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Figuring out how much you owe: Obamacare complicates calculations

One of our recurring themes in this blog is how complexity of the tax code tends to make compliance difficult.

The specific issue for you may be withholding, estimated taxes or some other aspect of the voluminous tax code. The point is that, the way the code is set up, it is often no easy to task to figure out how much you owe.

In this post, we will discuss concerns that the receipt of subsidies to buy health insurance under the Affordable Care Act might make the problem even worse for many people.

As CBS MoneyWatch noted last week, the Affordable Care Act (ACA or Obamacare) affects the taxes of about 20 million people this year. For one thing, if you do not have health insurance and did not buy it under the ACA, you could be hit with a tax penalty. This could also happen if you had a lapse in coverage of more than three months.

But this is not the only way that the ACA can affect your taxes. There are also many people who received subsidies to buy health insurance who must now try to account for those subsidies on their taxes.

The government calls these subsidies “advance premium tax credits,” and it is expecting taxpayers to determine the value of the credit by completing a complicated form. This form is called Form 8962.

Formerly, many people who received ACA subsidies may not even have had to file taxes because they had too little income. But now the need to account for ACA tax credit may force the filing of many more returns. Of the approximately 6 million people who received tax credits, about half may end up having to reimburse the IRS for part of the cost.

This will not only put pressure on individual taxpayers who were previously unburdened by IRS paperwork. It will also put pressure on the IRS itself to process all that work. For an agency that has been struggling with budget cuts, that is hardly welcome news.


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