IRS Form 13560: Health Plan Administrator Return of Funds

1. Introduction: What is Form 13560?

IRS Form 13560, officially titled the Health Plan Administrator (HPA) Return of Funds, is an administrative financial document published by the Internal Revenue Service (IRS). The IRS is a bureau of the United States Department of the Treasury responsible for administering the federal internal revenue code and overseeing targeted federal subsidy programs.

Unlike personal income tax returns or corporate tax schedules, Form 13560 is an institutional remittance voucher. It is used primarily by health insurance companies, Health Plan Administrators (HPAs), and Third-Party Administrators (TPAs) that participate in the federal Health Coverage Tax Credit (HCTC) program under Internal Revenue Code Section 35.

When an insurance administrator receives advance subsidy payments from the federal government that cannot be applied—due to policy cancellations, member changes, or overpayments—Form 13560 serves as the official accounting statement that accompanies the returned funds back to the U.S. Department of the Treasury.

2. Purpose of the Form

Under the Health Coverage Tax Credit (HCTC) Advance Monthly Payment (AMP) program, the federal government pays 72.5% of qualified health insurance premiums directly to health plans on behalf of eligible displaced workers and retirees. The participant pays their 27.5% share to the IRS, and the government disburses the full premium directly to the health insurance company.

However, real-world health coverage frequently changes. A participant may terminate their policy retroactively, switch insurance carriers, become eligible for Medicare, or pass away after the government has already transmitted the monthly subsidy payment.

Form 13560 exists to solve the accounting challenge of returning these federal funds. If an insurance company simply mails an unexplained check to the IRS, federal accounting systems cannot determine whose account to credit. Form 13560 provides the necessary audit trail, detailing exactly which participant the returned funds belong to, which coverage months are involved, and why the money is being refunded.

3. Who Needs to File This Form

Form 13560 is not filed by the general public. It is completed and submitted primarily by organizational benefits managers and insurance financial units, including:

• Health Plan Administrators (HPAs): Insurance companies, health maintenance organizations (HMOs), and health plan providers that receive direct HCTC advance subsidy payments from the IRS.
• Third-Party Administrators (TPAs): Benefits administration companies managing COBRA continuation coverage or retiree group health plans.
• Group Health Plan Sponsors: Employers or trust administrators that maintain qualified group coverage for HCTC-eligible individuals.
• Participants Receiving Duplicate Refunds: In rare cases, an individual taxpayer who receives a direct refund check from their insurer for months the government already subsidized must submit Form 13560 to return the government’s 72.5% portion.

4. Who Is Exempt / Not Required to File

Because Form 13560 is exclusively a refund remittance form for the HCTC program, most entities and individuals are completely exempt from filing it:

• Everyday Taxpayers: Individuals filing annual tax returns on Form 1040 never complete or file this form.
• Annual HCTC Claimants: Taxpayers who pay their full insurance premiums out of pocket and claim the credit once a year on Form 8885 have no need for this form.
• Affordable Care Act (ACA) Marketplace Plans: Insurers processing reconciliations for Marketplace plans subsidized by the Premium Tax Credit (Form 8962) follow separate Department of Health and Human Services (HHS) procedures.
• Administrators with Active Coverage: Health plan administrators who correctly apply all received government payments to active, eligible policies do not file Form 13560.

5. When to File

Form 13560 is an event-driven form rather than a recurring annual tax filing. It must be prepared and filed whenever an unapplied government subsidy occurs:

• Prompt Return Requirement: Health plan administrators should submit Form 13560 and the refund payment promptly upon discovering that funds cannot be applied, generally within 30 to 60 days of the policy change.
• Year-End Reporting Impact: Returning funds promptly is essential before the close of the calendar year. This ensures that the participant’s Form 1099-H (Health Coverage Tax Credit Advance Payments) accurately reflects only the net subsidies actually used, preventing tax filing errors for the individual.

