Will Obamacare Affect Your Tax Refund?
Have you filed tax returns for 2014 – and still wonder why you haven’t received a tax refund? To make it clearer, did you receive tax credits to subsidize your health insurance premiums under the Affordable Care Act law (ACA) known as Obamacare?
If so, join millions of Americans whose tax refunds may be delayed or the amount of the refund could easily be reduced due to the complications of different forms that must be filled out, which, in essence means the filing of the 2014 tax forms that require additional information actually determines how much refund a person will receive back from IRS (Internal Revenue Service).
Taxpayers received Obamacare subsidies based on estimated income for 2014.
Tax refunds are needed for families or individuals to pay off bills, buy a vehicle, take a vacation, purchase much needed items or for some to splurge with extra cash.
Taxpayers, for the most part, are used to filling out a simple 1040 EZ – but now they will face the task of filling out extra paperwork if they benefited from the ACA Health Insurance in 2014. And depending on how much credit a person received upfront to subsidize tax credit premiums under the Affordable Care Act(ACA), there is a great chance they will not get a refund at all.
Tax refunds delays including Obamacare penalties for those without insurance is a painful reminder for a mother of three from Savannah Georgia. Interviewed by a CNN reporter, Jessica Johnson complained after paying $281 dollars for Obamacare tax penalties for not having health insurance that she has suffered again from IRS delays of not sending her $9000 dollars in tax refunds
“I’m frustrated,” she stated, “I just want to know what’s going on. It’s ridiculous that I am being penalized for being honest for not having health care.”
News media reports estimate that close to 7 million Americans will face Obamacare (no healthcare coverage) penalties. Those with or without health coverage but earn high income will pay substantially more in taxes.
Consider a married couple making $100,000 in income. The bill comes to a cool $797.00 (Affordable Care Act) penalty, according to Tax Policy Center.
Taxpayers, for the most part, are used to filling out a simple 1040 EZ – but now they will face the task of filling out extra paperwork if they benefited from the ACA Health Insurance in 2014. Depending on how much credit a person received upfront to subsidize tax credit premiums under the Affordable Care Act(ACA), there is a great chance they will not get a refund at all.
Tax filing hit another big snag not long ago when incorrect tax forms were sent to over 800,000 Americans that enrolled in Obamacare Health Insurance. This problem, critics argue, only further delays tax refunds.
What’s more, according to Nina Olson, an H&R Block Tax Director, “the IRS told its representative not to tell callers the real reason for delays.”
A lawmaker expressed outraged.
“The White House tells us in a classic news dump that nearly one million Americans could see their tax refunds delayed because of this President’s inability to implement his own law,” Tennessee Representative Diane Black said in a statement released to national news media.
A White House Spokesman said the issue affects “less than 1 percent of people who file their taxes.”
Adding more woes to Obamacare that relate to tax filings this season involve recent news reports indicating many state-based Health Exchanges have not sent the subsidy data belonging to taxpayers to the IRS within a timely manner for the agency to calculate how much in tax credits was given to those who purchased insurance under the Affordable Care Act.
Processing tax returns creates a myriad of problems due to incessant delays according to critics.
The IRS revealed these numbers to dispute critics: IRS reported to CNN Money Report that through February 20, the IRS reportedly processed nearly 50 million tax returns, and nearly 40 million tax refunds worth approximately $125 billion dollars have been issued.
No doubt Tax season this year is a pain for most Americans, particularly those who purchased Obamacare primarily because Obamacare policies complicates the Healthcare Law and the U.S. Tax Code.
“Folks who got Health Care by a state or federal exchange were able to get advance payments for the premium tax credit to help them pay for the ACA required insurance,” Kay Bell told Newsblaze by email. Bell is a Tax Analyst at Bankrate.com.
“If the advance premium tax credit that they receive was too large, any refund they are due back will be reduced to cover the overpayment of the credit,” Bell said.
Studies have shown over two-thirds of tax payers who signed up for the ACA program were not aware that their 2014 tax returns would be used to repay their subsidy amount, according to a survey by H&R Block Tax Institute.
In a sneaky way, the Obama Administration discovered how to manipulate the Affordable Care Act into the tax code in two distinct ways that affect most American taxpayers. For example, the first, is that the ACA law requires all U.S. citizens to purchase health insurance or pay a fine for not having health care coverage. (U.S. Supreme Court Upheld This Requirement).
The second is the tax credit subsidy that millions of Americans received through Obamacare’s Exchanges to lower health insurance premiums.
And, as stated, don’t forget about the IRS new forms as result of President Obama’s Affordable Care Act.
“The ACA has made health care a tax issue and, in that sense, everyone will see an impact on their tax return this year,” said H&R Block Tax Institute Executive Director Kathy Pickering, in a recent news media interview distributed to numerous outlets.
