Obamacare is about to collide with the U.S. tax-filing season, adding frustration for millions of taxpayers trying to figure out how to comply and how much they will owe the government.
Tax filing for 2014 opens Jan. 20. The biggest change for most taxpayers is on Line 61 of Form 1040: a box to check if you have health insurance and a tax to pay if you don’t. Millions who received insurance through Obamacare’s exchanges will have a more complicated set of calculations to complete.
“There’s going to be tons of questions and confusion and uncertainty and complexity,” said Kathy Pickering, executive director of the Tax Institute, the research and analysis division of H&R Block Inc. “We still have a lot of questions.”
The added strain on taxpayers will increase burdens on the Internal Revenue Service at its busiest time of the year. The IRS is already warning that about half the people who call its toll-free phone lines won’t be able to get through.
“Because it’s never happened before, it’s a learning experience for everybody,” said Roberton Williams of the Tax Policy Center, a Washington research group. “This will be the hard year. Next year will be easier. Five years down the road, nobody will remember this was anything strange.”
The tax agency also says it will complete fewer audits this year because of a smaller enforcement staff.
Insurance Requirement
Congress passed Obamacare in 2010 to expand health- insurance coverage, and the law relies on the tax system for two important functions.
First, the IRS polices the requirement that individuals have health insurance, which can be satisfied with an employer- provided plan, a government program such as Medicaid or insurance purchased on the exchanges established under the law.
Failure to have health insurance in 2014 generates a penalty of $95 per person or 1 percent of household income, whichever is greater. Those thresholds will increase to $325 and 2 percent for 2015.