Surprise! Why the ACA is causing taxpayers unexpected dismay

Many households will be greeted to a ‘nasty tax surprise’ this season

Insurance News

By

Tax season is already dreadful for most Americans, and because of the Affordable Care Act (ACA), it may soon become worse for certain segments of Obamacare enrollees.
 
In particular, half of all households that were awarded federal subsidies to help pay for health insurance will owe money to the federal government this tax season, according to a new study issued by the Kaiser Family Foundation.
 
The sums will be hefty. 
 
These households will be required to pay $794 on average back to the government, since their annual income surpassed what they estimated when completing the application for subsidies, CNBC reports.
 
In addition, there’s another group of households that will owe an even greater amount, because they were paid too much to quality for subsidies in the first place.  These enrollees will owe between $2,306 and $3,837 on average, but the actual amount could be much more since this income bracket faces no limits on repayment.
 
This is not to say low-earners have it easy, though.  In this demographic, households that owe money will need to pay back $667 on average.
 
"None of these amounts are insignificant," Gary Claxton, co-author of the study, told CNBC.  “Some people are not going to know this was coming.”
 
While 90% of Obamacare customers were eligible for federal subsidies last year, four in 10 Americans remain unaware that recipients could be required to pay some of that assistance back to the federal government.
 
On the flip side, however, 45% of households will be owed a refund because they should have received more credits than they actually received.
 
In order to prevent similar fiascos in the future, Claxton believes that agents should inform individuals that any adjustments in income that stray from initial estimates need to be reported to the exchange in order to avoid potential tax penalties.
 
"Maybe more information is needed so people know when they signup what the expectation is, and that it really is important that they stay on top of any changes," he told CNBC.
 
 
 
 

Keep up with the latest news and events

Join our mailing list, it’s free!