you got a subsidy? Pay up!!!

I have been forecasting for 6 months that this tax season will be a mess- with alot of screaming.  Those people that registered without professional advise or guidance and got subsidies will end up owing the government.  I have said this is because (1) they accidentally underestimated their income, (2) they deliberately underestimated their income to get a lower premium, (3) the self-employed cannot accurately predict their income using a crystal ball,  and (4) they failed to report significant income changes to the IRS when they happened as required.

A January 1 article in the Wall Street Journal has some disturbing findings.  While the fines for not having health insurance last year kick in during this years tax season, it is expected to be “lightly enforced” due to “reduced staffing at the Internal Revenue Service.”  The IRS is “entrusting customers to answer honestly if they had health insurance or need to pay a penalty.”  They further acknowledge that “there is little to stop a filer from…” lying about having coverage, as there is no mechanism in place to verify their claim.

“Meanwhile, millions of Americans who got subsidies under the law may find that are getting smaller-than-expected refunds or owe the IRS because credits they received were too large.  As many as half of the roughly 6.8 million Americans who got subsidies may have to refund money to the government based on one estimate by tax firm H&R Block Inc.” (Emphasis added)  The estimate is the average amount would be about $208.