IRS created tool to calculate Obamacare repayments, didn’t share with public
The Internal Revenue Service developed an online tool that would have helped Americans who received health insurance subsidies under the Affordable Care Act to better calculate their tax bills, but opted not to share that information with the public, according to a new report from the U.S. Treasury Department’s Office of the Inspector-General.
In case you missed the news, 2015 tax-filing season was something of a fustercluck all around, as tens of thousands of Obamacare subsidy recipients were stuck with tax bills that were massively more than they expected. This past year marked the debut of the federal Advance Premium Tax Credit, intended to help modest-income Americans without workplace health insurance and who don’t qualify for Medicaid to purchase coverage through the Obamacare exchanges. However, because APTC adjustments are based on what a taxpayer projects his or her income will be over the course of the year, those who undershoot the figure are required to pay back some or all of the subsidy when they file their annual returns.
It turns out this is no small problem. According to H&R Block, fully two-thirds of tax filers who received the subsidy had to return some of it to the IRS. The average payment for that cohort, the company found, was $729. That’s nothing to sneeze at, given that the 2014 income guidelines would limit subsidies to individuals making between $11,770 and $47,080. Separate research by the Kaiser Family Foundation found that half of all subsidy recipients ended up having to pay something back to the government.
The IG’s report reveals that the IRS recognized the instructions for figuring out this so-called “shared responsibility payment” were so complicated that it had to develop an online tool to help its own examiners to calculate it. It just opted not to share that tool with the taxpayers who actually would be asked to comply with the rules and cough up the dough.
IRS management informed us that they decided not to provide taxpayers an online SRP calculator because approximately 80 percent of individual taxpayers use tax preparation software to file their tax return. IRS management stated that they partnered with tax return software providers to ensure that their software accurately computes the SRP and developed a detailed worksheet in the Form 8965 instructions to assist taxpayers in computing the SRP.
While we understand the IRS’s decision to partner with the tax return software provider community, we also believe the IRS has an obligation to provide the same level of assistance to all taxpayers, including those who file paper tax returns.
The report notes the agency is currently “reevaluating” whether to make the tool public in the future.
Subsidy repayment wasn’t the only nasty Obamacare surprise for taxpayers this year. H&R Block also found broad confusion about the penalty for failing to comply with the individual mandate. While many assumed they would be hit with a $95 fee, which was the figure most commonly reported in the press, the law actually sets a variety of potential penalties depending on income and family size. The company reported the average penalty paid was actually $178.
In 2016, the flat fee will rise to at least $325. For a family of four who earns $60,000, the penalty for failing to have coverage will be about $975. Mark Ciaramitaro, vice president of H&R Block health care and tax services, noted in a statement:
This season saw general ACA-related confusion, incorrect or delayed 1095-A information documents, and overall anxiety regarding refund impacts…With many taxpayers now receiving coverage documentation, more taxpayers who will experience APTC reconciliation and the doubling of penalties, unfortunately we should expect taxpayer anxiety and confusion to continue next year.
You can say that again.
