Yesterday, I attended an event by Covered California where some top officials flew in from Sacramento to have a discussion about Covered California and current updates, concerns, tips for the last month of open enrollment.
It really bothered me when they mention there was over 700 registered agents in the area that was notified about this event, and only about 50 actually showed up. How are you supposed to give your clients the best possible help if you do not really understand what is happening.
I learned so much in this 3 hour session it should have been mandatory for all agents, there was a lot of valuable insights, tips, and recommendation we learned.
I spent quite a bit of time speaking with the Director of Sales for Covered California, Kirk Whelan.
The highlight, was when I was honored to be asked to give my insights on the tax implications this year with IRS and Affordable Care Act.
I have a unique insight being a licensed tax preparer and Certified Covered California Insurance Agent.
After the event, I was invited by the City of San Bernardino Employment & Training Agency, to speak and educate up to 30 of their field staff and Certified Enrollment Counselors for Covered California, to discuss what to they can expect this tax season, to discuss the 1095 forms that consumer will start getting any day, and to discuss more about tax implications, tax penalties, and subsidies.
Looking forward to speaking at this event. If you have any questions about how ACA could affect your taxes gives us a call 909-570-1103
Every year, millions of americans look forward to their tax refunds to go on vacation, pay some bills, make large purchases for the home, however, this year that will all be put on hold according to the IRS. It looks like Tax refunds could be delay until early fall!
The IRS could be forced to delay tax refunds next year if Congress doesn’t strike a deal on dozens of expired tax provisions by the end of next month, the agency’s commissioner said this week.
IRS chief John Koskinen said the agency might have to postpone the 2015 filing season if lawmakers don’t act any sooner on the expired tax provisions known as extenders.
The uncertainty over the fate of the extenders, Koskinen said, has already raised “serious operational and compliance risks.” The IRS is currently upgrading technology systems, offering new instructions to customer service staff and revising forms in preparation for the next filing season, Koskinen added.
“Continued uncertainty would impose even more stress not only on the IRS, but also on the entire tax community, including tax professionals, software providers, and tax volunteers, who are all critical to the successful operation of our nation’s tax system,” Koskinen wrote in a letter dated Monday.The Senate Finance Committee cleared a bipartisan bill this year that would revive most of the temporary tax breaks that expired at the end of last year through 2015 — including incentives with broad support such as the credit for business research, and more narrow provisions that help NASCAR track owners and Puerto Rican rum distillers.
Senate Republicans blocked that bill this spring as part of their broader fight with Democrats over floor procedure, but GOP senators predicted that a deal on the provisions would likely materialize in the lame-duck session after November’s elections.
House Republicans, on the other hand, have been trying to extend some of the provisions permanently, in particular the research credit and other tax breaks for business write-offs.
Senate Finance Chairman Ron Wyden (D-Ore.), who received Koskinen’s letter, said the IRS warning should prod lawmakers to quickly renew the expired provisions when they return to Washington just over a week after the elections.
“As the economy begins to show signs of strength, uncertainty from the federal tax code is the last thing American businesses and families need as they look to grow and invest,” Wyden said in a statement.
This is far from the first time the IRS has warned Congress about pushing back tax refunds. The agency delayed the 2014 tax season because of the previous year’s government shutdown, after pushing back the 2013 season to deal with the late passage of the fiscal cliff deal.
The problems for the filing season would be even more severe if Congress doesn’t reach an extenders deal before the end of 2014, Koskinen warned — “likely resulting in service disruptions, millions of taxpayers needing to file amended returns, and substantially delayed refunds.”
At Risk of Losing or Having to Pay Back Health Insurance Subsidies from Affordable Care Act
By STEPHANIE ARMOUR
Updated Sept. 29, 2014 9:26 p.m. ET
Americans in the hundreds of thousands may lose or have to pay back health insurance subsidies from Obamacare if they don’t meet a Tuesday deadline. WSJ’s Stephanie Armour reports. Photo: AP
WASHINGTON—Hundreds of thousands of Americans face a Tuesday deadline to verify their income and are at risk of losing or having to pay back their federal health-insurance subsidies under the Affordable Care Act.
