Deluged with catastrophes, court challenges and criticism, Obamacare (ACA) has had a controversial life to date. Yet it is ready to enter a completely new phase where the implementation gets shifted to the Internal Revenue Service – America’s favorite three words. If you liked the health care plan up to now, you ain’t seen nothing yet.
2010 was actually the first year that the IRS was involved in Obamacare enforcement. The Small Business Health Care Tax Credit went into effect with this filing year. You may remember I wrote that there was mass resistance to this credit by the tax-preparer community. We could not figure out how to get the credit for our clients while at the same time keeping the cost of preparing the paperwork lower than the actual credit being received by our clients. The calculations and the complexity of the credit were obviously created by lawyers and policy wonks that have no discernible experience with taxes on this planet, let alone the United States. Accordingly to the Government Accountability Office (GAO), the result was that only 170,300 businesses took advantage of this credit during 2010 when it was estimated that between 1.4 and 4.0 million small business employers would be eligible. In fact, the credits were supposed to encourage small businesses that did not offer insurance to their employees to begin doing so. The GAO reported that the credits went to businesses that were already offering insurance to their employees.
That small amount of businesses claiming the credit was not because of preparer ignorance as supporters of Obamacare have claimed. To the contrary, the question becomes how many preparers took advantage of their clients by actually charging them for preparation of the paperwork to garner this credit?
Tax-year 2014 begins the filing of Obamacare-related reporting for individuals, and each person must report that they are in compliance with the new law through their own personal tax return. You think taxes were a nightmare before this? Each taxpayer must show that they have insurance or that they are exempt from insurance. To facilitate this the IRS has developed some spanking new forms for the benefit of us all. The primary form you must have in hand is a 1095 form. To make matters more complicated, the IRS could not live with one universal 1095 form; they had to develop three: A, B and C. A is for those receiving their insurance through the Obamacare websites, B is issued by insurance companies to people who have their own plans and C is for employees of large companies. Then there is another form (8965) if you have an exemption from having to have coverage.
I know you were thinking nothing could go wrong here. This is requiring millions and millions of additional forms to be filed by various insurance providers and sent to individuals who don’t have an understanding of the requirements. People will be receiving forms of which they have no understanding, and thus deluging their tax preparers with queries. I cannot wait until the IRS sends out millions of computer-generated letters threatening people and businesses about the fact they did not properly comply with the law. No wonder they hired 16,000 IRS agents to deal with this mess.
If you don’t have coverage as mandated by the law you are subject to (are you ready?) – The “Shared Responsibility Penalty.” Wow, some wonk worked ages to come up with that Orwellian name. Didn’t the Supreme Court determine that was a tax? What was Judge Roberts thinking?
We then get into the Premium Assistance Credit (PAC). That is what those people who go on the Obamacare website are told will reduce their premiums if they are income qualified. This has created a phenomenon rarely ever seen in our country. This has Americans working hard to reduce their income to reduce their health insurance premiums. Or others trying to falsely increase income to avoid being on Medicaid.
There are many traps here. The person teaching my class told of the poor schmoo who happily gets a Christmas bonus from his employer of $500. The problem is he has a family of four and his income before the bonus is $95,000. His new income of $95,500 exceeds the limit for income for a family of four to be eligible for the PAC by a whopping $100. He would then be exposed to refunding up to $12,000 of PAC through their tax return. Just wait until the happy Christmas bonus recipient finds that out around March.
While in class to learn about the implementation of all these new rules, we spent an entire morning going through the law and how it affects us (and thus you our clients). About two-thirds of the way through the morning I questioned the whole process. I stated that if someone walked into to my office who was receiving the PAC that I would not accept them as a client. The cost of preparing the paperwork to get them properly qualified to receive the benefit would exceed anything I could reasonably charge them. The instructor, a fine fellow from Iowa, stated he unfortunately had to agree with me. So now tax preparers will have to decide whether to accept clients based on our health care system -- just like doctors.
All of this mess was so that, to this time (prior to the 2014 enrollment period), 8.7 million people could be added to the Medicaid rolls and about three million Americans could lose their private insurance. 8.7 million people that are added to a system which already included 59 million people who could not find a doctor to serve them because of the meager reimbursement rates that exist.
Let me remind you of two things. Having health insurance does not equate to having health care despite the pleading of the Obamacare supporters. Also, Obamacare did zero, zilch, nada, bupkis, zippo to increase the supply of health care providers. Makes you wonder why doctors were involved in drafting this law.
I am sure you are really looking forward to preparing your income tax returns this coming year. But please don’t harm anyone after reading this column. There are simply not enough people to take care of them now.