Refundable Credits(p248)

The credits discussed in this part of the chapter are treated as payments of tax. If the total of these credits, withheld federal income tax, and estimated tax payments is more than your total tax, the excess can be refunded to you.

You must include in your income any amounts that regulated investment companies (commonly called mutual funds) or real estate investment trusts (REITs) allocated to you as capital gain distributions, even if you did not actually receive them. If the mutual fund or REIT paid a tax on the capital gain, you are allowed a credit for the tax since it is considered paid by you. The mutual fund or REIT will send you Form 2439 showing your share of the undistributed capital gains and the tax paid, if any.

To take the credit, attach Copy B of Form 2439 to your Form 1040. Include the amount from box 2 of your Form 2439 in the total for Form 1040, line 71, and check box a.

See Capital Gain Distributions in chapter 8 for more information on undistributed capital gains.

You may be able to take this credit for any month in which all the following statements were true on the first day of the month.

• You were an eligible trade adjustment assistance (TAA) recipient, alternative TAA (ATAA) recipient, reemployment TAA (RTAA) recipient, or Pension Benefit Guaranty Corporation (PBGC) pension recipient (defined later); or you were a qualified family member of one of these individuals when the individual died or you finalized a divorce with one of these individuals.
• You and/or your family members were covered by a qualified health insurance plan for which you paid the entire premiums, or your portion of the premiums, directly to your health plan or to "U.S. Treasury–HCTC."
• You were not enrolled in Medicare Part A, B, or C, or you were enrolled in Medicare but your family member(s) qualified for the HCTC.
• You were not enrolled in Medicaid or the Children's Health Insurance Program (CHIP).
• You were not enrolled in the Federal Employees Health Benefits program (FEHBP) or eligible to receive benefits under the U.S. military health system (TRICARE).
• You were not imprisoned under federal, state, or local authority.
• Your employer did not pay 50% or more of the cost of coverage.
• You did not receive a 65% COBRA premium reduction from your former employer or COBRA administrator.

But, you cannot take the credit if you can be claimed as a dependent on someone else's 2012 tax return. If you meet all of these conditions, you may be able to take a credit of up to 72.5% of the amount you paid directly to a qualified health plan for you and any qualifying family members. You cannot take the credit for insurance premiums on coverage that was actually paid for with a National Emergency Grant. The amount you paid for qualified health insurance coverage must be reduced by any Archer MSA and health savings account distributions used to pay for the coverage.

You can take this credit on your tax return or have it paid on your behalf in advance to your insurance company. If the credit is paid on your behalf in advance, that amount will reduce the amount of the credit you can take on your tax return.

You were an eligible TAA recipient on the first day of the month if, for any day in that month or the prior month, you:

• Received a trade readjustment allowance, or
• Would have been entitled to receive such an allowance except that you had not exhausted all rights to any unemployment insurance (except additional compensation that is funded by a state and is not reimbursed from any federal funds) to which you were entitled (or would be entitled if you applied).

You received a trade adjustment allowance for January 2012. You were an eligible TAA recipient on the first day of January and February.

You were an eligible alternative TAA recipient on the first day of the month if, for that month or the prior month, you received benefits under an alternative trade adjustment assistance program for older workers established by the Department of Labor.

You received benefits under an alternative trade adjustment assistance program for older workers for October 2012. The program was established by the Department of Labor. You were an eligible alternative TAA recipient on the first day of October and November.

You were an eligible RTAA recipient on the first day of the month if, for that month or the prior month, you received benefits under a reemployment trade adjustment assistance program for older workers established by the Department of Labor.

You were an eligible PBGC pension recipient on the first day of the month, if both of the following apply.

1. You were age 55 or older on the first day of the month.
2. You received a benefit for that month paid by the PBGC under title IV of the Employee Retirement Income Security Act of 1974 (ERISA).

If you received a lump-sum payment from the PBGC after August 5, 2002, you meet item (2) above for any month that you would have received a PBGC benefit if you had not received the lump-sum payment.

To take the credit, complete Form 8885 and attach it to your Form 1040. Include your credit in the total for Form 1040, line 71, and check box d.

You must attach health insurance bills (or COBRA payment coupons) and proof of payment for any amounts you include on Form 8885, line 2. For details, see Publication 502 or Form 8885.

