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ObamaCare Tax Nightmare: Half of Its Clients May Owe the IRS Money

The next ObamaCare disaster critics have been warning about is upon us, as the approach of Tax Day means it’s time for subsidy recipients to settle up with the Internal Revenue Service.

The problem, in a nutshell, is that ObamaCare’s expensive insurance plans would be completely unaffordable for most of its extremely modest customer base if other taxpayers weren’t forced to subsidize the purchases.  One of the reasons HealthCare.gov turned into the most spectacular launch crash in the history of the Internet was that the poorly-written ObamaCare website had to interface with numerous other government and insurance-industry computer systems to calculate subsidies and give shoppers a bottom-line price with Everybody Else’s share paid off.  If ObamaCare prices had been displayed without subsidies, no one would have bought a policy.

The buggy website didn’t do a great job of estimating those subsidies, and in any event, they’re based on projected income for the applicant – you have to tell the system what you expect to earn for the coming year.  If those estimates prove incorrect, or any other part of the subsidy estimate calculation was off, incorrectly tendered subsidy payments must be refunded to the IRS.

We always knew this was going to be a problem, although naturally the Obama Administration told people not to worry their pretty little heads about it.  Now, as reported by the Washington Examinerone of the nation’s largest tax preparation services is warning that half of ObamaCare’s clients might owe the IRS money.  It’s going to come out of their tax returns, and for those who don’t get a return big enough to cover the spread, they’ll have to write the Internal Revenue Service a check:

As many as 3.4 million people who received Obamacare subsidies may owe refunds to the federal government, according to an estimate by a tax preparation firm.

H&R Block is estimating that as many as half of the 6.8 million people who received insurance premium subsidies under the Affordable Care Act benefited from subsidies that were too large, the Wall Street Journal reported Thursday.

“The ACA is going to result in more confusion for existing clients, and many taxpayers may well be very disappointed by getting less money and possibly even owing money,” the president of a tax preparation and education school told the Journal.

While the Affordable Care Act fines those who don’t have health insurance, it also provides subsidies for people making up to four times the federal poverty line ($46,680).

But the subsidies are based on past tax returns, so many people may be receiving too much, according to Vanderbilt University assistant professor John Graves, who projects the average subsidy is $208 too high, the Journal reports.

Tax preparers, who frequently advertise their ability to deliver big refunds, have been working feverishly to avoid customer anger stemming from lower-than-expected refunds due to insurance premiums. They also are trying to make sure customers understand the potential fines for not having insurance.

“Eighty-five percent of our customers get a refund,” said Kathy Pickering, who directs the H&R Block Tax Institute, according to the Washington Post. “That refund could be offset by the penalty. And if that happens, they’re going to be understandably angry.”

It’ll be fun to watch the big government left hoisted on its own petard for a tax season or two, until the serfs grow accustomed to this new way of life.  For decades, they’ve profited politically from the neat trick of bribing people with their own money — teaching them to think of the annual tax rebate as a “gift” from the friendly Leviathan State, rather than money taken by the government over the course of a year and returned without interest.  Now they’ll to reap a little whirlwind of anger over refunds which are unexpectedly smaller than anticipated.

Also, the trans-Constitutional individual mandate tax/penalty for not having government-approved insurance is rising to $325 or 2 percent of taxable income, whichever is greater, and King Barack’s royal decrees exempting many people from this marvelous new tax burden are going to expire eventually.  That will cause a bit more public anger, but not to worry +- this was all factored into the ObamaCare scam from day one.  Its worst aspects were shoved into the shadowy reaches of the “out years,” with revenue shortfalls hidden from Congressional Budget Office protections and painful taxes hidden from voters.  The pain will keep dribbling in, but the legion of dependents rallied around ObamaCare’s benefits will protect it from repeal by the angry populace.  The lies of Barack Obama, Jonathan Gruber, and the rest of the scam artists who dumped this hideous program on the American people will become historical footnotes, studied with admiration by the perpetrators of the next socialist scheme — can you believe he actually convinced people they’d be able to keep their old plans if they liked them?  Wow!

The compliance costs for ObamaCare’s tax wrinkles will be huge as well, but that should be no problem, because the American people were long ago tricked into ignoring the billions of dollars in compliance costs siphoned out of our national economy by our ridiculously complicated tax system.  One of big government’s best tricks was persuading us to see the value of the hours we sacrifice to the paperwork gods as nearly zero.

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