If you receive a subsidy for your insurance through a health care exchange, and then get a divorce or lose a spouse, expect a visit from the IRS:
Obamacare’s rollout dented the Department of Health and Human Services in just the first month. Up next year: the Internal Revenue Service.
A key piece of the health care law gives Americans making less than 400 percent of the poverty line subsidies to buy insurance. But if buyers don’t alert the insurance exchanges to big life changes throughout the year — like a divorce, promotion or new job for them or a spouse— they could wind up with sticker shock at tax time.
It’s a new responsibility for this group — many of whom are just struggling to sign up.
The IRS, for its part, must make sure consumers don’t get blindsided — or it will face a bunch of angry taxpayers who didn’t realize they would owe Uncle Sam money back, tax experts said.
“If I were the IRS, I would be very concerned that I’m going to be viewed as the villain when people have to pay back money the government gave them for health insurance,” said Chris Condeluci, who was Senate Finance Committee GOP tax counsel during drafting of the Affordable Care Act.
There is time. Potential “repayments” to the government will not come due until 2015, when recipients file next year’s taxes. But the new rule for reporting these life changes begins this January.
But there might be good news: If a recipient’s income were to fall and it wasn’t reported, the recipient could get a nice, fat check because he or she would be owed a larger Obamacare tax credit than was received.
Right now, the IRS does explain the issue on its website, but consumers would have to be looking for the information to find it.
All experts interviewed on the topic worried that most tax credit recipients do not have a clue about the new reporting responsibilities, noting that even policymakers are still trying to grasp how the process works.
Hat Tip: Pat Dollard