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The U.S. Supreme Court is going to hear the case of California v. Texas this Fall. There is a somewhat remote possibility that the case may result in a finding that the Affordable Care Act (ACA) is unconstitutional. This finding may result in a finding that a taxpayer who paid an additional 0.9% Medicare tax on earned income and 3.8% tax on net investment income tax (NIIT) is entitled to a refund of those taxes.
These taxes apply to an individual whose adjusted gross income exceeds $125,000 married filing, separate, $250,000 married filing joint or $200,000 filing single. Estates and trusts with adjusted gross income in excess of the dollar amount at which the highest tax bracket begins for 2016 ($12,400) can be subject to the 3.8% net investment income tax.
The statute of limitations related to the potential refund of these 2016 taxes is set to expire at midnight July 15, 2020 if you filed your tax return for 2016 on or before July 15, 2017. A taxpayer who filed the 2016 tax return during this period must file a protective claim for refund prior to midnight July 15, 2020.
While a finding of the unconstitutionality of the ACA is not believed by many scholars to be likely, if you paid extra Medicare tax or NIIT with your 2016 tax return, you need to file your protective claim for refund by midnight July 15, 2020. Filing for an individual is accomplished by mailing the protective claim for refund to the proper IRS Service Center address where your 2016 Form 1040 (individual) or 1041 (trusts and estates) would have been mailed. You should keep proof of mailing which may include by return receipt mail to the proper IRS Service Center. If that is not possible, consider taking an unrelated witness with you when you drop the claim in the mail with proper postage and ask that person to write down in his or her handwriting what he or she witnessed you do and save it.
If you filed your 2016 tax return after July 15, 2017, you have three years from the date of that tax return filing to file the protective claim for refund. For example, if you extended your Form 1040 and filed in October 15, 2017, you have until October 15, 2020 to file the claim.
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