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ObamaCare and tax refunds: an update after filing season

This is a follow-up to a post we did early last month on delays in tax refunds to people who used the Affordable Care Act (ACA) to get health insurance.

The IRS had to delay refunds to many of these taxpayers because the subsidies to encourage people to buy health insurance were structured as tax credits. As we noted in our March 6 post, this raised difficulties at tax time because the credits required estimating income - which is often not that easy to do.

In today's post, we will update you on what has happened to these taxpayers.

This week, the respected tax preparation service H&R Block reported that about 2 of every 3 people who got subsidies under the ACA (also called ObamaCare) ended up having to pay back part of the subsidy to the federal government. The average payback amount was $729.

This cut into the average refund for these taxpayers by a factor of one third. But given the complexity of the ACA, there was also some countervailing news. About 1 in 4 people who used the new law to get health insurance ended up getting a greater tax credit than they expected - in the average amount of $425.

So will Congress and the IRS have this all figured out in time for the next tax season?

A vice president at H&R Block suggested that the confusion is likely to remain unresolved for some time to come. This is not only because estimates of income can be inaccurate. It is also because, as the tax year goes on, taxpayers may experience life changes (marriage, divorce, birth of a child and so on) that affect their taxes and their ACA subsidies.

There is also the fact that a budget-strapped IRS has been limited in the resources it has committed for educating or assisting taxpayers with ACA compliance.

Source: The Hill, "ObamaCare credit reduced taxpayer refunds: H&R Block," Bernie Becker, April 27, 2015

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