6. Where and How to File

Form 13560 cannot be submitted through consumer tax preparation software. It must be delivered through specialized administrative channels alongside physical refund payments.

The completed Form 13560 must be mailed directly with the refund check made payable to the “United States Treasury.” The packet must be sent to the specific IRS address as per instructions outlined in the official HCTC Health Plan Administrator operational guidelines.

Administrators should always send the form and check via certified mail or trackable commercial courier to maintain proof of delivery. A copy of the check and the completed Form 13560 should be retained in the administrator’s financial compliance archives.

7. Step-by-Step Instructions to Fill the Form

Form 13560 is a structured remittance voucher designed to capture both administrator details and member-level accounting data. Review the table below for a section-by-section walkthrough.

Section Name	Required Information	Instructions for Administrators
Administrator Details	HPA Legal Name & EIN	Enter the full corporate name of the insurance company or TPA, business address, and 9-digit Employer Identification Number.
Contact Information	HPA Contact Person	Provide the name, job title, direct telephone number, and email address of the accounting or billing specialist completing the form.
Remittance Summary	Check Information	Record the total dollar amount of the refund check, the check number, the check date, and the total number of members included.
Participant Details	Subscriber Information	List the participant’s legal name, Social Security Number (SSN) or HCTC Participant Identification Number (PIN), and policy/member ID.
Coverage Breakdown	Dates & Return Amounts	Specify the exact coverage months and years (MM/YYYY) being refunded and the exact dollar amount returned for that participant.
Reason for Return	Reason Codes	Indicate why the money is being returned (e.g., coverage cancelled, premium overpayment, member enrolled in Medicare, or member deceased).
Certification	Authorized Signature	An authorized financial representative signs and dates the form, certifying that the information is accurate.

Understanding Reason Codes for Returned Funds

When completing the participant detail schedule, administrators must designate the precise reason the subsidy could not be applied:

• Coverage Cancelled or Terminated: The member cancelled their policy, failed to pay their required 27.5% share, or the policy was terminated retroactively.
• Enrolled in Disqualifying Coverage: The participant gained coverage under Medicare, Medicaid, or an employer-sponsored plan paying 50% or more of the premium.
• Premium Overpayment or Duplicate: The IRS sent excess funds, or duplicate payments were received for the same coverage period.
• Member Deceased: The covered participant passed away prior to or during the coverage month.

8. Required Documents/Information Needed Before Filling

Before preparing Form 13560, accounting personnel should assemble the necessary internal records to ensure all numbers reconcile:

• Original IRS Payment Records: Electronic Funds Transfer (EFT) trace numbers, deposit advices, or Treasury check copies showing when the government sent the original subsidy.
• Policy Accounting Records: Premium billing statements and cancellation notices showing the exact date coverage was terminated or modified.
• Participant Identifiers: The member’s legal name, Social Security Number, HCTC PIN, and insurance subscriber ID.
• Refund Check: A corporate refund check drawn on the administrator’s account payable to the “United States Treasury” matching the total on Form 13560.

9. Common Mistakes to Avoid

Remittance errors can disrupt tax records for both the administrator and the insured individual. Avoid these frequent mistakes:

• Sending a Check Without the Form: Mailing a refund check without Form 13560 will cause the payment to sit in an unapplied suspense account, leaving the member’s tax profile incorrect.
• Returning the Member’s Portion to the IRS: Form 13560 is strictly for returning the government’s 72.5% contribution. Any refund of the member’s personal 27.5% share must be paid directly back to the member.
• Omitting Coverage Months: Failing to specify which calendar months the refund applies to prevents the IRS from adjusting the correct tax periods.
• Mismatched Check Amounts: The total dollar sum of all individual member refunds listed on the schedule must equal the refund check amount down to the penny.
• Transposing Identification Numbers: Entering incorrect Social Security Numbers or HCTC PINs will misallocate the refund against the wrong taxpayer’s account.