The need for people to pay back the government could become a headache during next year’s tax season, when Americans are expected to pay back any subsidies they weren’t eligible for.
The Obama administration has told more than 300,000 individuals who obtained coverage through the federal HealthCare.gov site that they may lose some or all of the subsidies if they don’t provide additional income information that jibes with Internal Revenue Service data. That information includes tax returns, wages and tax statements, pay stubs and letters from employers.
Hundreds of thousands of people who obtained health coverage through state exchanges also have documentation issues and could potentially be getting subsidies they aren’t eligible for.
Enrollees whose income changed during the year but didn’t update their information could also owe the government if they received larger tax credits than they were entitled to. The owed amounts could total thousands of dollars, health policy experts say.
“Most people don’t know they even got advance tax credits,” said Mark Ciaramitaro, vice president, health-care services at tax preparer H&R Block Inc. “They are going to be surprised and need to know what just happened, and a lot of people will be frustrated.”
Individuals who signed up on HealthCare.gov for insurance and subsidies to lower their coverage costs were asked on their applications to estimate 2014 income and provide citizenship information. That information was checked against their 2012 tax returns. In some cases, the data didn’t match.
In addition to the roughly 300,000 people affected by the income verification, another 115,000 people may lose coverage on Tuesday because they didn’t provide requested documents verifying their citizenship or immigration status by a Sept. 5 federal deadline.
Collectively, more than 400,000 people who enrolled in health plans using HealthCare.gov have data-matching problems regarding their income or citizenship and immigration status.
“There are a lot of people counting on their refund to pay for Christmas charges, and instead they’ll be paying back their tax credit,” said Timothy Jost, a professor of health law at Washington and Lee University.
People accessing the Affordable Health Care Act website in December. Associated Press
White House officials pointed to the health law’s requirement that people who are proven to be ineligible for subsidies have to pay them back, but said additional guidance on how to do that will be provided later.
“Generally, individuals who enroll through the marketplace and receive advance premium tax credits will file federal income-tax returns and, at tax time, advance payments of the premium tax credit will be reconciled,” according to a statement from the Treasury Department.
Some experts say the repayment could be deducted from a tax refund, or consumers could have to write a check to the government if they don’t have a refund coming or it isn’t enough to cover what they owe.
Repayments may be limited to an amount between $300 and $2,500 for certain lower earners, according to the Internal Revenue Service. But higher earners may have to pay back the full amount.
Consumers who provide income data as requested by the federal government for Tuesday’s deadline may in some cases still wind up owing at tax time if they were previously getting incorrect subsidy amounts and the total is more than they are entitled to for the year, said policy experts.
The income inconsistencies are a politically thorny issue for the Obama administration. Republicans in Congress said during a June hearing that the system for verifying income and eligibility information through the federal marketplace was incomplete.
A report released in July by the Health and Human Services Department’s office of inspector general found that the federal marketplace sent notices to applicants requesting additional documents to resolve inconsistencies, but lacked the system capability to process them and resolve the mismatches.
Several state marketplaces reported federal data sources appeared at times not to be current or accurate. For example, one state marketplace said infants and young children included on applications were erroneously identified as incarcerated according to federal data, the OIG report said. The report looked at inconsistencies from October through December 2013.
But Aaron Albright, a spokesman for the Centers for Medicare and Medicaid Services, said a Treasury inspector-general report also in July showed the IRS was nearly 100% accurate in providing information on income to health-insurance exchanges.
“We are committed to keeping coverage affordable for the millions of Americans who depend on it, and to doing so in an efficient, transparent way that protects taxpayers,” said Mr. Albright.
The government initially wasn’t able to accurately determine the income of about 1.2 million households out of the 5.4 million individuals who obtained coverage through the site. Federal officials say the majority of cases of inconsistencies have been resolved.
About 85% of the more than eight million people who enrolled in private coverage through the ACA obtained premium subsidies, according to HHS.
