STUMP » Articles » Obamacare Tax Watch: Obama Notices » 1 February 2015, 07:11

(I guess he read something in the news or something.)

Okay, enough fun from books and reading, time to get back to the Obamacare haul. I said I’d revisit my New Years Prediction re: Obamacare taxes, so let’s look at recent events, shall we?

I usually like to link to a news story directly, but I’m going to link to Althouse’s post on the matter: because there are good comments. Really, read the comment thread – some good information in there.

First, the excerpt Althouse pulls in her title and post:

“Obama administration officials and other supporters of the Affordable Care Act say they worry that the tax-filing season will generate new anger…”

“… as uninsured consumers learn that they must pay tax penalties and as many people struggle with complex forms needed to justify tax credits they received in 2014 to pay for health insurance…. The penalties, approaching 1 percent of income for some households, are supposed to be paid with income taxes due April 15. In addition, officials said, many people with subsidized coverage purchased through the new public insurance exchanges will need to repay some of the subsidies because they received more than they were entitled to. More than 6.5 million people had insurance through the exchanges at some point last year, and 85 percent of them qualified for financial assistance, in the form of tax credits, to lower their premiums. Most people chose to have the subsidies paid in advance, based on projected income for 2014. If their actual income was higher — because they got a raise or found a new job — they will be entitled to a smaller subsidy and must repay the difference, subject to certain limits.”

Well, that’s what I said a while back, isn’t it? (that post was from November, but I mentioned the tax issue some years ago on another blog.)

They just now paid attention to this, I suppose, because everybody is finally getting their W-2s and trying to file for taxes. And getting pissed off.

(This does not count as fulfilling my prediction, by the way.)

I will now link to the NYT article, because Althouse didn’t link to the supposed remedies:

Federal officials have authorized more than 30 types of exemptions from the penalty for not having insurance. One is for low-income people who live in states that did not expand Medicaid. Another is available to people who would have to pay premiums amounting to more than 8 percent of their household income. The government will also allow a variety of hardship exemptions and in most cases will require taxpayers to send in documents as evidence of hardship.

Okay, those already existed, by the way. I think the 8% thing was already written into the law, but if you think I’m going to try reading the law again (yes, I’ve done it, once, years ago), you’re going to have to pay me a lot for my time. A few bucks in Amazon referral fees is not enough to pay me for that shit.

One of Althouse’s readers comments:

Carol said…
I do tax prep too and though we were anticipating a lot of anger, but it’s been pretty mellow so far. The poors come in early to get their big refunds and they often are exempt because Medicaid wasn’t expanded here.

I kinda think ACA is not going to go away, either. I know a lot ofvery grateful to be able to get the insurance. Then there are the ones who saved up a lot of money and plan to retire early..this is a godsend to them.

Tread carefully, GOP.

I agree with Carol re: early retirement. I personally know a couple actuaries who retired because of Obamacare. No, not because they worked in health insurance and would get screwed (note: health actuaries are way in demand because of Obamacare), but because the heaviest subsidies go to those with the highest premiums for the same income… i.e., people just under the age 65 limit for Medicare.

I have no comment on the political advice, but as a practical matter, I am keeping an eye out on labor participation rates for those in the age 60 – 65 range for my dayjob. Since I get paid to do that, sorry, that will not show up in this blog. You can do your own legwork.

But back to the NYT — the hardship exemptions already existed, and the main one I remember being added (that weren’t in the law) had to do with the Obamacare exchange screw-ups.

So what extra thing will there be?

Obama administration officials said they were considering a “special enrollment period” that would give some people extra time to obtain insurance. But they said consumers could not count on an extension of the Feb. 15 deadline and should not delay signing up.

This, I think, is somewhat fair. I think a lot of people were not going to be aware that the penalty wasn’t really $95 for them, but hundreds to thousands of dollars.

By February 15, a lot of people still won’t have their tax situation figured out — I am one of the weirdos who starts putting stuff into TurboTax on January 1, especially if I’m expecting to owe, because I have to plan that out. I do not like big tax surprises (after having a particularly nasty one one year… yes! I learn from my own bad experience, and not just other people’s!)

