Americans who underestimated their income for 2014 when they applied for health insurance might see their tax refund reduced or eliminated completely, the Washington Examiner reports.
The Obama administration is warning taxpayers that they need to provide updates about changes in income, but the message doesn’t seem to be getting through.
“As time goes on, the ability to make adjustments diminishes,” Mark Ciaramitaro, H&R Block’s vice president of health care services told the Examiner. “Clients count on that refund as their biggest financial transaction of the year. When that refund goes down, it really has reverberations.”
Taxpayers who make use of tax credits to help pay health insurance premiums are at serious risk, since if income increases unexpectedly during the year, the tax credit could not only dry up completely, but instead reverse, leaving taxpayers with an additional bill.
In response to the confusion, the IRS is working on new tax forms to help facilitate insurance tax credits, but experts are finding that the forms will likely only make an already complex process even more convoluted. Some taxpayers will now have to make calculations month-by-month to keep on top of the process.
But regardless of how complicated the process is, at the end of the day, the IRS will still come collecting.
An adjusted repayment means that if your refund doesn’t cover the newly assessed figure, you will have to pay the IRS directly out of pocket.
“More than a third of tax credit recipients will owe some money back, and (that) can lead to some pretty hefty repayment liabilities,” George Brandes, vice president for health care programs at Jackson Hewitt Tax Service told the Examiner. There are currently seven million households with health insurance tax credits. The vast majority are unaware of any additional risks or liabilities associated with Obamacare.
Health and Human Services spokesman Aaron Albright says that the administration will only increase its efforts.
“They are not messing around,” Brandes added. While collection caps for the IRS do exist, they vary by household size, and for households making four times above the poverty line, those caps disappear.
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