H&R Block, Your Taxes, and ObamaCare

On December 9, business reporter Mark Davis posted an article up on the website of the Kansas City Star headlined “About 25 percent of H&R Block customers will ‘confront’ the Affordable Care Act”; the next day it appeared in the wood pulp version of the newspaper. Davis reported on a meeting in New York where H&R Block, the world’s largest tax services provider, told investor’s “that it sees the potential for significant growth in business thanks to the health care reform commonly called Obamacare.”

Inasmuch as Block bases “customer bills on the complexity of their returns, such as how many and which tax forms are involved,” does this mean that ObamaCare is going to make federal income taxes even more of a headache? For some taxpayers, the answer is yes (italics added):

There will be new tax forms to fill out, more documents to collect and more questions to answer, H&R Block chief financial officer Greg Macfarlane told investors.

“We will be charging for them this season,” Macfarlane said of the new tax forms required. “There is pricing opportunity for us here, for sure.” He did not divulge the amount of the fees to avoid tipping off competitors.

Block expects to gain customers from among taxpayers who currently do their taxes themselves […].

Macfarlane said current H&R Block customers and those who “sample” the company in the coming year will be more likely to remain customers because of Block’s skill in handling their first tax experience under the health care reform.

“And that situation will only get more complicated as the next few years unravel,” he said.

And who are these lucky people, some of whom have been able to prepare their income taxes themselves but must now pay a professional tax preparer? Well, some are the taxpayers who get tax credit subsidies. So if your income is so low that you need help from the feds to pay your ObamaCare health insurance premiums, you might have to start paying to have your income taxes done for you. Davis also reports: “The act also won’t allow some former users of Form 1040EZ to use that simple method to meet all the demands of the Affordable Care Act.” More complexity:

“Our surveys reveal a much messier reality,” [H&R Block vice president Mark Ciaramitaro] said.

For example, even households covered by health care through an employer or government provider can face a messy situation.

If everyone in a household has health coverage all year, the 2014 tax forms will allow the tax filer to check a box to say coverage was complete.

“If even one household member was not covered for any period of time, this check box cannot be used,” Ciaramitaro said.

He also outlined several potential impacts the act could bring in the coming months.

Many will need to document health care coverage and the amount of tax credit benefits received th[r]ough one of the exchanges. Those who received benefits will have to reconcile the amount of credits they received based on an estimate of their 2014 earnings with their actual income.

Taxpayers will need help with worksheets to figure out their “shared responsibility” for coverage under the act. Some will need assistance to navigate the “complicated maze” of exemptions to paying a penalty, he said.

What we’re considering here is the individual mandate and how it will impact the federal Individual Income Tax in 2014 and beyond. But the term “individual mandate” appears nowhere in the text of ObamaCare. In that law the term is “individual responsibility,” which appears 11 times. Also, there is not a single iteration of the term “individual shared responsibility,” which is the term now bandied about.

One can learn something about the impacts of the individual mandate at the IRS’s The Individual Shared Responsibility Provision, which features a short video starring John Koskinen, commissioner of our beloved IRS.

The term “marketplace” has been used ad nauseam, but that term also appears nowhere in the text of the law. Some committee in the president’s marketing department must have concluded that “exchange,” the term used in the law, was toxic. But what kind of market is it if one can buy only government-approved products and the government commands one to buy those products or pay a penalty? Well, it’s “the Marketplace.”

Now that I’ve got that off my chest, let’s turn to the impacts of ObamaCare on your taxes. Since Davis’s report, I’ve been checking www.irs.gov each day for the 2014 Form 1040. But with less than a week left in the year, the agency hasn’t gotten it out. However, the 2014 Form 1040EZ is out, and it has two more lines than in 2013 (lines 11 and 12). Line 11 reads: “Health care: individual responsibility (see instructions)” followed by a box to check for “Full-year coverage.” You’ll find out how to fill in Line 11 on page 18 of the instructions for the 2014 1040EZ. Page 18 tells you that if you or yours were without qualifying health insurance for any month during 2014, that you must see the instructions for Form 8965. But if you or your spouse are eligible for the “premium tax credit,” you cannot use the 1040EZ; you’ll have to use the regular 1040 or the 1040A.

So ObamaCare, just as Davis reported, will deny some taxpayers the option of using the 1040EZ, thereby complicating their tax returns. However, all taxpayers will rub up against ObamaCare when they do their taxes, not just the 25 percent that the Star headline mentions. Even taxpayers exempt from ObamaCare will have considerable complication added to their taxes.

