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Headaches for some taxpayers under the Affordable Care Act

New tax penalties for not having health insurance go into effect this season.

Vadim Jigoulov and his wife were hoping for a small tax refund after the birth of their second child. Instead they owe the federal government more than $2,000 related to subsidies they received to help them buy health insurance under Obamacare.

The Baltimore couple are among millions of Americans confronting tax implications under the 2010 Affordable Care Act for the first time.

All taxpayers must check a box on their returns to affirm they had health insurance — or face a financial penalty — as the so-called individual mandate goes into effect this year. Those who didn't have health insurance for most of 2014 must pay either $95 or 1 percent of their income, whichever is greater.

And some taxpayers are finding they received too much in subsidies when they bought health insurance through the exchanges for 2014, triggering a tax penalty.

"For most people, really the majority of people, there isn't much more involved than just checking a box on the return saying, 'Yes, I had insurance all year,'" said Jackie Perlman, a principal tax research analyst at the Tax Institute at tax preparation firm H&R Block. "But if you're someone who didn't have insurance all year, or didn't have insurance at all, you've got some work to do."

Tax returns are due by Wednesday, when they must be electronically filed or postmarked. For those waiting until the last minute, the U.S. Postal Service issued a reminder that post offices will be open regular hours on April 15.

Every tax season comes with tweaks to the tax code that can add to the workload.

Greg Horning, a CPA and partner in the Hunt Valley-based firm Stout, Causey & Horning PA, said this year one tweak changes the way depreciation is calculated on property bought by business owners. "Those changes tend to be very favorable to the taxpayer but require a substantial amount of work to benefit from those new regulations," Horning said.

This year also has been marked by fraud. In February, the company behind TurboTax temporarily suspended processing state tax returns after some customers logged on and found that their tax return had already been claimed.

But the biggest difference in the tax season this year is the Affordable Care Act.

IRS Commissioner John Koskinen said late last month that disruptions from ACA changes have been kept to a minimum, in part because most people use tax filing software that eases the process.

"The filing season has gone swimmingly," he said. "The ability to implement all of the new statutory requirements and changes and have the season run smoothly has surprised almost everybody. We are delighted with it."

Some taxpayers and accountants disagree.

They have reported difficulty calculating in advance the penalty for not having health insurance and determining the accurate amount of credits someone should receive when buying on an exchange.

Perlman said there was a "misconception" when the law passed that the penalty for not having insurance under the individual mandate would only be $95. "But that's the minimum," she said.

According to a survey earlier this tax season by H&R Block, the average tax penalty for not having insurance was $172.

For those who received subsidies when enrolling in health insurance through exchanges, roughly half will now have to pay money back, according to the Kaiser Family Foundation. In its survey, H&R Block found that 52 percent of people had to pay back a portion of their tax credits — an average of $530.

"The additional tax burden imposed under the Affordable Care Act continues to be one that requires attention and planning to minimize its impact," Horning said.

"The people who it's causing issues for in 2014 are people who for one reason or another bought insurance on the exchange and may have received advanced credits that had some reporting issues, and likely have caused some difficulties in properly accounting for the credits."

The Jigoulovs said they weren't totally surprised when they filed their 2014 taxes and discovered, based on their income, they had received too much in subsidies.

They suspected they were getting too much when they first enrolled for insurance through the state's exchange, an online store where those without insurance can buy health plans. Although they thought they were enrolling in one family plan, they actually had enrolled in two separate plans.

They tried to correct the issue but said they were stymied by the website, which was plagued with technical problems at the time. Jigoulov said a call center worker told him he would not be he held liable and that what ultimately mattered was that he had insurance. He said it is unfair that he now has to pay.

"I am sure I am not the only one in this situation," he said. "Because problems with the website were widely reported."

A spokesman with the Health Benefit Exchange, which manages the website, said it doesn't discuss individual cases. In general, people are only entitled to the subsidies based on their income, said spokesman Andrew Ratner.

"Whatever mistake is made, you owe the tax that is owed," he said.

Jigoulov filed a complaint with the attorney general's office. The office investigated the complaint but did not have jurisdiction over the matter, said spokesman David Nitkin. He said such cases are the purview of the IRS.

Meanwhile, taxpayers are having difficulty getting timely answers from the IRS, said Mark Luscombe, a principal analyst for Wolters Kluwer Tax & Accounting. Since fiscal year 2010, the IRS's budget has been cut by about $900 million and the agency has 10,000 fewer employees.

"Taxpayer service has been cut back," Luscombe said. "People aren't getting their phone calls answered as frequently as they have in the past. People have been encouraged to act sooner than they have in the past because if they have a question, they likely won't get it answered quickly."

Perlman advised those without health insurance this year to sign up as soon as they can, or face an increased penalty next year. While there are some exemptions available for people in various circumstances, the penalty is set to rise to 2 percent of income in 2015 and 2.5 percent of income in 2016.

"It's not too late to sign up for insurance through the marketplace and eliminate or cut down on any 2015 penalty," she said. "It will definitely be more expensive to not have insurance in 2015 and even more so in 2016."

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