Much of the strategy of getting Obamacare passed in the first place was to put off the pain until the elections were over. That was a no-brainer for the cynical politicians who wanted to saddle us with something nobody understood, but put off all the nasty features until it was too late to scrap the whole idea.
People started seeing how much the new health care laws were going to cost them in higher premiums and lower deductibles last year. Now let’s look at how much more of a pain Obamacare is going to make filling out your 1040.
First, there is the insurance penalty. Although the returns are not ready yet, they will have a box to check with a question like “Do you have health insurance?” If you don’t (and answer honestly) then you will have to calculate the penalty. By the way, it is no coincidence that Congress decided to make the IRS the “penalty” collector -or is it a “tax”? Either way, penalties and interest backed by jail time is the very big stick hanging over your head for not reporting.
The penalty is calculated simply enough: Take the lesser of $95 per non-insured adult and $47.50 for each child under 18; or $285. Then, pay the greater of this amount or your household income minus $10,150 if filing single or $20,300 for married filing jointly. However, your penalty can’t exceed the “national average bronze level premium,” which might be around $2,500 -nobody seems sure. This penalty is supposed to go up each year.
Then there is the investment income tax: 3.8%. This can be a significant tax that is added to investment income. This was actually due on last year’s income tax return, but went unnoticed by many since you need $200,000 to $250,000 of modified adjusted gross income (in most cases) before the tax kicks in. With the market doing better this past year, many people will start to feel this tax.
Finally, the is the premium tax credit. For people who qualified in the exchanges for a premium credit, they need to understand that the credit was an estimate. Many people who have been used to doing a simple 1040 will now find they are required to file a Form 8962. This is the case for taxpayers who receive a 1095-A as the result of taking part in an exchange, which is supposed to go out by January 31. According to Forbes Magazine “H&R Block estimated that up to one half of the approximately 6.8 million taxpayers who got subsidies in 2014 may have to send money back to the government.”
Won’t that be a pretty picture? People who got subsidies to afford (Affordable Care Act, remember?) insurance, may have to pay back part of the subsidies. As a final blow, the Supreme Court may decide that the exchanges set up in states were not valid. If that happens, the credits that people received would likewise be invalid. Then what?