Tag Archives: tax return

Obamacare and taxes: Full employment for H&R Block

H&R Block Out to Help Americans’ Resolve to Tax Preparation – Video – TheStreet.

If you’re on Obamacare, and especially if you are receiving a subsidy or intend to claim it on your tax return, things just got complicated. No more 1040EZ if you’re in subsidy land.

No doubt, Obamacare is a full employment service for H&R Block and other tax preparation services.

Share

Received a subsidy? Visit a tax preparation service

Latest Tax Season Headache? Obamacare – Bloomberg View.

There’s been a lot of talk about the “hidden taxes” in the Affordable Care Act, but here’s one I hadn’t thought of before or seen mentioned anywhere: the sudden need for folks with simple tax returns to avail themselves of the services of a paid professional. If you have no income outside a modest salary, and not much in the way of potential deductions such as huge mortgage interest or state tax bills, then there was really no reason to use a tax preparer. Even the mathematically challenged should, with the aid of a calculator, be able to fill out their 1040EZ forms just fine. But Obamacare has introduced a significant level of complexity into the taxes of lower-middle-class wage earners. More of them are going to need an accountant to negotiate the process — or risk owing the government hundreds of dollars because they didn’t fill out the forms correctly.

The money doesn’t go to the government, of course, but in many ways this looks like a tax: Suddenly, people with simple incomes are going to need to pay a significant sum to keep themselves out of trouble with the IRS. This tax will be extremely regressive, because the people most likely to be hit by it are people whose incomes are (or have been) low enough to qualify for subsidies.

That’s not to say that these people are worse off because of Obamacare. For one thing, lower-middle-class workers have always historically used tax preparation services more than they really should, because they really need their refunds and they’re worried about getting it wrong. But it is one more symptom of the law’s Byzantine complexity that new costs keep popping up just where voters least expect them. (all emphasis added)

Goodbye 1040EZ, hello tax complications for those who can least afford it. Rube Goldberg I say.

Oh, the publically traded tax firms are H&R Block and Liberty Tax Services.

 

Share

The Obamacare tax man cometh: Will you be ready?

The Obamacare tax man cometh: Will you be ready?.

While more than 75 percent of filers are expected to have no problem complying with a new disclosure requirement, millions of others could face a time-consuming, complicated process to determine if they owe the government money or are owed money in connection with subsidies they received to help pay for their Obamacare health insurance plans.

If peoples’ annual incomes were higher than they first estimated when they applied for those subsidies, they will owe money back to the government. The reverse is true if their incomes were lower than estimated. About 85 percent of the 6.7 million paying Obamacare customers as of October were receiving subsidies, and research suggests that many of them could have had income swings during the year.

Millions of other people will be trying to figure out during tax season if they qualify for one or more of a slew of exemptions from the Obamacare mandate that they have health insurance during 2014 or face a fine.

Resources:

Share

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
Share

Thanks Obamacare: 3 Tips for Filing Taxes

CMS (Center for Medicare and Medicaid Services) has come out with a helpful document titled: 3 Tips About Marketplace Coverage & Your Taxes

The tips are:

  1. Watch your mail for Form 1095-A. It will help you file your 2014 federal taxes.
  2. Your final premium tax credit for 2014 will be computed with your federal income tax return. Use Form 8962
  3. If you didn’t have health coverage for part of 2014, use Form 8965.

The complexity is mind boggling. If you are receiving a subsidy, say goodbye to Form 1040EZ. Have a problem, call your Washington legislatures.

Download (PDF, 165KB)

 

 

Share

Coming soon to subsidy receivers: A more intimate relationship with the IRS

Obamacare Unleashes IRS on Americans | Policy Paper | Senate Republican Policy Committee.

 

 

 

 

The Penalty:

Early next year, the IRS will begin collecting revenue from Obamacare’s individual mandate tax penalty. Americans who fail to obtain insurance that complies with numerous Washington mandates – and who fail to qualify for an exemption from the individual mandate – face penalties of $95 ($285 per family) or one percent of household income, whichever is greater. To collect this penalty, the IRS will target people’s tax refunds.