10. Penalties for Non-Filing or Errors

Form 13560 is an administrative accounting remittance form rather than a tax return, but failing to return unearned federal funds carries severe regulatory consequences:

• Unlawful Retention of Federal Funds: Holding federal subsidy payments that were not earned or applied to valid health coverage violates federal grant and subsidy regulations, exposing the administrator to federal demand letters and statutory interest.
• Revocation of Qualified Plan Status: Administrators that fail to comply with HCTC refund and operational guidelines risk having their health plans disqualified from future federal subsidy participation.
• Taxpayer Harm and Audit Exposure: If an administrator fails to return unapplied funds, the IRS will issue an inaccurate Form 1099-H to the participant, potentially triggering tax audits or unwarranted credit recapture against an innocent individual.
• False Claims Act Liability: Knowingly retaining government overpayments or falsifying return reasons on Form 13560 violates 18 U.S.C. Section 1001 and the federal False Claims Act, exposing companies to civil fraud penalties and treble damages.

11. Related Forms or Schedules

Form 13560 operates alongside several key Health Coverage Tax Credit documents:

• Form 13441-A: Health Coverage Tax Credit (HCTC) Monthly Registration and Update
• Form 8885: Health Coverage Tax Credit (annual tax return schedule)
• Form 14095: The Health Coverage Tax Credit (HCTC) Reimbursement Request
• Form 1099-H: Health Coverage Tax Credit (HCTC) Advance Payments
• Form 3881: ACH Vendor/Miscellaneous Payment Enrollment Form (used by HPAs for electronic deposits)
• Form 1040: U.S. Individual Income Tax Return

12. Frequently Asked Questions

What portion of the premium is returned using Form 13560?

Form 13560 is used strictly to return the federal government’s 72.5% contribution. If the health plan also owes a refund for the member’s personal 27.5% contribution, that money must be refunded directly to the member, not sent to the IRS.

Can an administrator include multiple participants on one Form 13560?

Yes. An administrator can issue a single corporate check covering multiple participants, provided an itemized Form 13560 schedule is attached listing each member’s name, identification number, coverage months, and individual refund amount.

What happens to the participant’s Form 1099-H when funds are returned?

When the IRS processes Form 13560, it reduces the total advance payments recorded for that participant. This ensures that the annual Form 1099-H sent to the taxpayer in January reflects only the subsidies actually used for active coverage.

Can an individual taxpayer ever be required to submit Form 13560?

Yes, in rare situations. If an insurer erroneously sends a full 100% premium refund check directly to the taxpayer instead of splitting it, the taxpayer must keep their 27.5% share and use Form 13560 to forward the government’s 72.5% portion back to the U.S. Treasury.

What should an administrator do if an HCTC participant dies?

The administrator should terminate the policy as of the date of death, determine whether any advance payments were received for subsequent coverage months, and use Form 13560 with the “Member Deceased” reason code to return the unearned government funds.

Does returning funds through Form 13560 cancel the participant’s HCTC eligibility?

No. Returning funds simply clears the unapplied balance for that specific policy or month. If the participant subsequently enrolls in a different qualified health plan, they can resume advance payments or claim the credit on their annual tax return.

13. Conclusion: Key Takeaways Summarized

IRS Form 13560 ensures that unapplied federal health care subsidies are returned to the government smoothly and accurately. Keep these core takeaways in mind:

• Purpose-Built for HCTC Refunds: Form 13560 is used by health plan administrators to accompany the return of federal 72.5% health insurance subsidies.
• Detailed Member Accounting: The form requires exact member details, Social Security Numbers or PINs, coverage months, and specific reason codes for the return.
• Government Share Only: Never send the member’s personal 27.5% share to the IRS; refund personal payments directly to the participant.
• Protect Taxpayer Records: Returning funds promptly ensures that participants’ annual Form 1099-H statements remain accurate, preventing tax filing discrepancies.
• Submit with Payment: Mail the completed form and check payable to the United States Treasury to the specific IRS address as per instructions in HCTC operational guidelines.