Tuesday’s deadlines just apply to applicants who purchased coverage on the federal marketplace. But some states that set up their own exchanges for purchasing insurance are also requesting information.
In California, notices have gone out to consumers reminding them to update income changes online so there are no discrepancies at tax time, said Angelina Valencia, spokeswoman for Covered California, the state exchange. Letters went out to more than 290,000 families where the state may be awaiting income documentation or information about whether the family had a decrease or increase in its size, which could affect what they owe when they do their taxes.
Maybe you’re collecting more sales commissions in an improving economy. Or your spouse got a promotion. It could trigger an unwelcome surprise.
The danger is that as your income grows, you don’t qualify for as much of a tax credit. Any difference will come out of your tax refund, unless you have promptly reported the changes.
“If you got too much of a subsidy, consumers will see money coming out of their refund,” Meg Sutton, a senior advisor for tax and healthcare services at H&R Block, told CBS News.
The tax credits are available to individuals with household incomes between 100 and 400 percent of the federal poverty level, taking into account factors like family size. Nearly 7 million households have received subsidies, and major tax preparation companies say most of those consumers appear to be unaware of the risk.
“More than a third of tax credit recipients will owe some money back, and (that) can lead to some pretty hefty repayment liabilities,” said George Brandes, vice president for health care programs at Jackson Hewitt Tax Service.
Two basic statistics bracket the potential exposure:
The average tax credit for subsidized coverage on the new health insurance exchanges is $264 a month, or $3,168 for a full 12 months.
The average tax refund is about $2,690.
Having to pay back even as little as 10 percent of your tax credit can reduce your refund by several hundred dollars.
They will pay higher health insurance premiums for the rest of this year, but they can avoid financial pain come spring.
“As time goes on, the ability to make adjustments diminishes,” warned Mark Ciaramitaro, H&R Block’s vice president of health care services. “Clients count on that refund as their biggest financial transaction of the year. When that refund goes down, it really has reverberations.”
The Obama administration says it’s constantly urging newly insured consumers to report changes that could affect their coverage.
But those messages don’t drive home the point about tax refunds.
“What probably isn’t clear is that there may be consequences at tax time,” said Ciaramitaro.
Aaron Albright, a spokesman for the Health and Human Services department, said the administration plans to “ramp up” its efforts.
Concern about the complex connection between the health care law and taxes has increased recently, after the Internal Revenue Service released drafts of new forms to administer health insurance tax credits next filing season.
The forms set up a final accounting that ensures each household is getting the correct tax credit that the law provides. Various factors are involved, including income, family size, where you live and the premiums for a “benchmark” plan in your community.
Even experts find the forms highly complicated, requiring month-by-month computations for some taxpayers.
Taxpayers accustomed to filing a simplified 1040EZ will not be able to do so if they received health insurance tax credits this year.
— You may have heard that the IRS cannot use liens and levies to collect the law’s penalty on people who remain uninsured. But there is no limitation on collection efforts in cases where consumers got too big a tax credit. If your refund isn’t large enough to cover the repayment, you will have to write the IRS a check. “They are not messing around,” Brandes said.
— Health insurance is expensive, and with that in mind, the repayment amount the IRS can collect is capped for most people. For individuals making less than $22,980 the IRS can only collect up to $300 in repayments. That rises to $750 for individuals making between $22,980 and $34,470. For individuals making between $34,470 and $45,960, the cap is $1,250.
For families, the cap is double the amount that individuals can be charged, but the income thresholds vary according to household size. An IRS table may help simplify computation, which is based on the federal poverty levels for 2013.
— There is no collection cap for households making more than four times the federal poverty level. They face the greatest financial risk from repayments, because they would be liable for the entire amount of the tax credit they received.
Those income thresholds are $45,960 and above for an individual, $78,120 and above for a family of three, and $94,200 for a family of four. Ciaramitaro says people facing that predicament should try to minimize their taxable income through legal means, such as putting money into an IRA. The IRS says it will work with taxpayers who can’t pay in full so they understand their options.
— If you overestimated your income and got too small a tax credit for health care, the IRS will increase your refund.