September 18, 2014 Email Print Free Newsletter RPC // Obamacare Unleashes IRS on Americans Federal Information & News Dispatch, Inc. September 18, 2014 Obamacare Unleashes IRS on Americans Over the past month, the IRS released drafts of seven new tax forms it will use to monitor Americans compliance with Obamacares individual and employer mandates, as well as the laws complicated subsidy scheme. Together, these forms take 13 pages and contain 206 lines for entries. Instructions for five of these forms make up another 19 pages - the IRS has not yet posted the instructions for the other two forms. Even many of the laws most ardent supporters describe the forms as complex and dense. New IRS paperwork burden The president has requested that the IRS receive nearly half a billion dollars in fiscal year 2015 to implement Obamacare. In contrast, genuine, consumer-based reform would have improved the countrys health care system without increasing the IRSs power, complicating the tax code, and raising compliance costs for taxpayers. IRSs Outsized Role in Enforcing Obamacare Obamacare dramatically increased the size and power of the IRS - an agency shown over the past year to be untrustworthy and partisan - and its role in the American health care system. For starters, over the next decade, Obamacare hiked taxes by more than $1 trillion, through more than 20 tax increases. The IRSfaces enormous challenges in implementing these new taxes. For example, last month the Treasury Departments inspector general for tax administration found that IRS was unable to properly collect the medical device tax. Early next year, the IRS will begin collecting revenue from Obamacares individual mandate tax penalty. Americans who fail to obtain insurance that complies with numerous Washington mandates - and who fail to qualify for an exemption from the individual mandate - face penalties of $95 ($285 per family) or one percent of household income, whichever is greater. To collect this penalty, the IRS will target peoples tax refunds. After a one-year delay, the employer mandate takes effect next January for businesses employing the vast majority of Americans. Employers that have more than 50 full-time workers and fail to meet certain arbitrary criteria set by the administration will be subject to tax penalties of up to $3,000 per worker. The IRS also plays a key role in implementing Obamacares complicated subsidy scheme. The health care law authorizes tax credits for people in households with income between 100 percent and 400 percent of the federal poverty level, who cant get insurance through work or through a government program, and who reside in states that established their own exchanges. In 2012, the IRS issued an illegal rule that also extended these tax credits to people in states that use the federal exchange. IRSs Complicated New Obamacare Forms for Individuals People who claim a tax credit will receive Form 1095-A from the exchange, and they will be responsible for filing Form 8962 with the IRS. Form 1095-A provides information about the type of plan the person purchased, as well as the amount of the advanced tax credit received. Form 1095-A has 33 lines for entry. It contains 56 boxes for entries for single filers and 74 boxes for entries for married filers with two dependents. Even a pair of supporters of the law, writing on the Health Affairs blog on August 4, acknowledged concerns about the forms: [F]or tax filers accustomed to handling one or more W-2s and perhaps their banks 1099, the new 1095s with over a dozen data fields will be mystifying. Some tax filers will receive multiple 1095s from Marketplaces, employers and insurers. Although the instructions for Form 8962 have not yet been released, this form allows people who qualify for a tax credit to calculate the correct tax credit amount and the amount that will need to be reconciled. The form has 36 lines for entry and will require filers with any change in coverage during the year to fill in 72 boxes (six boxes per month). Altogether, Form 8962 has 95 boxes for entries for single filers and 133 boxes for entries for married filers with two dependents. The IRS will undoubtedly need to issue numerous pages of instructions for people to figure all this out. The instructions will also have to explain how filers should appropriately allocate tax credits under certain applicable conditions and how they should correctly calculate tax credits if household size changes during the year, such as through marriage, divorce, birth of a child, or death of a family member. People who previously used IRSs short form (1040EZ) to file their return and who received advanced credits this year, will need to switch to the more complicated long form (1040 or 1040A). Taxpayers who claim an exemption from the individual mandate must file Form 8965 with the IRS. Form 8965 has 21 boxes for entries for single filers and 78 boxes for entries for married filers with two dependents. One tax expert told Politico, in an August 11 article, that the application requirements for some of the exemptions are hopelessly complex. Liberal supporters of the law agreed, telling the paper: The folks who are helping consumers are reeling. A consumer cant be expected to understand this. IRSs Complicated New Obamacare Forms for Businesses The instructions for Form 1094-C and Form 1095-C contain 13 pages of dense and complicated material. The forms are for businesses with more than 50 full-time employees to report information to the IRS about the health insurance they offer and which of their employees have enrolled in the company plan. These forms also allow the IRS to determine whether businesses owe employer mandate tax penalties. Form 1095-C consists of 52 boxes for entries for single employees and 78 boxes for entries for married filers with two dependents. Businesses must file a Form 1095-C for each person they employed during the year. Much of these forms complexity arises from the arbitrary exemptions to the employer mandate that the administration issued for 2015. Form 1094-B and Form 1095-B, which must be completed by certain self-insured employers, provide the IRS with information about which of their workers are adequately covered and are therefore not liable for the individual mandate tax penalty. The Obama administration decided that these forms, like Forms 1094-C and 1095-C, are not required for 2014. Although employers are free from the burden of filling out these forms this year, the administrations decision means that the government will not be verifying one of the qualifications for receiving the tax credits. That means Washington will waste money giving tax credits to people who do not lawfully qualify for them. Tax Time Will Be Unpleasant for Many Exchange Enrollees While paying taxes is often discouraging for people, given how much money the federal government wastes, many families anticipate receiving income tax refunds each year. According to H&R Block, refunds average $2,500 to $3,000 and often represents the filers largest financial transaction of the year. People often urgently need their refunds to pay important bills. The health care law could threaten those refunds for millions of Americans. Most people receiving subsidies to buy insurance through the Obamacare exchanges get them in the form of a monthly check sent from the Treasury to their insurance company. Since monthly subsidies were based on an estimate of what recipients would earn during the year, at tax filing time taxpayers will have to reconcile the amount Treasury paid out during the year with how much it should have paid. Many Americans, particularly those who earned additional income during the year, will find that Treasury sent too high of a payment to the insurance company on their behalf Although the Treasury was cutting checks to the insurer, the IRS will go after the taxpayer for any overpayment. This problem will be compounded since, as Health Affairs noted last month, [m]any subsidized enrollees will probably not recall receiving advance tax credits, since the advance credits simply offset... premiums. The seemingly endless problems with HealthCare.gov will likely delay many filers from receiving their returns on time. Exchanges were supposed to start reporting information about enrollment and exemptions at the beginning of the year. However, because of problems with the web site and related information systems, the first monthly report is not scheduled to be delivered until October 15, 2014. As a consequence, there will be little time to ensure the enrollment and payment information is accurate prior to when the forms must be filed with the IRS. If these forms are late, lower-income taxpayers who need them to file their return will have to wait, delaying their refund. Millions of Americans are being hurt by Obamacare through lower wages, higher premiums, reduced choices, and a loss of coverage that they liked. The IRSs large role in enforcing the laws perverse scheme of taxes, mandates, and subsidies adds to the laws many problems and will hit millions of families squarely in the wallet come tax time.
Posted on: Fri, 03 Oct 2014 19:48:18 +0000
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