Tuesday, January 6, 2015

Obamacare Creates a Trickier Tax Season

Subsidy Estimates May Be Inaccurate, While IRS Girds for a Flood of Queries
The first year of the Affordable Care Act is in the books, and now comes a tricky tax-filing season for millions of Americans.
The law’s requirement that most Americans carry health insurance means all filers must indicate on federal tax forms whether they had coverage last year and got tax credits to help pay for it. Those who didn’t have coverage could face a fine, although reduced staffing at the Internal Revenue Service and certain changes to the law mean the so-called individual mandate is expected to be lightly enforced this year, tax preparers say.
Meanwhile, millions of Americans who got subsidies under the law may find they are getting smaller-than-expected refunds or owe the IRS because credits they received to offset their insurance premiums were too large. As many as half of the roughly 6.8 million Americans who got subsidies may have to refund money to the government, based on one estimate by tax firm H&R Block Inc.
What if you didn’t have health insurance in 2014?
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“The ACA is going to result in more confusion for existing clients and many taxpayers may well be very disappointed by getting less money and possibly even owing money,” said Charles McCabe, president of Peoples Income Tax and the Income Tax School, a Richmond, Va., provider of tax preparation and education. “The whole implementation of Obamacare will be frustrating for tax preparers.”
But the season could be a lucrative one for tax firms. Liberty Tax Service, a tax-preparation franchise, began calling hundreds of thousands of customers in November to invite them to a store to get help applying for an exemption to the insurance-coverage requirement. About half of the company’s 4,000 stores opened weeks ahead of their usual start date to provide health-law tax advice.
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The IRS also is expecting more calls from consumers at a time when congressional funding for the agency has dropped nearly $1 billion since fiscal 2010, and its workforce has 13,000 fewer full-time employees than it did in 2010. Congressional Republicans opposed to the health law have said limiting the IRS’s budget is one way to slow the law’s implementation, including in last month’s budget agreement for the remainder of fiscal 2015.
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