Obamacare taxes & Penalites – The Rube Goldberg edition

New health care law complicates tax filing season for many in NC | National Politics | NewsObserver.com. NOTHING in this article is restricted to North Carolina, the problems and challenges described are NATIONWIDE issues.

The purpose of subsidies is to make Affordable Care Act plans… well “affordable” for lower income households. While a subsidy may at times accomplish this purpose, it creates a wealth of complications for these very same people.

The imminent tax law changes are likely to bewilder the people for whom the Affordable Care Act was designed: low-income people who needed help to figure out how to buy federally subsidized health insurance.

Jackson Hewitt Tax Service is predicting on its website that more than a third of people who received health insurance subsidies were overpaid and now will owe “pretty hefty repayment liabilities.” Others could end up paying hundreds of dollars in penalties for failing to buy health insurance.

This creates two issues:

  1. People who used to do their tax returns can no longer do them thanks to the complications of Obamacare
  2. The cost of tax preparation services is going to increase

Professional tax preparers plan to charge extra for sorting through the ACA’s knotty requirements. Still, they count on a flood of new customers ready to pay more in hopes of maximizing their subsidies and minimizing penalties, especially the myriads who opted to ignore the law and skip insurance coverage this year.

Isn’t capitalism great? Publicly traded tax companies include H&R Block and Liberty Tax.

Taxes are what you owe if you received too much in subsidy payments (technically advanced tax credits). Penalties are what you owe if you weren’t insured. Speaking of penalties for 2014…

The ACA’s minimum penalty this year is $95 per individual or $285 per family, but the law specifies that violators must pay the higher of two penalties. The higher penalty is calculated as 1 percent of household income above the tax filing threshold, which could come to several hundred dollars per person in many instances.

The maximum annual penalty this year, based on household income, is $2,448 per individual, and $12,240 for a family of five or more.

The penalties are docked from tax refunds, and for people who don’t get a refund this year, the penalty will be rolled over to future years, shadowing the taxpayer from year to year unless the IRS issues an amnesty.

Low-income filers are particularly vulnerable to the ACA penalty because they are dependent on tax refunds, notably the federal earned income tax credit, which can easily come to several thousand dollars per person, said Kala Shivali, franchisee of four Liberty Tax offices in Raleigh.

The sheer complexity of the new tax requirements, compounded by expected technical and administrative glitches, has some predicting that the the IRS will be in a forgiving mood this year.

“Health care systems don’t have to be this complicated,” said law professor Timothy Jost at Washington and Lee University. “I think this year they’ll have to cut people slack on this stuff.”

Read more here: http://www.newsobserver.com/2014/11/12/4317123_new-health-care-law-complicates.html?rh=1#storylink=cpy

No, they don’t have to be this complicated. Talk about jumping from the frying pan into the fire.

Prediction: Chaos

 

Read more here: http://www.newsobserver.com/2014/11/12/4317123_new-health-care-law-complicates.html?rh=1#storylink=cpy

 

Read more here: http://www.newsobserver.com/2014/11/12/4317123_new-health-care-law-complicates.html?rh=1#storylink=cpy
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