Receiving a taxpayer-funded tax subsidy to purchase health insurance under Pres. Barack Obama’s law means that millions of Americans may have a tax problem this year, according to a Fox Business report published Saturday.
Those who filed for tax credits to purchase subsidized Obamacare policies are going to need to complete a new form that is to be distributed by the government insurance exchange before they can file for tax refunds next year.
Moreover, the form that acts like a W-2 for people getting tax credits to help pay for health insurance premiums must be issued by the federal agency that handled the badly botched roll out of Obamacare.
Some tax professionals are already voicing their concerns that the federal and state insurance marketplaces may not get those forms out in time, which would then create potential for delayed tax refunds for millions of consumers.
The new tax forms are issued by the Health and Human Services Department, which must send out millions of the forms to Obamacare consumers.
More specifically, the new tax form titled 1095-A requires listing each person in each household who has tax-credit subsidized health coverage. Beyond identifying family members, the form records how much the government paid in tax credits for each of the 5 million affected consumers per month.
For consumers who incorrectly stated or underestimated their annual incomes when signing up for health insurance tax credits under HealthCare.gov, their tax refunds may be affected by hundreds of dollars or eliminated altogether.
Generally, IRS agents receive verification of earnings from employers who are required to report such information to the agency each year. With 5 million cases to consider, experts say discrepancies – between income reported at sign-up verses income reported to IRS by employers at the end of the year – are a given.
Meanwhile, even for those whose income matches to the penny, their actual income-tax refunds could be delayed days or even weeks if the Health and Human Services Department cannot get the millions of forms out by deadline.
“It’s very unrealistic to expect that they would be able to implement a process that distributed these forms in the middle of open enrollment, and on time,” said George Brandes, vice president for health care programs at Jackson Hewitt Tax Service.
Like other implementations of Obamacare that were delayed by the administration, the new 1095-A report is likely to become a source of consternation for consumers who took tax credits to purchase Obamacare.
Tax experts say the average consumer tax refund is about $2,690. Any delay in receiving such a bundle of cash back from the government could affect family budgets negatively.
With the potential for millions of income discrepancies, particularly in the first year, Americans who see their tax refunds shrink or disappear may be unprepared for such a consequence.
Collecting taxes owed by from Obamacare consumers is how the government plans to pay for the Affordable Health Care Act.