Expert: Obamacare May Saddle Taxpayers With Thousands in Unexpected Dues | Washington Free Beacon - FACTOIDS
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Expert: Obamacare May Saddle Taxpayers With Thousands in Unexpected Dues | Washington Free Beacon

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Thanks to glitches in Obamacare, many Americans may find themselves unexpectedly owing thousands of dollars next tax season, according to one tax expert. This could make next filing season “one of the most chaotic in years.”

The problems will arise from Obamacare’s tax credit program, which advances tax credits to insurance companies from the IRS based on rough estimates of the applicant’s income for the upcoming year. This means that the credit is applied to the applicant’s premium far before the taxpayer actually knows what their income will  be—and consequently, how large a credit they are really eligible for.

Since the application process is new, convoluted, and happens rapidly, both applicants and the government are already struggling to estimate accurately. Ryan Ellis of Americans for Tax Reform describes it as “rather like trying to fill out a 1040 on the fly.” As a result, “It is the middle of June, and many people have now been receiving inaccurate subsidies for six months.”

In his testimony before the House Ways and Means subcommittees on Health and Oversight on Monday, Ellis outlined what would happen to these taxpayers:

A hypothetical example might help illustrate: a health exchange customer selects an Obamacare exchange plan.  The government estimates that this taxpayer will earn $30,000 this year, which makes her eligible for a $2000 tax credit.  This $2000 is paid to the taxpayer’s insurance company to help with premiums.

The next spring, our customer/taxpayer is filling out her tax return.  Unfortunately, the government estimated the taxpayer earned too little and paid too large a credit.  She actually earned $40,000, and so only had a $1500 credit coming to her.

Depending on the taxpayer’s income level and availability of verified affordable workplace insurance, she will have to pay back much or all of the $500 overage to the IRS.  This means skinnier refunds and maybe even liabilities, and it won’t be the taxpayer’s fault—it will be the government’s fault.

In the end, Ellis projects, “many people will end up owing thousands of dollars, and it will be a complete surprise.”

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