If you paid additional Medicare tax and/or net investment income tax in any prior year continue reading. Earlier this year, the U.S. Supreme Court agreed to hear appeals in a case challenging the constitutionality of the Affordable Care Act (ACA) tax provisions. When the ACA was enacted, it contained certain tax provisions that affected many individual taxpayers and also estates and trusts. In particular and the taxes at issue are: 1) the additional Medicare tax on earned income in excess of $200,000 for single filers or $250,000 for joint filers; and, 2) the net investment income tax on net investment income that is imposed on single filers with adjusted gross income over $200,000 or joint filers with adjusted gross income over $250,000. If the Court determines that these ACA tax provisions are unconstitutional, taxpayers who had paid these taxes would be able to file an amended return to claim a refund for any tax year where the statute of limitations is still open. Generally, these are the last 3 tax years. If either or both of these taxes are determined unconstitutional, taxpayers who have filed a protective claim for a closed tax year before the statute of limitations expired will receive a refund for such closed tax year. For example, if you filed your 2016 tax return by April 15, 2017, then the statute of limitations to file a protective claim for the 2016 tax year expires on July 15, 2020. While the likelihood of these taxes being declared unconstitutional for tax years prior to 2019 are not significant, you should nevertheless contact your accountant, as soon as possible, to determine if you should file a protective claim for the 2016 tax year by July 15, 2020. You should also discuss with your accountant whether you should file a protective claim for any tax year after 2016.
If you have any questions, please contact an attorney from our Tax or Private Wealth Service practice groups.
