Where Taxpayers Get Tripped Up on Obamacare
NEW YORK ( TheStreet) -- April 15 is just hours away, but last-minute taxpayers shouldn't panic and wind up making mistakes related to the Affordable Care Act that could haunt them next year.
The ACA's individual mandate requires adults without insurance or access to employer-sponsored health care coverage, or who qualify for Medicare or Medicaid, to have signed up for health care insurance through state or federal health care insurance exchanges by March 31. Americans who missed the deadline can't get back in the government's good graces until November, when the open enrollment period for 2015 opens up.
People who are without health care insurance for three or more months in 2014 face a penalty of either a flat fee of $95 or 1% of their gross annual household income (minus the first $10,150 for a single person or $20,300 for a married couple filing jointly).
But that's not the only tax-related concern.
In fact, millions of Americans could get "stung by surprise tax bills" when they see their 2014 tax bills, says Michael Mahoney, vice president of consumer marketing at GoHealth Insurance , an online health insurance services firm.
According to Mahoney, the ACA was framed, in large part, to provide subsidies to help struggling Americans afford heath care. In general, the lower your income, the fatter the subsidy for many consumers.
But what many people will miss is that if your family income goes up in 2014, you essentially end up with a bigger subsidy than you are entitled to. That can result in smaller tax refunds or surprise tax bills in the spring 2015 filing season for millions of middle-income families.
We spoke to Mahoney got his take on the tax impact of the ACA and what consumers face when it comes to their tax returns and health care reforms.
Do health care consumers realize their tax situation could change as a result of the ACA subsidies?
Mahoney: It depends on who you ask. Our licensed insurance advisers are trained to educate consumers about the tax subsidy so they can avoid surprises when filing their 2015 taxes. Given all the changes taking place under the Affordable Care Act, there will certainly be consumers who'll miss the memo. That's why it is important to educate the public about the tax implications of health care reform. The current tax season is a perfect time to do that.
If you make more money in 2014 as compared with 2013, your tax refund could go down, or your tax bill can go up. Can you elaborate on that?
Mahoney: Taxpayers were able to estimate their 2014 incomes when enrolling in a health insurance plan to see if they were eligible for a tax credit, then they could apply the tax credit in advance to their monthly premium.