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his semiannual update surveys requirement. The court found that the
Trecent federal tax developments evidence, including the testimony of the In Muhammad, the
aunt, showed the children stayed with the
involving individuals. It summarizes
aunt at her home more than half of the Tax Court upheld the
notable cases, rulings, and guidance on
tax year. IRS’s determination
a variety of topics issued during the six
months ending December 2021. The Sec. 36B: Refundable credit that the petitioner
update was written by members of the for coverage under a qualified incorrectly and
health plan
AICPA Individual & Self-Employed frivolously excluded
Household income for advance
Tax Technical Resource Panel. The
premium tax credit (APTC): In Knox,3 her wages from her
items are arranged in Code section
the taxpayers omitted Form 8962, Pre-
order. Form 1040.
mium Tax Credit, to reconcile payments
of the APTC. Their income included
Sec. 24: Child tax credit lump-sum Social Security benefits from income (AGI) was more than 400%
The IRS updated its frequently asked two prior years, and they elected under of the federal poverty line, the taxpay-
questions (FAQs) regarding the child Sec. 86(e) to limit the amount they ers had to pay back the APTC of over
tax credit,1 listing all prior FAQs by date included in gross income to the sum of $15,000.
issued as well as adding new ones dated the increases in gross income that would Failure to maintain essential
Oct. 4, 2021, and Nov. 8, 2021. The IRS have resulted if the income had been health care coverage: An attorney
explained that FAQs will not be relied taken into account in the prior tax years sued both the Treasury Department and
on by the IRS to resolve a case because to which it was attributable. The Tax Treasury Secretary Janet Yellen on the
they are not published in the Internal Court, following its decisions in Johnson4 basis that the government does not have
Revenue Bulletin, but a taxpayer who and other prior cases, found that the Sec. the power to require citizens to pay a tax
reasonably relies on the FAQs will have 86(e) election does not reduce modified if they do not have essential health care
a defense to penalties. One of the latest adjusted gross income (MAGI) for the coverage. The Second Circuit affirmed
FAQs as of this writing is Q-A17, which APTC. In the taxpayers’ case, including a New York district court in saying that
explains the procedure for updating the the lump-sum Social Security payments the plaintiff lacked standing to sue. He
IRS when 2021 income will be signifi- attributable in the prior years put them failed to demonstrate that he had suf-
cantly different from 2020’s. over 400% of the federal poverty line, fered a legal injury because he actually
and thus the taxpayers were required to had essential health care coverage and
Sec. 32: Earned income tax repay the excess credits they received. failed to show how he would be penal-
credit Constitutionality: In Amburgey,5 the ized for failing to disclose the coverage
In Griffin,2 the Tax Court allowed an taxpayers were relying on the Texas6 case to the IRS on his return.9
aunt to claim the earned income tax cred- that held the Patient Protection and Af-
it (EITC) for her niece and two nephews. fordable Care Act7 unconstitutional, to Sec. 61: Gross income defined
The court went through the requirements excuse them from having to pay back the 2020 unemployment benefits
for dependency and determined that APTC they had received. The Tax Court exclusion: After announcing the plan
each of the children was a qualifying found that the Fifth Circuit’s reasoning in a June 2021 news release,10 the IRS
child, then looked at the tests for the in Texas did not apply in the taxpayer’s sent more than 8.7 million refunds to
child tax credit and the EITC. The IRS case and further that the judgment of identified taxpayers who had paid taxes
had disallowed the credits because the the Fifth Circuit in that case was vacated on unemployment compensation that,
children resided at times with their father by the U.S. Supreme Court in June under the American Rescue Plan Act
and the aunt did not meet the residency 2021.8 Thus, because their adjusted gross (ARPA),11 was excluded from income.

1. 2021 Child Tax Credit and Advance Child Tax Credit Payments Frequently 6. Texas, 945 F.3d 355 (5th Cir. 2019).
Asked Questions. 7. Patient Protection and Affordable Care Act, P.L. 111-148.
2. Griffin, T.C. Summ. 2021-26. 8. California v. Texas, No. 19-840 (U.S. 6/17/21).
3. Knox, T.C. Memo. 2021-126. 9. Bank, No. 19-3977 (2d Cir. 10/29/21).
4. Johnson, 152 T.C. 121 (2019). 10. IR-2021-123 (June 4, 2021); see also IR-2021-159 (July 28, 2021).
5. Amburgey, T.C. Memo. 2021-124. 11. American Rescue Plan Act, P.L. 117-2.

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