Study: More than 3 million taxpayers will owe IRS for Obamacare subsidy overpayment

A study by tax preparation specialist H&R Block estimates that as many as 3.4 million Americans will have their refunds trimmed or owe the IRS extra taxes due to faulty calculations of the Obamacare subsidy received by consumers.

A similar number will have received less in subsidies than they were eligible for and will see their refund increase.

But the bottom line this tax season is mass confusion and complexity.

Wall Street Journal:

Meanwhile, millions of Americans who got subsidies under the law may find they are getting smaller-than-expected refunds or owe the IRS because credits they received to offset their insurance premiums were too large. As many as half of the roughly 6.8 million Americans who got subsidies may have to refund money to the government, based on one estimate by tax firm H&R Block Inc.

“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,” said Charles McCabe, president of Peoples Income Tax and the Income Tax School, a Richmond, Va., provider of tax preparation and education. “The whole implementation of Obamacare will be frustrating for tax preparers.”

But the season could be a lucrative one for tax firms. Liberty Tax Service, a tax-preparation franchise, began calling hundreds of thousands of customers in November to invite them to a store to get help applying for an exemption to the insurance-coverage requirement. About half of the company’s 4,000 stores opened weeks ahead of their usual start date to provide health-law tax advice.

The IRS also is expecting more calls from consumers at a time when congressional funding for the agency has dropped nearly $1 billion since fiscal 2010, and its workforce has 13,000 fewer full-time employees than it did in 2010. Congressional Republicans opposed to the health law have said limiting the IRS’s budget is one way to slow the law’s implementation, including in last month’s budget agreement for the remainder of fiscal 2015.

IRS Commissioner John Koskinen , in a November speech, said his agency’s reduced funding would hamper its ability “to provide the level of taxpayer services that the public has a right to expect.”

Jazz Shaw of Hot Air observes that this confusion is not a one-off; it's going to happen every year.

As long as you are unable to predict what your medical requirements will be and the rules keep changing from year to year, there will be no effective way to plan for precisely what your costs will be and how the reimbursements will affect you come tax time. As the author notes, it might be better if the law was even worse, as long as it was consistently worse.

In any event, if you know anyone who is enrolled in Obamacare, you might do them a favor and tell them to set aside a few extra dollars from their paychecks between now and the middle of April. Apparently they’ll need it when the tax man cometh.

Except for the bonanza for tax prep firms who will be busy helping bewildered taxpayers with filling out the forms correctly, the confusion will only make it easier to overturn Obamacare.  Who wants to go through this nightmare every year?  The whole rotten edifice of Obamacare needs to be torn down and replaced with sensible market-based reforms that will actually bring down the cost of insurance and health care.

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