Subsidy Reconciliation:

The IRS also plays a key role in implementing Obamacare’s complicated subsidy scheme. The health care law authorizes tax credits for people in households with income between 100 percent and 400 percent of the federal poverty level, who can’t get insurance through work or through a government program, and who reside in states that established their own exchanges. In 2012, the IRS issued an illegal rule that also extended these tax credits to people in states that use the federal exchange. (Ed note: The Supreme court will decide  if federal exchange subsidies are legal)

Form 8962 for subsidy reconciliation:

Form 8962 allows households that claim a premium tax credit to calculate the correct tax credit amount and the amount that will need to be reconciled. The form has 36 lines for entry and will require filers with any change in coverage during the year to fill in 72 boxes (six boxes per month). Altogether, Form 8962 has 95 boxes for entries for single filers and 133 boxes for entries for married filers with two dependents. People who previously used IRS’s short form (1040EZ) to file their return, and who receive credits this year, will need to switch to the more complicated long form (1040 or 1040A).

Instructions for Form 8962 consist of 15 pages of complicated terminology and worksheets that will take the average tax filer hours to understand, will be incredibly frustrating, and will undoubtedly result in many inaccuracies. . Because of the convoluted structure of Obamacare’s subsidy scheme, the instructions have to explain how tax filers should allocate tax credits under certain conditions and how they should correctly calculate tax credits if household size changes during the year, such as through marriage, divorce, birth of a child, or death of a family member. Despite their length, the instructions fail to provide directions for filers to figure out whether offered employer coverage satisfies Obamacare’s minimum essential coverage requirement.

Taxpayers who claim one of the 19 exemptions from the individual mandate must file Form 8965 with the IRS. As many as 23 million Americans may have to file a Form 8965 for the 2014 filing season. The form has 21 boxes for entries for single filers and 78 boxes for entries for married filers with two dependents. Instructions for Form 8965 take 12 pages and contain five worksheets. One tax expert told Politico, in an August 11 article, that the application requirements for some of the exemptions are “hopelessly complex.” Liberal supporters of the law agreed, telling the paper: “The folks who are helping consumers are reeling. A consumer can’t be expected to understand this.”

You can call this a Republican “hack job” but unfortunately most Republican protestations that have been ridiculed by the legacy media and Democrats have turned out to be largely truthful.

Prediction: Chaos

Share

ALERT: Obamacare Trifecta: Subsidy, Penalties and Taxes

Affordable Care Act’s Tax Effects Now Loom for Filers.

For most taxpayers, this will simply mean checking a box on a tax return indicating they had insurance for the full year. But millions of others will have to grapple with new tax forms and calculations that may generate unexpected results.

For instance, most of the 6.7 million people who bought insurance through the exchanges received subsidies, which reduced their monthly premiums. But those subsidies were based on previous years’ income — so people whose incomes have changed will inevitably have to pay some of that money back, while others may receive fatter refunds.

I’m not sure why they say a subsidy was based on someone’s previous years income. The subsidy is based on the applicant’s ESTIMATE of his income for the tax year in question. Also, it’s not clear to me that “most” of the 6.7 million people received subsidies on a monthly basis or received subsidies at all.

The subsidy you receive is reconciled on your tax return to determine if you receive too much, too little or if the account was just right….

RECONCILING People who bought subsidized insurance on the exchanges received what is actually an advance on a tax credit. Since the amount of help taxpayers received was based on 2012 income (Ed note – simply not true), it will need to be reconciled against what they actually earned in 2014 — particularly if they earned more or less and did not update their income data on the exchange.

Some people will be surprised that they must pay some of that money back, or at least have it deducted from what they would have received in a refund. Conversely, people who earned less money in 2014 — and who received subsidies that were too small — may receive money back. Changes in life circumstances — a divorce, marriage, a new child — can also affect those numbers.

“This is the part that can be very complex,” said Kathy Pickering, executive director of the Tax Institute at H&R Block. “People think of the tax credit as a discount on their premium. But realizing it can be something you repay a portion of is going to be a surprise.” (emphasis added)

Let me get this straight, we have a very complex tax return for the lower income portion of the population. Can you spell “RECIPE FOR DISASTER?”

The article also discussed the Obamacare penalty for not having compliant coverage.

Share