Tax season just got more complicated for hundreds of thousands of Americans, as the Obama administration scrambles to fix an error affecting one out of every five Obamacare customers who received government subsidies to help them pay for coverage on HealthCare.gov.
The unforced error could delay users’ returns to the IRS, and it spoiled the administration’s victory lap after a relatively successful enrollment period that ended Feb. 15.
Roughly 800,000 customers received a tax form that listed the wrong benchmark plan by which their subsidy is calculated. Filers need the form, known as a 1095-A, to reconcile their amount of subsidy with their income.
Administration officials are notifying customers and asking them to hold off on filing their tax returns until corrected forms can be issued in the first week in March.
The Centers for Medicare and Medicaid Services said Friday about 50,000 of the affected users filed already, causing headaches even as the White House tries to move beyond the stumbles that plagued its signature health overhaul last year.
Congressional Republicans who want to repeal and replace the Affordable Care Act pounced on the error, saying it bolsters their belief that the law is unworkable.
“This is beyond embarrassing for President Obama and is an unfair blow to taxpayers who are once again left holding the bag for this administration’s incompetence,” said Rep. Diane Black, Tennessee Republican.
House Republicans will dig into the matter when they convene an oversight hearing Thursday on Obamacare’s progress and implications for tax season.
Hoping to head off more trouble, the administration on Friday offered a six-week enrollment period to uninsured Americans who must pay a penalty for lacking insurance last year but missed the deadline to enroll on HealthCare.gov — thus avoiding an even heftier penalty for remaining uncovered in 2015.
The administration says 11.4 million Americans signed up for coverage during the formal enrollment season from Nov. 15 to Feb. 15.
The special period will last from March 15 to April 30 and apply to federal exchange customers in 37 states who, while filing their taxes, “learn for the first time of the need to pay a fee,” said Andy Slavitt, principal deputy administrator of the Centers for Medicare and Medicaid Services.
Four states — Washington, Minnesota, Vermont and California — have offered penalty payers extra time to enroll on their state-run Obamacare portals.
The administration has estimated that up to 6 million people will be subject to the “individual mandate” tax for not holding insurance last year, although it has not projected how many will take advantage of the special enrollment period.
The government will not offer relief from the 2014 penalty, which is the greater of $95 or 1 percent of household income above the filing threshold.
Officials offered the grace period because Obamacare’s Feb. 15 sign-up deadline didn’t match up with the tax deadline on April 15, leaving two months of in-between for filers to discover the tax penalty on Americans who can afford insurance yet do not acquire it — and thus do not qualify for an exemption from the mandate.
The 2015 penalty for lacking insurance is $325 or 2 percent of household income.