In any case, while I knew the individual coverage mandate/penalty/tax would piss people off, the real big anger will be over having to pay subsidies back.

Anything in the NYT article about a remedy for that?

Many people awarded insurance subsidies for 2014 did not realize that the amount would be reviewed and recalculated at tax time in 2015.

Consumers are sure to have questions, but cannot expect much help from the tax agency, where officials said customer service had been curtailed because of budget cuts.

…and? A fix?

Nope.

I don’t think that’s a part that can be “fixed”. You can’t have people getting more subsidies than they really deserved. Extending open enrollment for Obamacare — was done before (due to shitty exchanges). Changing the formula for subsidies? Nope. That would require legislative change.

So my prediction still stands about angry taxpayers.

As Big Mike says in Althouse’s comments:

Big Mike said…

Even if you don’t owe anything, the paperwork to prove that is so daunting that the average taxpayer will have to get an accountant (which means paying money that you he or she shouldn’t have had to pay) or spend dozens of hours of what should have been leisure time and still worry that the IRS will come after him or her.

Fundamentally the Dumbocrats are making it up as they go along, and the result is like a multi-story building erected without a blueprint or any attention paid to the laws of physics. It’s all going to come down on people’s heads.

1/31/15, 8:59 PM

One of the biggest problems, even without subsidies to throw into the mix, is that a lot of low income people who have been filing 1040EZ for years will have to use the long form 1040, and fill out additional forms. I will look at what those forms look like in a later post, but I have seen professional tax preparers talking about the extra time and expense in filling these out.

I wasn’t really joking about Obama reading about the problem in the paper. The NYT article came days after this WSJ article on the individual mandate and tax time consequences:

WASHINGTON—The U.S. government estimates as many as six million households may have to pay a penalty for not having had health-insurance coverage last year as required under the Affordable Care Act, officials said Wednesday.

….
Up to 20% of tax filers—or *about 30 million*—who weren’t insured for most or any of last year likely will request and receive an exemption from the penalty, officials said. Many exemptions can be applied for during the tax-filing process.

….
The health law requires almost all Americans to have coverage or pay a penalty, with some exemptions. About 2% to 4% of tax filers are expected to have to pay the fine for not having carried insurance in 2014, which is $95 per adult, or 1% of family income, whichever is greater.

….
As many as 5% of taxpayers got subsidies that offset the cost of premiums for insurance plans obtained through the ACA. Subsidy amounts were based on consumers’ projections of their 2014 income. Because income can vary and estimates can be inaccurate, some of those who received the credit may owe money or get smaller refunds. Others may get larger refunds if subsidy amounts were too low, officials said.

…..
Taxpayers who meet certain requirements and have a balance due on their income tax based on reconciling tax credits will get relief from an IRS penalty for underpayment.

The nonpartisan Congressional Budget Office, which measures the law’s spending and impact of coverage, hasn’t publicly estimated how many people it expected would pay the 2014 penalty, which is the first year the requirement was in effect. In a June 2014 report, the CBO said about four million people would pay a penalty because they are uninsured in 2016.

So… there is some “relief” for the over-subsidized. Yes, they have to pay back the subsidies (remember the bit about the IRS not having the ability to collect Obamacare taxes? That’s only for the penalty for not having coverage. That’s not about the subsidies — they will take that money back), but they won’t have to pay extra.

For now.

Anyway, here’s my prediction update:

Yes, there will still be stories about pissed-off taxpayers in mainstream media.

Even if open enrollment is extended (and I think it may be extended, but I’m less than 90% on that one.)

Even if extra penalties for oversubsidizing are not there.

Even if the IRS gets the extra funding they want in their budget (which they’re not going to get.)

I still haven’t seen the stories I mean yet — tax preparers and government officials wringing their hands do not count.

But I am not moving from my prediction: no matter how many “fixes” are put forth by the Obama administration, there are going to be loads of really pissed-off people. And the mainstream media is not going to be able to ignore it.