payments.
Processes Ensure Victims of Domestic Violence or Spousal Abandonment
Who File As Married Filing Separately Can Claim the Premium Tax Credit
To qualify for the PTC, a taxpayer cannot file a tax return using the filing status of Married Filing
Separately, unless they qualify for certain exceptions (e.g., victims of domestic violence, spousal
abandonment).  Taxpayers use the check box on Line B, above Part I of Form 8962 to note this
exception (see Figure 3).  Our review of Tax Year 2021 Forms 8962, e-filed as of May 5, 2022,
identified 8,147 taxpayers who checked the box for victims of domestic violence or spousal
abandonment and found that their PTC claims were processed correctly.  These taxpayers
received $45.4 million in PTCs.
In addition, in May 2022, we recommended and the IRS agreed to update the Form 8962
instructions to inform taxpayers of the methods for reporting that they are a victim of domestic
violence.13  Our review of the draft Tax Year 2022 Form 8962 instructions found the IRS included
the National Domestic Violence Hotline and a reference to Publication 3865, Tax Information for
Survivors of Domestic Abuse.  However, the instructions do not include information about the
actions taxpayers can take to have a victim of domestic violence indicator placed on their tax
account.
The IRS developed a specific indicator denoting a taxpayer could be a victim of domestic
violence.  The indicator is set on tax accounts when a victim contacts the IRS and requests the
indicator be placed on their account or completes Part V of Form 8857, Request for Innocent
Spouse Relief.  As of May 5, 2022, 38,185 taxpayers had a victim of domestic violence indicator
on their tax account.
Recommendation 5 (E-Mail Alert):  On October 25, 2022, we notified the Director, Submission
Processing, of our concerns with the draft Tax Year 2022 Form 8962 instructions.  We
recommended that the IRS revise the instructions to inform taxpayers that they have an option
to set a domestic violence indicator on their tax return.

Management’s Response to Alert:  The IRS agreed with this recommendation and
revised the instructions for Form 8962, effective November 9, 2022, to include
information on domestic violence and instructions on how the victims may indicate their
qualification for the exception to the requirement they file jointly with their spouse to
qualify for the PTC.

13 TIGTA, Report No. 2022-47-034, American Rescue Plan Act: Implementation of Premium Tax Credit Provisions
(May 2022).

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Appendix I
Detailed Objective, Scope, and Methodology
The overall objective of this audit was to assess the adequacy of processes and procedures to
ensure expanded PTC eligibility requirements are met prior to credits being allowed.  To
accomplish our objective, we:
•
Identified relevant forms, instructions, and publications related to the PTC and ensured
they have been updated to include accurate information related to PTC changes for
Tax Year 2021.
•
Assessed the accuracy of the processing of PTC claims during Processing Year 2022.
Specifically, we ensured computer programming for the IRS’s systemic calculation of the
PTC had been updated to reflect new and modified PTC eligibility rules for Tax
Year 2021.
•
Assessed IRS processes to ensure individuals claiming the unemployment income
exception were eligible.  We quantified the number of taxpayers whose unemployment
exception was not supported.  We also quantified taxpayers who received
unemployment income but did not claim the PTC unemployment exception.
•
Followed up on our prior recommendation to update the Form 8962 instructions to
inform taxpayers of the options available to have the IRS mark their tax account with a
Victim of Domestic Violence indicator and quantified the population of taxpayers with
this indicator.  We also quantified the population of taxpayers who checked box B on
Form 8962, Married Filing Separately exception, and verified that these taxpayers’ PTC
claims were correctly processed.
Performance of This Review
This review was performed with information obtained from the Wage and Investment Division
Submission Processing function office in Covington, Kentucky, and Return Integrity and
Compliance Services function in Atlanta, Georgia, during the period April 2022 through
January 2023.  We conducted this performance audit in accordance with generally accepted
government auditing standards.  Those standards require that we plan and perform the audit to
obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and
conclusions based on our audit objective.  We believe that the evidence obtained provides a
reasonable basis for our findings and conclusions based on our audit objective.
Major contributors to the report were Russell P. Martin, Deputy Inspector General for
Inspections and Evaluations; Diana M. Tengesdal, Acting Assistant Inspector General for Audit
(Returns Processing and Account Services); Deann L. Baiza, Director; Jane G. Lee, Audit Manager;
Ngan B. Tang, Audit Manager; Michael J. Bibler, Lead Auditor; Hee Koo Kang, Auditor.
Validity and Reliability of Data From Computer-Based Systems
During this review, we obtained extracts from the Error Resolution files for Processing Year 2022,
Individual Master File for Tax Year 2021, Individual Return Transactions File for Processing
Year 2022, and Information Returns Master File for Tax Year 2021 that were available on the

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Treasury Inspector General for Tax Administration Data Center Warehouse.  We evaluated the
data by (1) performing electronic testing of required data elements, (2) reviewing existing
information about the data and the system that produced them, and (3) interviewing agency
officials knowledgeable about the data.  We determined that the data were sufficiently reliable
for purposes of this report.
Internal Controls Methodology
Internal controls relate to management’s plans, methods, and procedures used to meet their
mission, goals, and objectives.  Internal controls include the processes and procedures for
planning, organizing, directing, and controlling program operations.  They include the systems
for measuring, reporting, and monitoring program performance.  We determined that the
following internal controls were relevant to our audit objective:  the IRS implementation strategy
to address the new and modified PTC eligibility rules for Tax Year 2021.  We evaluated these
controls by verifying the accuracy of IRS’s systemic calculation of the PTC, meeting with IRS
management, and reviewing IRS procedures.