For definitions and special rules, including those relating to qualified health insurance plans, qualifying family members, the effect of certain life events, and employer-sponsored health insurance plans, see Publication 502 and the Form 8885 instructions.

If you paid the alternative minimum tax for 2011 or you had a minimum tax credit carryforward to 2012, you may be able to take a credit for prior year minimum tax. For information about the nonrefundable credit for prior year minimum tax you may be able to take, see Nonrefundable Credit for Prior Year Minimum Tax, earlier. However, for 2012, you may qualify for a refundable credit for prior year minimum tax if you had a minimum tax credit carryforward to 2010 (on your 2009 Form 8801, line 30) and you have not used all of that carryforward, even if the total amount of your current year credit is more than your total tax liability. To figure the amount of any 2012 refundable credit, complete Part IV of Form 8801. Include any refundable credit on Form 1040, line 71, and check box c.

Most employers must withhold social security tax from your wages. If you work for a railroad employer, that employer must withhold tier 1 railroad retirement (RRTA) tax and tier 2 RRTA tax.

If you worked for two or more employers in 2012, you may have had too much social security or tier 1 RRTA tax withheld from your pay. You can claim the excess social security or tier 1 RRTA tax as a credit against your income tax. The following table shows the maximum amount of wages subject to tax and the maximum amount of tax that should have been withheld for 2012.

Type of tax	Maximum wages subject to tax	Maximum tax that should have been withheld
Social security or RRTA tier 1	$110,100	$4,624.20
RRTA tier 2	$81,900	$3,194.10

If any one employer withheld too much social security or tier 1 RRTA tax, you cannot take the excess as a credit against your income tax. The employer should adjust the tax for you. If the employer does not adjust the overcollection, you can file a claim for refund using Form 843.

If you are filing a joint return, you cannot add the social security or tier 1 RRTA tax withheld from your spouse's wages to the amount withheld from your wages. Figure the withholding separately for you and your spouse to determine if either of you has excess withholding.

If you did not work for a railroad during 2012, figure the credit as follows:

1.	Add all social security tax withheld (but not more than $4,624.20 for each employer). Enter the total here
2.	Enter any uncollected social security tax on tips or group-term life insurance included in the total on Form 1040, line 60, identified by "UT"
3.	Add lines 1 and 2. If $4,624.20 or less, stop here. You cannot take the credit
4.	Social security tax limit	4,624.20
5.	Credit. Subtract line 4 from line 3. Enter the result here and on Form 1040, line 69 (or Form 1040A, line 41)	$

You are married and file a joint return with your spouse who had no gross income in 2012. During 2012, you worked for the Brown Technology Company and earned $60,000 in wages. Social security tax of $2,520 was withheld. You also worked for another employer in 2012 and earned $55,000 in wages. $2,310 of social security tax was withheld from these wages. Because you worked for more than one employer and your total wages were more than $110,100, you can take a credit of $205.80 for the excess social security tax withheld.

1.	Add all social security tax withheld (but not more than $4,624.20 for each employer). Enter the total here	$4,830.00
2.	Enter any uncollected social security tax on tips or group-term life insurance included in the total on Form 1040, line 60, identified by "UT"	-0-
3.	Add lines 1 and 2. If $4,624.20 or less, stop here. You cannot take the credit	4,830.00
4.	Social security tax limit	4,624.20
5.	Credit. Subtract line 4 from line 3. Enter the result here and on Form 1040, line 69 (or Form 1040A, line 41)	$205.80

If you were a railroad employee at any time during 2012, figure the credit as follows:

1.	Add all social security and tier 1 RRTA tax withheld (but not more than $4,624.20 for each employer). Enter the total here
2.	Enter any uncollected social security and tier 1 RRTA tax on tips or group-term life insurance included in the total on Form 1040, line 60, identified by "UT"
3.	Add lines 1 and 2. If $4,624.20 or less, stop here. You cannot take the credit
4.	Social security and tier 1 RRTA tax limit	4,624.20
5.	Credit. Subtract line 4 from line 3. Enter the result here and on Form 1040, line 69 (or Form 1040A, line 41)	$

Enter the credit on Form 1040, line 69, or include it in the total for Form 1040A, line 41.

For more information on the credit, see Publication 505.