Affordable Care Act Provides Expanded Tax Benefit to Health Professionals Working in Underserved Areas

Here is some good news for health care professionals who received student loan relief under certain state programs that reward those who work in under-served communities. If this is you, the IRS has announced you may now qualify to receive a special tax break.

The Affordable Care Act went into effect last year (2009); it expands the tax exclusion received by health professionals under loan repayment and forgiveness programs. Prior to this new law, only amounts received under the National Health Service Corps Loan Repayment Program or certain state loan repayment programs eligible under the Public Health Service Act qualified for a tax exclusion.

Basically, the Affordable Care Act expands the prior tax exclusion to include any state loan repayment or loan forgiveness programs that were created to increase the availability of health care services in under-served areas or in “health professional shortage areas” and the Act makes this exclusion retroactive to the 2009 tax year.

If you are a health care professional serving in one of these areas or participating in these programs and have reported income from repaid or forgiven loan amounts on their 2009 returns (possibly after receiving a Form W-2, Wage and Tax Statement, or Form 1099a) you may be due a refund.

Here’s some additional information released by the IRS:

• Those who believe they qualify for this relief may want to consult their state loan program offices to determine whether the program is covered by the new law.
• Health care professionals who have not yet filed for 2009 need not report eligible loan repayment or forgiveness amounts when they file. Those who have already filed may exclude eligible amounts by filing Form 1040X, Amended U.S. Individual Income Tax Return. This form can be downloaded from this website. Individuals filing Form 1040X to claim this exclusion should write “Excluded student loan amount under 2010 Health Care Act” in the Explanation of Changes box.
• Health care professionals may request an employer or other issuer to provide a Form W-2c, Corrected Wage and Tax Statement, or 1099 and may attach the corrected form to the Form 1040X. However, the Amended Tax Return Form 1040X may also be filed without attaching a corrected W-2 form.