The tax bill came due for many Obamacare customers Wednesday, with at least half of those who got health care subsidies in 2014 having to pay money back to the IRS, agency Commissioner John Koskinen told Congress Wednesday, though he said the process was less painful than most would have predicted.
That doesn’t mean there weren’t horror stories on Tax Day — April 15 — the deadline to file.
Senate Homeland Security and Governmental Affairs Committee Chairman Ron Johnson said he’d heard from one couple who owed $11,550 to the IRS because the agency determined they were ineligible for the subsidies they’d been getting since the middle of last year.
They said the IRS had initially approved them for subsidies when they moved from Colorado to Wisconsin to care for an ailing parent.
“They followed all the rules,” Mr. Johnson said. “They talked to people they thought were knowledgeable.”
Mr. Koskinen, though, said those stories have been rare as his agency grappled with the first year of Obamacare’s individual mandate, which requires Americans to have health insurance, be granted an exemption or else pay the tax penalty written into the law.
“We have not seen a significant number of calls with people who have problems,” Mr. Koskinen said.
The commissioner said “regarding the IRS portion of the ACA, all indications are that most taxpayers have been able to fulfill their filing obligations without a great degree of difficulty.”
Most taxpayers fulfilled their obligation by checking a box on their return asserting they had their own insurance coverage last year. Those who bought policies on the Obamacare exchanges and got subsidies to cover part of the premiums, however, had to reconcile their 2014 income estimates with what they actually earned at year’s end.
That totaled about 4.5 million to 7.5 million people, according to Treasury estimates.
Between 50 percent and 55 percent of those were paid too much in subsidies and owed the government money back, Mr. Koskinen said.
A recent analysis from the nonpartisan Kaiser Family Foundation put the average repayment of subsidy at $794 and the average amount back from the IRS at $773.
This year’s biggest Obamacare-related tax blunder came from HealthCare.gov, not the IRS.
The administration said it sent erroneous tax forms to 800,000 people who received tax credits on the federal health exchange known as HealthCare.gov. The forms listed the wrong benchmark plan by which the tax credits are calculated, causing headaches for filers.
The administration, which says it has worked to correct the issue, has asked consumers to contact the Obamacare marketplace if they still faced problems at the filing deadline.
The IRS, meanwhile, said customers who couldn’t file an accurate return because of the problem have until Oct. 15 to file their returns.
“These mistakes affect real people,” Mr. Johnson said Wednesday.
The administration is also letting customers enroll on HealthCare.gov through April 30 if they paid a penalty for lacking insurance in 2014 and want to avoid a steeper penalty this year.
The 2015 tax for lacking insurance is the greater of $325 or 2 percent of household income above the filing threshold, up from $95 or 1 percent of income last year.
Mr. Johnson predicted that many Americans will be blindsided by the extent of the penalty when they “exercise their freedom and choose not to buy an individual policy.”
He also criticized the IRS for failing to gird for the Supreme Court’s ruling this June in King v. Burwell, a lawsuit challenging the IRS’s decision to pay Obamacare subsidies to people who use the federally run exchange. The law offers tax credits to exchanges “established by the state.”
Mr. Koskinen said he has no idea how the justices will rule, so he cannot prepare for it.
“My rule in life,” he said, “is play the hand you’re dealt and move forward.”