Truth Frequency Radio
Jan 20, 2015

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Being a tax preparer for 30 years, it’s my job to research all of the changes in tax laws so that I can better prepare my clients for what to expect and how to plan their financial strategies, in order to pay the least amount of taxes allowable by law. This year, by far, will turn out to be the most complicated and the most expensive for taxpayers everywhere. Those who are used to preparing their own tax returns each year, will be unable to do so because of the complexity added to the tax code in regards to Obamacare. Many who expect a tax refund will be rudely awakened to the new reality. Most will be shocked by just how much it will cost them, over and above the high cost of yearly premiums. To add fuel to the fire, these additional taxes and penalties will be enforced by the Internal Revenue Service, an agency that few trust and even fewer believe in.

All of this comes at a time when the IRS has publicly stated that they will not be able to be as efficient and accommodating as in previous years. The agency has warned that refunds may be delayed and Customer Service phone lines may not be able to take calls from taxpayers as promptly as once done. Up until this year, the average wait-time for taxpayers to ask questions was four minutes. But because of Congressional budget cuts, that wait-time this year may be extended to 30 minutes. No one really knows how long it may take to process and issue refunds, but it has been implied that it WILL be longer than usual.

There are two main aspects contributing to all of the changes, complexity, and additional paperwork, one that has been expected and the other which is totally unexpected. First, is the penalties for not having health insurance. We were told that the penalty was only $95, so many opted to just pay the penalties because they could not afford the high cost of premiums. But that’s not completely true. That penalty of $95 is only for single taxpayers and is only part of the calculation. The actual penalty is $95 OR 1% of gross income, WHICHEVER IS GREATER. So, as long as you are single and make less than $9500 in gross wages, that is true. BUT, if you are single and make $25,000 in wages, YOUR penalty will be $250. If you are single and make $50,000, YOUR penalty will be $500. That same penalty increases for this tax year (2015) to $325 for a single person OR 2% of total gross income, WHICHEVER IS GREATER.  And of course, the penalties are higher if you are married, filing a joint return.

NO, THANK YOU!

The unexpected aspect of complications and an increase in taxes due, concerns the subsidies. If you make less than $46,680, you qualified for a subsidy to help you cover the cost of your premiums. Most of the almost 7 million taxpayers who qualified for the subsidy, based their anticipated income this year, on last year’s income. If, when actually filing their 2014 tax return, their income was more this year than they estimated, they’ll be required to pay back a portion, if not all, of the subsidies they received. This will result in a reduction of their refunds or a tax bill which must be paid to the IRS.

Half of Obamacare Subsidy Recipients May Owe Refunds to the IRS

As many as 3.4 million people who received Obamacare subsidies may owe refunds to the federal government, according to an estimate by a tax preparation firm.

H&R Block is estimating that as many as half of the 6.8 million people who received insurance premium subsidies under the Affordable Care Act benefited from subsidies that were too large, the Wall Street Journal reported Thursday.

“The ACA is going to result in more confusion for existing clients, and many taxpayers may well be very disappointed by getting less money and possibly even owing money,” the president of a tax preparation and education school told the Journal.

While the Affordable Care Act fines those who don’t have health insurance, it also provides subsidies for people making up to four times the federal poverty line ($46,680). But the subsidies are based on past tax returns, so many people may be receiving too much, according to Vanderbilt University assistant professor John Graves, who projects the average subsidy is $208 too high, the Journal reports.

Tax preparers, who frequently advertise their ability to deliver big refunds, have been working feverishly to avoid customer anger stemming from lower-than-expected refunds due to insurance premiums. They also are trying to make sure customers understand the potential fines for not having insurance.

“Eighty-five percent of our customers get a refund,” said Kathy Pickering, who directs the H&R Block Tax Institute, according to the Washington Post. “That refund could be offset by the penalty. And if that happens, they’re going to be understandably angry.”

Courtesy of: http://www.washingtonexaminer.com/half-of-obamacare-subsidy-recipients-may-owe-refunds-to-the-irs/article/2558106

MORE And MORE Costs

 

I have over 100 clients, many of whom fall into one of these categories. “Understandably angry” does not even begin to describe how most will feel after discovering how much of their refund will be kept by the IRS. They will be outraged and horrified and there will be little consolation I can offer. Most of them hate that the ACA was forced down their throats to begin with and this new wrinkle just adds insult to injury. The ONLY thing I can say is, “THIS is just part of the cost of government-run healthcare, I am sorry.”

~TERRY LEE~

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