Glitch: 'I Have to Pay Back My Obamacare Subsidy'

Janice Riddle got a nasty surprise when she filled out her tax return this year. The Los Angeles resident had applied for Obamacare in late 2013, when she was unemployed. She qualified for a hefty subsidy of $470 a month, leaving her with a monthly premium of $1 for the cheapest plan available. Riddle landed a job in early 2014 at a life insurance agency, but since her new employer didn't offer health benefits, she kept her Obamacare plan. However, she didn't update her income with the California exchange, which she acknowledges was her mistake. Now, she has to pay back the entire subsidy, which is forcing her to dip into her savings..."I was blindsided that the subsidy has to be paid back," said Riddle, adding she didn't even use the coverage, which she had until she qualified for Medicare in October. "I'm in shock...but I have no choice. Do I want to argue with the IRS or the Obama administration?" Like Riddle, many Americans on the exchange will likely have to pay back some or all of their subsidies. Between 4.5 million and 7.5 million taxpayers received subsidies for insurance premiums when they signed up for coverage on Obamacare exchanges, federal officials said. These folks had to forecast their 2014 income when they applied. Those who underestimated their earnings either will receive smaller tax refunds or will owe the IRS money.

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If you're among the roughly 20 million people affected by the Affordable Care Act -- either because you bought insurance through health exchanges or will be subject to penalties or exemptions for failing to get coverage -- filing a tax return just got a lot harder. Indeed, potentially millions of people who never before had to file tax returns will now need to file as the result of the health law…[Obamacare's] subsidies that may appear to simply lower the cost of insurance premiums are actually "advance premium tax credits" that are paid directly to health insurers. Because those credits are made on each taxpayer's behalf, it's up to individual taxpayers to determine whether the "advance payment" was too much or too little. Though many of these individuals have never had to file before -- they simply earned too little to be required to file -- they will now need to complete tax returns to reconcile the Obamacare subsidies they got with what they owe, according to the IRS...Meanwhile, those who didn't buy insurance or had a lapse in coverage that exceeded three months will need to determine whether they're subject to a tax penalty. Both situations involve slogging through new forms and dozens of pages of instructions.

The Obamacare window technically just closed this weekend, but a new round of political headaches could just be beginning for the administration. That's because it's tax season, and many Americans could soon be getting an unwelcome surprise that they owe the government a penalty for skipping health insurance coverage. Up to 6 million Americans are expected to pay a penalty for not having coverage in 2014, according to recent Obama administration projections. The 2014 penalty for this tax season is $95, or 1 percent of family income — purposefully on the weaker side to let people adjust to this new coverage scheme. Most of the uninsured won't actually face the penalty because they'll qualify for an exemption, either related to their inability to afford coverage or some other hardship. But it's likely that a lot of people who will have to pay don't know it yet. Despite the unpopularity of the individual mandate and the high-stakes Supreme Court case over it three years ago, there's still limited awareness of the penalty among those who could risk triggering it.