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Refunds delayed for many who signed up for Obamacare tax credits

The IRS has had to delay refunds to many people who signed up for health insurance under the new law.

In this post, we will inform you about issue, which affects tens of thousands of taxpayers.

Much of the controversy surrounding the Affordable Care Act (ACA or Obamacare) originally centered on the so-called “individual mandate.” This refers to the requirement to buy health insurance that applies to those who do not have coverage at work or under a family member’s plan. When Congress passed the ACA in 2010, it directed the IRS to impose penalties on these people through the tax code.

Those penalties are only part of the reason that refunds are being delayed. The aspect of the ACA that is especially causing refund delays is the peculiar way that the subsidies to help people buy health insurance were structured.

These subsidies took the form of tax credits, for which recipients were required to estimate their income. But estimating income is not that easy to do for many people.

If you received a subsidy to purchase a health policy under the ACA but underestimated your income, you may have to pay part of the subsidy back. Or, if you overestimated your income, you may get a bigger refund than you expected.

Either way, the result is additional review for many tax returns involving ACA tax credits. The compliance headaches for taxpayers forced to fill out the convoluted Form 8962 to calculate the tax credits were already a problem. We discussed that in our February 25 post.

Now the latest wrinkle is a delay in refunds – a delay about which the IRS is less than forthcoming. National Taxpayer Advocate Nina Elson says the IRS has instructed its employees who answer telephone inquiries about refunds to not give taxpayers a reason for the delay.

Source: CNN Money, “IRS delaying refunds for thousands of Obamacare enrollees,” Mar. 3, 2015

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