Tax filing season is going to be a headache according to the IRS and they are already warning that they have neither the staff nor the resources to manage the deluge of calls they anticipate from tax filers. The culprit: ObamaCare’s tax penalty.
This tax filing season which kicks off January 1 will be the first time Americans have to demonstrate they had healthcare coverage in 2013 or face a penalty. For most taxpayers, it will mean checking a box on our tax returns indicating we had insurance for the full year. For millions of others with ObamaCare plans, they’ll face new forms and calculations that will leave their wallets lighter than they expected.
As we know, about 80 percent of the 6.7 million people who bought healthcare coverage in 2014 were only able to afford their plans through taxpayer subsidies that shrunk their monthly premiums to manageable levels. (How affordable is ObamaCare if buyers need subsidies to help them pay for their plans?)
However, those subsidies were based upon their 2012 incomes which likely changed in 2013. That means that they may have received more in subsidies than they really qualified for last year. As a result, those customers will have to pay some of that money back. The IRS can’t garnish wages or place liens on property but they can deduct the overpayment or any tax penalty from refunds due. What happens if a tax filer is owed no refund? The penalty is just rolled over to next year’s return. We can already see the snowball effect for tax and healthcare dodgers.
Some taxpayers may come out ahead: those whose incomes were lower in 2013 than the previous year. They may receive bigger refunds as a result.
Then there are those not getting anything out of this deal: taxpayers who never agreed to our tax dollars being redistributed for ObamaCare to begin with. Unfortunately, there’s no recourse for us.
If you decided to skip health insurance this year, consider this: Unless you can prove you have a valid excuse, you will be liable for a penalty during the coming tax season — and the time to start making your case is now.
That's not all. People who bought subsidized insurance through one of the marketplaces may have new tax forms to complete, while paying the penalty itself may demand some serious number-crunching.
The Internal Revenue Service is gearing up to answer questions, but it warns that only half of the callers may get through — and those who succeed may have to wait a half-hour or more.
The tax filing season will also serve as yet another big test for the federal government, since it will require several government entities — the state and federal marketplaces and the I.R.S. among them — to share data and send out new tax forms with accurate information in a timely manner.
Here are some of the biggest ways the new law may affect taxpayers:
PENALTIES Uninsured people who cannot qualify for an exemption will be required to pay a penalty, also known as the individual shared responsibility payment. Even people who went without insurance for more than three months may have to pay something.
For the 2014 tax year, individuals pay whichever is more: $95 or 1 percent of the portion of their modified adjusted gross income that exceeds the federal income tax filing threshold: $10,150, for example, for those with single filing status. But payments are calculated on a monthly basis for each household member.
If this sounds like a big mess in the making, it is.
As we noted the IRS is already scaling back expectations and preparing tax filers, especially those with ObamaCare, for a frustrating season of lack of communication and delays in processing their returns. CBS reports, ObamaCare customers will now have to submit new forms that include information such as total monthly premiums they paid and the monthly tax credits or subsidies applied toward those premiums. If only the processing procedures on the government’s side had been finalized. They have not despite a January 31 deadline for these forms to be sent to customers. There goes that efficiency in government on full display!
This is just a slice of the administrative burden that ObamaCare introduced and this is just on individuals due to the individual mandate. We can expect far worse on businesses when the employer mandate kicks in.