The aforementioned Form 8965, “Health Coverage Exemptions,” is the new form that must be filed to get an exemption from having to buy ObamaCare health insurance. The instructions for 8965 were posted on Dec. 18, and if you’re in the market for an exemption you’re gonna love them. Exemptions are available through the Marketplace or the IRS (see Publication 5172). To find out more about exemptions, visit How to apply for an exemption at your exchange; uh, excuse me, I meant “the Marketplace.”

Form 8962, “Premium Tax Credit (PTC),” is the new form used to reconcile tax credits based upon the difference between your estimated income and your actual income. Form 1095-A, “Health Insurance Marketplace Statement,” is a new form needed to complete 8962, and it will be sent to purchasers of health care insurance. Form 1095-A tells us (italics added): “You must complete Form 8962 and file it with your tax return if you received premium assistance through advance credit payments (whether or not you otherwise are required to file a tax return).”

How much business will the tax preparation industry get from helping taxpayers comply with ObamaCare? After reading the IRS forms used for claiming exemptions, reconciling tax credits (subsidies), and figuring one’s “shared responsibility payment” (i.e. the tax figured on page 5 of the instructions for Form 8965), I can understand why H&R Block thinks ObamaCare presents a good business opportunity.

In 1955, brothers Henry and Richard Bloch founded H&R Block; it’s headquartered right here in Kansas City. The Blochs are a very fine old Kansas City family and they’ve been quite generous to our community. So I’m relieved that the company has diversified, because with genuine tax reform the tax preparation industry would be radically downsized.

The main reason that the tax preparation business exists is because of the Tax Code’s ungodly complexity, which ObamaCare is only adding to. Get rid of complexity, and the tax preparation business fades away. Just about everybody should be able to use the 1040EZ, but ObamaCare is taking us in the opposite direction.

Of course, the new business that H&R Block is expecting may not last for very long. That’s because the subsidies that Block plans to help taxpayers reconcile are at the heart of the upcoming case before the Supreme Court, King v. Burwell, and calling the exchanges “the Marketplace” isn’t going to save this sorry excuse of a law.

Happy New Year!

Jon N. Hall is a programmer/analyst from Kansas City.

On December 9, business reporter Mark Davis posted an article up on the website of the Kansas City Star headlined “About 25 percent of H&R Block customers will ‘confront’ the Affordable Care Act”; the next day it appeared in the wood pulp version of the newspaper. Davis reported on a meeting in New York where H&R Block, the world’s largest tax services provider, told investor’s “that it sees the potential for significant growth in business thanks to the health care reform commonly called Obamacare.”

Inasmuch as Block bases “customer bills on the complexity of their returns, such as how many and which tax forms are involved,” does this mean that ObamaCare is going to make federal income taxes even more of a headache? For some taxpayers, the answer is yes (italics added):

There will be new tax forms to fill out, more documents to collect and more questions to answer, H&R Block chief financial officer Greg Macfarlane told investors.

“We will be charging for them this season,” Macfarlane said of the new tax forms required. “There is pricing opportunity for us here, for sure.” He did not divulge the amount of the fees to avoid tipping off competitors.

Block expects to gain customers from among taxpayers who currently do their taxes themselves […].

Macfarlane said current H&R Block customers and those who “sample” the company in the coming year will be more likely to remain customers because of Block’s skill in handling their first tax experience under the health care reform.

“And that situation will only get more complicated as the next few years unravel,” he said.

And who are these lucky people, some of whom have been able to prepare their income taxes themselves but must now pay a professional tax preparer? Well, some are the taxpayers who get tax credit subsidies. So if your income is so low that you need help from the feds to pay your ObamaCare health insurance premiums, you might have to start paying to have your income taxes done for you. Davis also reports: “The act also won’t allow some former users of Form 1040EZ to use that simple method to meet all the demands of the Affordable Care Act.” More complexity:

“Our surveys reveal a much messier reality,” [H&R Block vice president Mark Ciaramitaro] said.

For example, even households covered by health care through an employer or government provider can face a messy situation.

If everyone in a household has health coverage all year, the 2014 tax forms will allow the tax filer to check a box to say coverage was complete.

“If even one household member was not covered for any period of time, this check box cannot be used,” Ciaramitaro said.

He also outlined several potential impacts the act could bring in the coming months.

