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Tax Credit Impacted Refunds of Many Obamacare Customers, H&R Block Says

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Apr 29th 2015
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For many taxpayers who benefited from the Advance Premium Tax Credit (APTC) under the Affordable Care Act, the controversial healthcare law also known as Obamacare, raindrops may be falling on their parade.

According to an analysis by tax-preparation firm H&R Block, about two-thirds of taxpayers who bought health insurance through one of the Affordable Care Act’s sanctioned marketplaces had to pay back an average of $729 of the APTC, cutting their potential refund by almost one-third. The reduction was due to subsidy payments exceeding allowable levels.

But the skies remained sunny for other taxpayers. H&R Block said on April 27 that about one-quarter of eligible taxpayers deserved a higher subsidy, with Uncle Sam coughing up an extra $425 on average.

Under the Affordable Care Act, a premium tax credit is available to certain low-to-moderate-income families. You can choose to have the credit paid in advance to lower your monthly premiums or claim the credit when you file your federal income tax return. With an advance credit, the amount you owe is reconciled with a tax return calculation.

“There was quite a bit of new ACA-related complexity for taxpayers to deal with this tax season,” Mike Ciaramitaro, vice president of H&R Block health care and tax services, said in a written statement. “But our figures highlight the importance of estimating income as accurately as possible when applying for premium tax credits and notifying the marketplace with any life changes that impact annual household income or size.”

H&R Block compiled various other figures of note, including:

  • The average refund for taxpayers with an APTC was $2,195.
  • Thirteen percent of those with an APTC had no repayment or additional refund, most likely because they chose the bronze-level coverage plan with the lowest premiums.
  • Bronze-level taxpayers also received the lowest average premium tax credit, which was $890 for the year.
  • The average shared responsibility payment due to lack of minimum essential coverage was approximately $178, about 7 percent of the potential refund.

The findings were similar to figures reported by H&R Block just six weeks into tax-filing season, with some slight increases.

Although many kinks in the system were worked out this year, don’t expect next year to be completely free of glitches. For 2014, only taxpayers who acquired insurance through a state marketplace received Form 1095-A, Health Insurance Marketplace Statement. But next year, every taxpayer with health insurance will receive documentation from either the government, an employer, or a private insurance carrier. Two new documents, 1095-B and 1095-C, will be initiated.

“This season saw general ACA-related confusion, incorrect or delayed 1095-A information documents, and overall anxiety regarding refund impacts,” Ciaramitaro stated. “With many taxpayers now receiving coverage documentation, more taxpayers who will experience APTC reconciliation, and the doubling of penalties, unfortunately we should expect taxpayer anxiety and confusion to continue next year.”

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