Protecting your Ability to Recover Prior Year Federal Taxes – Filing Protective Claims

July 8, 2020 by Ali Carbo
Copeland Buhl

The U.S. Supreme Court will hear a case regarding certain issues related to the Affordable Care Act (ACA) in the next 12 months.  If the ACA is ruled unconstitutional, it could eliminate the net investment income tax and Medicare surtax.  These taxes applied to certain taxpayers with income in excess of $200,000 ($250,000 for joint returns).

Clients who paid these taxes in prior years may file a protective claim to request a refund.  The claim is only processed by the IRS upon the condition that the ACA is unconstitutional, and the court’s findings are made retroactive to that tax year. 

Taxpayers have three years from the date of their original tax filing to file a protective claim to prevent the statute of limitations from closing while we wait for the Court’s decision. 

Clients should understand that there is no certainty as to how the Supreme Court will decide, so the taxes need to be significant to warrant the expense of filing the claims. 

Please contact your Copeland Buhl representative for more information.