Tax Analyst Kay Bell explained another drop hole to Newsblaze. Bell said even if a person didn’t purchase health coverage they would pay a tax penalty for being uninsured, and, Bell further explained, if a taxpayer claimed an uninsured household dependent on tax returns, that same person must pay a second penalty for the uninsured dependent.
Which begets the question: why were American Taxpayers were not informed in advance that funds would be deducted from tax returns as a mandated penalty if they, by chance, claimed an uninsured dependent.
Public awareness of monetary penalties is pretty slim. The Kaiser Family Foundation, based on research, discovered approximately 72% of Americans were not aware of fines imposed under Obama’s Affordable Care Act.
“Individuals who did not get any coverage last year will face the shared responsibility payment, which essentially, is the tax penalty due for not getting coverage,” Bell said. “The 2014 tax year penalty is $95 per person or 1 percent of annual household income, whichever amount is larger,” Bell stated.
Tax Analysts recommend these basic tips for consumers to follow when trying to figure out how to file taxes properly for the first time under Affordable Care Health Law and not have taxes delayed due to incorrect information as the April 15th deadline approach for IRS to process all returns.
If You Are Covered By An Employer Or Medicare/Medicaid Government Program, Tax Experts Recommend The Following:
- Coverage Under a Specific Plan
There is an additional line on the 1040 form; all the person must do is check the box indicating you are covered under a specific plan, so your work is practically done except for making sure that each person in your household is insured even if the insurance is totally different from a government program.
- Insurance Purchased Through Obamacare And Government Tax Credits.
Although Tax credits contributed significantly to make healthcare more affordable, the flip side is: you must prove you still have insurance, and that you didn’t receive too little or too much of a subsidy.
Assuming a person received a large tax credit upfront, then the person must repay a larger amount out of their refund. To accomplish this, Tax Analyst Kay Bell says, a taxpayer must fill out a new form called 1095-A.
“The 1095-A, shows how much your total insurance premium was and how large a tax credit a person got each month they were covered.”
“You need that information to fill out another form called the 8962,” Bell added.
Bell refers to this extra paperwork as, “a form to fill out a form.”
- A Person With Health Insurance Not Purchased Through An Employer Or Government That Did Not Receive Tax Credits.
Tax experts explains that if a person purchased an unsubsidized plan from an Obamacare Exchange, then use the information from your 1095-A, and put it on your 8962.
Next, according to experts, check off line 21 of your 1040.
Remember, they say; if a person didn’t use a Government Exchange, that person only has to be concerned about line 61.
- Premium Tax Credits: Are Subsidies Too High?
Tax Analyst Kay Bell said in an email that premium tax credits are only available based on financial need. “In most states, anyone making under 400 percent of the federal poverty level can get some type of subsidy,” Bell pointed out. “The more money you make, the smaller the tax credit. For the 2015 tax year, if your estimated income is above $46,680.00 – for an individual or $95,400.00 for a family of four, you won’t be able to claim the premium tax credit,” Bell concluded.
John Gray, Assistant Professor of Health Policy at Vanderbilt University in Nashville Tennessee, said, in an L.A. Times news story, that based on his research of household income data “the average subsidy is $208.00 to high.”
- No Health Insurance
People without health insurance face tax penalties starting at $95.00 – up to $11,000,00, according to the Obama Adminstration. If a person didn’t earn enough money to pay taxes, for example, as a single person under 65, that earned less than $10,150,00.
To Qualify for Affordable Care Act exemptions, a person filing tax returns must apply to their own selected insurance exchange. It works this way: exemptions includes religions that oppose insurance coverage. Or if a person resides in a state that didn’t expand Medicaid under Obamacare, and under these circumstances, a person may not qualify for low-cost or free coverage. A person is also exempted if they canceled a pre-Obamacare insurance policy.
Further, the Obamacare Exchange Program provides hardship exemptions for a number of reasons such as if a person is evicted or filed for bankruptcy.
Tax Analyst Kay Bell summed up the totality of Obamacare and the impact it has on taxpayers with or without health care coverage.
“It was never a secret that there would be costs to health care coverage under the Affordable Care Act.”
“How much, however,” Bell said, “has been unclear in the five years since the law was enacted and now, this is the first tax filing season in which we all are experiencing its practical effects.”
“Also, there is a disconnect between the creation and enactment of legislation and the actual enforcing of it. Congress writes the law and it falls to the IRS to write the guidelines on how it will enforce them,” Bell said.
For more information about all of the rules, see the IRS’s Affordable Care Act Tax Provisions page, especially Publication 5187, Health Care Law: What’s New for Individuals & Families, which is a great resource with information about each situation. Also see How Obamacare Complicates the Filing of Your 2014 Tax Return.