When the Affordable Care Act (aka “Obamacare”) was fully rolled out, people knew that it would likely make filing tax returns more complicated. What they weren’t counting on was complications due to widespread errors. Yet it was recently reported that about 800,000 Americans who obtained insurance coverage through the federal exchange were sent incorrect statements about their coverage from 2014.
The botched 1095-A tax forms relate to tax credits individuals should receive based on local premiums. Because calculations were based on estimated annual income, some Healthcare.gov enrollees are entitled to a larger refund, while others must reimburse the government (either through owing money or taking a smaller return) because they received an overly generous credit.
Although the incorrect IRS tax forms are certainly a headache, there is some good news for people who have already filed returns using the erroneous documents. The government recently announced that around 50,000 timely tax filers will not have to pay additional taxes if their corrected forms show that they owe more money than they paid. Those early filers who overpaid will have a chance to apply for a larger refund, however.
This will probably not be the last snag in implementing the Affordable Care Act, which has had many technical problems in addition to stubborn political opposition (remember the debacle related to the website where many Americans tried to sign up for coverage?). Hopefully, as the ACA becomes a more established institution, officials will be able to reduce errors and smooth out any remaining tax issues.
Source: The Wall Street Journal, “IRS Won’t Collect Additional Taxes From Filers Who Used Incorrect Forms,” Stephanie Armour, Feb. 24, 2015