Tax refunds may get hit due to health law credits


#1

CAVEAT:

Everybody who has posted (or lurked) here for more than 5 minutes knows that I am EXTREMELY anti-Obamacare. I see that it has done utterly nothing to help the common good in this country and, to the contrary, has done incredible damage to this country – we have barely scratched the surface as far as seeing the damage done to our society as a result of this abortion.

That is not the reason I’m posting this particular thread.

From the AP:

Taxes? Who wants to think about taxes around Labor Day?

But if you count on your tax refund and you’re one of the millions getting tax credits to help pay health insurance premiums under President Barack Obama’s law, it’s not too early.

Here’s why: If your income for 2014 is going to be higher than you estimated when you applied for health insurance, then complex connections between the health law and taxes can reduce or even eliminate your tax refund next year.

Maybe you’re collecting more commissions in an improving economy. Or your spouse got a better job. It could trigger an unwelcome surprise.

I post the above article as a heads-up for folks. If your actual income appears to be higher than the income you predicted as part of your “Exchange” application, you may end up with a really, really nasty surprise, particularly if your income rises to be over 400% of the federal poverty level (if you are over 400% of the FPL, you lose all eligibility for any affortable health tax credits).

If you are getting Obamacare “subsidies” (which are actually tax credits that are “advanced” to you and must be reconciled when you file your tax), you need to check your income now and make sure that you won’t earn more than you anticipated at the beginning of the year (or that you are prepared to pay back the excess advance premium tax credit that you received throughout the year). See line 46 of this draft 1040:

i.imgur.com/l3d75bW.png

You may also want to study the draft Form 8962 (Premium Tax Credit) to see what kind of documentation you will need to have…

I would normally rant about this time, but I am simply trying to make this particular post as a public service to those of you who receive Obamacare subsidies. You want to check now so that you are prepared when it comes time to file taxes next year…otherwise you might be in for a really, really nasty surprise.


#2

Thanks for (1) sparing us the rant and (2) making people aware of this potential “gotcha” in the tax code. You’re probably correct that many folks are ignorant of the way this tax credit works. As you say, it could result in a nasty surprise come tax time for those who underestimated their income for the year.

On the other hand, for someone who OVER estimated their income for the year, it could result in a lower tax liability, a larger refund, and a very welcome surprise.


#3

On the bright side, Obamacare is a sure winner for professional tax preparers. Low income people who previously had very simple returns will be lined up around the block.

After all these years, we still don’t know what’s in it.


#4

See. He told you it would stimulate the economy. :thumbsup:


#5

Lord have Mercy, God Bless, Memaw


#6

That is true. I will continue my love/hate relationship with the IRS.


#7

And I will continue my hate/hate relationship with the IRS.


closed #8

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