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Appendix II
Outcome Measures
This appendix presents detailed information on the measurable impact that our recommended
corrective actions will have on tax administration.  These benefits will be incorporated into our
Semiannual Report to Congress.
Type and Value of Outcome Measure:
•
Taxpayer Rights and Entitlements – Potential; 316,672 taxpayers that either under
claimed PTC or overreported excess APTC repayments totaling $333.8 million (see
Recommendation 2).
Methodology Used to Measure the Reported Benefit:
As of May 5, 2022, using the Individual Return Transaction File, we identified 6,402,043 filed Tax
Year 2021 tax returns with Form 8962, Premium Tax Credit.  We developed a systemic program
to independently compute net PTC and excess APTC repayment for all eligible taxpayers.  We
compared our amount of net PTC and excess APTC repayment to the amounts shown on the
Individual Master File for each individual.  Our analysis identified 317,418 taxpayers who under
claimed PTC or overreported excess APTC repayment.
We removed 746 taxpayers who are also included in the 10,069 taxpayers in the following
measure who received unemployment compensation during Calendar Year 2021 but did not
check the unemployment box on Form 8962.  We arrived at 316,672 taxpayers who are
potentially eligible to receive $182,489,655 in additional PTC or overreported $151,357,615 in
excess APTC repayments.  These include:
•
125,377 taxpayers overreported $119,494,199 in excess APTC repayments.
•
124,076 taxpayers potentially received $132,751,618 less in PTC than they are entitled.
•
67,219 taxpayers should potentially receive $49,738,037 in PTC but did not.  Instead,
these taxpayers overreported $31,863,416 in excess APTC repayments.
Overall, 316,672 (125,377 + 124,076 + 67,219) taxpayers either under claimed the PTC or
overreported excess APTC repayments totaling $333,847,270 ($119,494,199 + $132,751,618 +
$49,738,037 + $31,863,416).
Type and Value of Outcome Measure:
•
Taxpayer Rights and Entitlements – Potential; 10,069 taxpayers who received
unemployment compensation during Calendar Year 2021 but did not check the
unemployment box on Form 8962.  These taxpayers either under claimed PTC or
overreported excess APTC repayments totaling $20.1 million (see Recommendation 4).
Methodology Used to Measure the Reported Benefit:
As of May 5, 2022, using the Individual Return Transaction File we identified 6,402,043 filed Tax
Year 2021 tax returns with Form 8962, Premium Tax Credit.  We used Forms 1099-G, Certain

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American Rescue Plan Act:  Continued Review of Premium Tax Credit Provisions
Government Payments, information returns data as of September 1, 2022, and identified
10,069 taxpayers who received unemployment compensation during Calendar Year 2021 but did
not check the unemployment box on Form 8962.  These taxpayers are potentially eligible for
$8,161,400 in additional PTC or potentially overreported $11,901,351 more in excess APTC.
These include:
•
6,116 taxpayers should potentially receive $5,582,076 in PTC but did not.  Instead, these
taxpayers overreported $9,457,266 in excess APTC repayments.
•
2,011 taxpayers potentially received $2,579,324 less in PTC than they are entitled.
•
1,942 taxpayers overreported $2,444,085 in excess APTC repayments.
Overall, 10,069 (6,116 + 2,011 + 1,942) taxpayers either under claimed the PTC or overreported
excess APTC repayments totaling $20,062,751 ($5,582,076+$9,457,266+$2,579,324+$2,444,085).

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Appendix III
Management’s Response to the Draft Report

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Appendix IV
Abbreviations
APTC
Advanced Premium Tax Credit
ARPA
American Rescue Plan Act of 2021
E-file(d)
Electronically File(d)
FPL
Federal Poverty Level
IRS
Internal Revenue Service
PTC
Premium Tax Credit
TIGTA
Treasury Inspector General for Tax Administration

To report fraud, waste, or abuse,
contact our hotline on the web at www.tigta.gov or via e-mail at
oi.govreports@tigta.treas.gov.

To make suggestions to improve IRS policies, processes, or systems
affecting taxpayers, contact us at www.tigta.gov/form/suggestions.

Information you provide is confidential, and you may remain anonymous.

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