The Obamacare Tax Headache
The Affordable Care Act will make this tax season very complicated for some Americans, said Ann Carrns in The New York Times. This is the first year that taxpayers must address their health insurance status when filing returns, but budget cuts and staff reductions at the Internal Revenue Service “are likely to mean fewer customer service representatives answering questions by phone.” So in a year when there will probably be more confusion, there also will be longer wait times for answers. Taxpayers who bought insurance policies on government exchanges and received subsidies will have to reconcile their income with the credits they received, which could affect the size of their tax bill or refund. And those who went without insurance for more than three months last year will have to “file for an exemption or pay a penalty.”
Obamacare enrollees who made more than they expected last year may be in for a rude surprise, said Tami Luhby in CNNMoney.com. Those who underestimated their earnings when they signed up for insurance—some as early as October 2013—and then accepted subsidies “could owe thousands of dollars” come tax day. One estimate by tax firm H&R Block suggests as many as half of the roughly 6.8 million Americans who got assistance “may have to refund money to the government,” said Stephanie Armour and Louise Radnofsky in The Wall Street Journal. To add further complications to this already “tricky tax-filing season,” those Americans who do not have insurance will be fined, starting at $95 and ranging up to 1 percent of household income. All participants in the health exchanges should be on the lookout for Form 1095-A, which will be mailed in the next few weeks. It states how much each household member received in monthly subsidies and must be used to declare and reconcile details on insurance, income, and credits.
Even though this may be a tricky tax year, don’t assume you need to rely on a paid tax professional, said Dan Mangan in CNBC.com. The IRS and the Department of Health and Human Services (HHS) will soon launch several free online tools to help taxpayers figure out their obligations, and the independent Tax Policy Center has an online ACA Tax Penalty Calculator to help insurance-less filers figure out what penalties they owe. TurboTax, the commercial tax software provider, has also launched a free tool to help taxpayers figure out whether they’re eligible to have the health-care penalty waived. And the HHS plans to reach out to members of health exchanges via email, phone, and text in coming weeks to help them file correctly and on time.
see also finance and business knowledge
