STUMP » Articles » Obamacare Tax Watch: Mess to Come Noted By Tax Pros, Conservative Media » 20 January 2015, 01:41

Where Stu & MP spout off about everything.

Obamacare Tax Watch: Mess to Come Noted By Tax Pros, Conservative Media  

by

20 January 2015, 01:41

To be sure, none of this is exactly new, but I want to be clear that the following couple of stories are not fulfilling my prediction: stories in mainstream media about pissed-off taxpayers due to Obamacare taxes/penalties/clawbacks.

All we’re hearing about so far are the tax pros warning about the ugliness to come. This is partly due to federal taxes being unable to be filed until today, January 20.

So here’s one warning in the Washington Times:

Those Americans who didn’t get health insurance last year could be in for a rude awakening when the IRS asks them to fork over their Obamacare penalty — and it could be a lot more than the $95 many of them may be expecting.

The Affordable Care Act requires those who didn’t have insurance last year and didn’t qualify for one of the exemptions to pay a tax penalty, which was widely cited as $95 the first year. But the $95 is actually a minimum, and middle- and upper-income families will actually end up paying 1 percent of their household income as their penalty.

TurboTax, an online tax service, estimated that the average penalty for lacking health insurance in 2014 will be $301.^

“People would hear the $95, quit listening, and make an assumption that that was what their penalty was going to be,” said Chuck Lovelace, vice president of affordable care for Liberty Tax Service. “I think that a lot of people will be surprised when they get in there and find out that their penalty is [based] on their household income.”

….
“We will be showing them what the penalty is,” said Jackie Perlman, principal tax research analyst at The Tax Institute at H&R Block, said of this year’s customers. “But we will also be telling them, ‘How do we not go down this road next year?’”

Problem is, if these people trickle into the tax offices in March or April, they will be too late to get Obamacare coverage for 2015. The open enrollment period closes February 15, 2015.

The article linked above also mentions the subsidies.

I will get back to the non-coverage tax/penalty in a later post. This was what I was originally talking about when I made the prediction. But then, later, I realized the subsidy situation was going to be even worse, for a variety of reasons.

Then there’s this warning from H&R Block specifically:

H&R Block, the nation’s largest retail tax preparation company warns that the newly released Obamacare tax code, officially called the Affordable Care Act, is likely to confuse millions of taxpayers who try to tackle their tax returns for 2014.

“Now that the Affordable Care Act has made health care a tax issue, no one can understand it,” H&R Block flatly tells taxpayers in a video that resides on its dedicated Obamacare web site.

A former IRS Commissioner agrees, and cautions that the new tax requirements will be a “shock to the system,” especially afflicting low-income earners who have never itemized on their tax return.

The tax preparation giant — with 24 million tax clients worldwide — reports that the Obamacare tax rules now constitute “the biggest tax code change in the last 20 years.”

A lot of the stories I’ve been coming across in the mainstream media so far has been just talking up complexity, and not necessarily the $$ hit. Yes, there will be a lot of people who were used to filing 1040EZ who all of a sudden find they’ve got a much more complicated filing situation.

This is the H&R Block video mentioned:

This is not merely H&R Block ginning up business, by the way. I have a feeling they’re putting out these warnings because they would rather not their tax pros get figuratively or literally beat up over these problems.

(I am not predicting such a news story, but I wouldn’t be surprised to hear frustration taken out on tax prep pros in a concrete way.)

Yes, it’s also good marketing, but the Obamacare tax problems are not of H&R Block’s making.

^ Further thoughts on the tax shitstorm to come:

When I saw the $301 estimate (love that specificity) it reminded me of the waning days of my liberalhood. I was working somewhere where somebody had made a tuition donation for a specific student, but the student ultimately bowed out and the donator wanted the money back. This didn’t often happen at this place, so we didn’t have a timely procedure for giving refunds.

The guy on our side who took the phone call from the donator got off the phone and started making fun of 1. the guy’s thick southern accent (nb: I don’t have a strong accent, but I grew up in Georgia and the Carolinas), 2. where the guy lived (some rural route mailing address), and 3. the urgency of this guy wanting his couple hundred dollars back. The guy making fun was ultraliberal… and a trust fund baby. Surprise.

I had to educate this man that $300 was a lot of money to many people and to check his privilege.

Okay, I didn’t use those words, but I wish I had. That would’ve been delicious. (Also, those words weren’t the rage over a decade ago)

Anyway, I knew from experience that the donator needed his money sooner rather than later, so made sure we got that check cut ASAP, even if it wasn’t our priority.

Similarly, those who are pooh-poohing the hundreds-dollars hits with regards to Obamacare taxes, they should really consider how pissed off people will be to see hundreds taken out of their tax refunds. To many people, this is a lot of money.

And some aren’t going to be merely hit with a few-hundreds-penalty/clawback. But that’s for a later post.


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