Many will need to document health care coverage and the amount of tax credit benefits received th[r]ough one of the exchanges. Those who received benefits will have to reconcile the amount of credits they received based on an estimate of their 2014 earnings with their actual income.

Taxpayers will need help with worksheets to figure out their “shared responsibility” for coverage under the act. Some will need assistance to navigate the “complicated maze” of exemptions to paying a penalty, he said.

What we’re considering here is the individual mandate and how it will impact the federal Individual Income Tax in 2014 and beyond. But the term “individual mandate” appears nowhere in the text of ObamaCare. In that law the term is “individual responsibility,” which appears 11 times. Also, there is not a single iteration of the term “individual shared responsibility,” which is the term now bandied about.

One can learn something about the impacts of the individual mandate at the IRS’s The Individual Shared Responsibility Provision, which features a short video starring John Koskinen, commissioner of our beloved IRS.

The term “marketplace” has been used ad nauseam, but that term also appears nowhere in the text of the law. Some committee in the president’s marketing department must have concluded that “exchange,” the term used in the law, was toxic. But what kind of market is it if one can buy only government-approved products and the government commands one to buy those products or pay a penalty? Well, it’s “the Marketplace.”

Now that I’ve got that off my chest, let’s turn to the impacts of ObamaCare on your taxes. Since Davis’s report, I’ve been checking www.irs.gov each day for the 2014 Form 1040. But with less than a week left in the year, the agency hasn’t gotten it out. However, the 2014 Form 1040EZ is out, and it has two more lines than in 2013 (lines 11 and 12). Line 11 reads: “Health care: individual responsibility (see instructions)” followed by a box to check for “Full-year coverage.” You’ll find out how to fill in Line 11 on page 18 of the instructions for the 2014 1040EZ. Page 18 tells you that if you or yours were without qualifying health insurance for any month during 2014, that you must see the instructions for Form 8965. But if you or your spouse are eligible for the “premium tax credit,” you cannot use the 1040EZ; you’ll have to use the regular 1040 or the 1040A.

So ObamaCare, just as Davis reported, will deny some taxpayers the option of using the 1040EZ, thereby complicating their tax returns. However, all taxpayers will rub up against ObamaCare when they do their taxes, not just the 25 percent that the Star headline mentions. Even taxpayers exempt from ObamaCare will have considerable complication added to their taxes.

The aforementioned Form 8965, “Health Coverage Exemptions,” is the new form that must be filed to get an exemption from having to buy ObamaCare health insurance. The instructions for 8965 were posted on Dec. 18, and if you’re in the market for an exemption you’re gonna love them. Exemptions are available through the Marketplace or the IRS (see Publication 5172). To find out more about exemptions, visit How to apply for an exemption at your exchange; uh, excuse me, I meant “the Marketplace.”

Form 8962, “Premium Tax Credit (PTC),” is the new form used to reconcile tax credits based upon the difference between your estimated income and your actual income. Form 1095-A, “Health Insurance Marketplace Statement,” is a new form needed to complete 8962, and it will be sent to purchasers of health care insurance. Form 1095-A tells us (italics added): “You must complete Form 8962 and file it with your tax return if you received premium assistance through advance credit payments (whether or not you otherwise are required to file a tax return).”

How much business will the tax preparation industry get from helping taxpayers comply with ObamaCare? After reading the IRS forms used for claiming exemptions, reconciling tax credits (subsidies), and figuring one’s “shared responsibility payment” (i.e. the tax figured on page 5 of the instructions for Form 8965), I can understand why H&R Block thinks ObamaCare presents a good business opportunity.

In 1955, brothers Henry and Richard Bloch founded H&R Block; it’s headquartered right here in Kansas City. The Blochs are a very fine old Kansas City family and they’ve been quite generous to our community. So I’m relieved that the company has diversified, because with genuine tax reform the tax preparation industry would be radically downsized.

The main reason that the tax preparation business exists is because of the Tax Code’s ungodly complexity, which ObamaCare is only adding to. Get rid of complexity, and the tax preparation business fades away. Just about everybody should be able to use the 1040EZ, but ObamaCare is taking us in the opposite direction.

Of course, the new business that H&R Block is expecting may not last for very long. That’s because the subsidies that Block plans to help taxpayers reconcile are at the heart of the upcoming case before the Supreme Court, King v. Burwell, and calling the exchanges “the Marketplace” isn’t going to save this sorry excuse of a law.

Happy New Year!

Jon N. Hall is a programmer/analyst from Kansas City.