STUMP » Articles » Obamacare Tax Watch: Federal Oopsies Hit 800K (at least) » 21 February 2015, 06:35

Where Stu & MP spout off about everything.

Obamacare Tax Watch: Federal Oopsies Hit 800K (at least)  


21 February 2015, 06:35

So, in a recent Obamacare post I wrote:

And I’m curious to see how bad their tax form screw-ups will be.

Well, we didn’t have to wait long. It wasn’t just delays… they had screwed-up forms sent out to hundreds of thousands of people:

Approximately 800,000 taxpayers who received health care coverage through the federal insurance marketplace were sent the wrong information on their Form 1095-A and are being urged to wait to file their taxes until the first week of March when they receive the correct information from the federal government.

“About 20 percent of the tax filers who had Federally-facilitated Marketplace coverage in 2014 and used tax credits to lower their premium cost —about 800,000 (< 1% of total tax filers) —will soon receive an updated Form 1095-A because the original version they were issued listed an incorrect benchmark plan premium amount,” said a blog post on the Web site of the Centers for Medicare and Medicaid Services. “Based upon preliminary estimates, we understand that approximately 90-95% of these tax filers haven’t filed their tax return yet. We are advising them to wait until the first week of March when they receive their new form or go online for correct information before filing. For those who have filed their taxes—approximately 50,000 (< 0.05% of total tax filers) —the Treasury Department will provide additional information soon.”

Yes, fewer than %1 of tax filers. Because the percentage of adults who were forced into these exchanges has been small, so far.

Twitchy has a few people scratching their heads over the explanation:

But as screw-ups go, (and the explanation), it’s pretty straightforward.

The subsidies are based on a benchmark premium — actual premium amount being charged on actual policies that the people receiving subsidies could have bought.

Now, to make it “simple”, for each area (could be entire state, could be geographic region within state), there is one such benchmark. So far, so good.

It changes every year, because premiums change every year.

Subsidies received during 2014 were based on the 2014 benchmark. But now it has to be reported, so as to correctly calculate what subsidy should have been received.

For those 800K people, what was reported was the 2015 benchmark.

That’s what’s being claimed by the HHS, at any rate. I can think of lots of other things they also screwed up. Heck, the comments section of Accounting Today have some good nuggets of info of other kinds of screwups:

JUST TRIED TO COMPLETE A CLIENT 1040A. Guess what invalid policy #. I bet it is going to be more that 10% screw up. No wonder Bill Clinton put the plan on hold. Obamacare a mistake from day one. Now we all will suffer from incompetence.

Posted by: JPOWLINGINC | February 20, 2015 3:33 PM

As for the numbers, they appear consistent with the statement that 20% of the taxpayers who use (the Federal marketplace) are affected, but we don’t know of any of the state marketplaces that are affected, so 10% of all marketplace customers are affected.

Or it could be that only marketplace customers who receive the incorrect form and apply for the premium subsidy on their 1040 are affected; the advance subsidy reported on the 1095-A undoubtedly reflects the actual advance subsidy.

In any case, 20% with an incorrect form and 10% affected is not unlikely.

Posted by: A.Rubin | February 20, 2015 1:28 PM

This is great. I love it, as a tax preparer.

Posted by: LINDA D | February 20, 2015 12:52 PM

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Just wait – next we’ll hear that it was because of budget cuts that the mistake was made!

Posted by: Sue M | February 20, 2015 12:22 PM

Yeah, I don’t need to make that prediction. They already have been using that excuse preemptively.

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.

That was from January.

But let’s go back to what @exjon wrote — I would be willing to bet the people who made this mistake went to the best schools. Because they always assume they’re right, and therefore, they’re never checked. Or they didn’t have time. Or they don’t care.

This is a problem with “experts” — they are used to not making errors (and yes, their error rate may be lower overall than many people), so they don’t “waste time” error-checking.

And so they’re given more and more important stuff to do, so when they do screw up, it’s a doozy.

It’s been pretty clear that there hasn’t been any kind of appropriate check and controls on their processes.

Hey, I know a good book for that (for Excel).

Anyway, I wouldn’t be surprised if there are more screwups. Tax-related ones, I mean. We already know there are other screwups.

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