The next Obamacare controversy is right around the corner.
Soon, Obamacare enrollees who received payment assistance to help pay for coverage will have to reconcile how much they really earned in 2014 with how much they estimated when they applied months ago.
If you underestimated your income you will either receive smaller tax refunds or you will owe the IRS money.
This is because the payment assistance is actually tax credits that are based on annual income, but some got their 2014 payment assistance before knowing exactly what they would be making in 2014. You will have to reconcile the two with the IRS during the upcoming tax filing season.
If many enrollees guessed incorrectly, it will not be a surprise. Many signed up in October 2013, when the sign up period began, and did not know what they’d earn in 2014.
Payment assistance amounts could also be recalculated because of major changes in their circumstances such as landing a new job or getting married.
According to the most recent figures reported by the Obama administration, those who applied through the federal exchange received an average monthly payment assistance of $264. Roughly 85% of total enrollees received help with insurance premiums; they only had to pay $82 a month, on average, for coverage. Last month the administration said 2014 enrollment was 6.7 million.
Though there is a $2,500 cap for those who remain eligible for payment assistance, those who underestimated their earnings could owe thousands of dollars. The eligibility threshold for eligibility is based on income – $45,900 for an individual and $94,200 for a family in 2014.
Those who overestimated their 2014 income may get a healthier-than-expected refund, and others will see no change.
What happens next is:
By Jan. 31, Obamacare enrollees should receive Form 1095-A from their exchange. It lists who in the household had policies and how much they received in monthly payment assistance.
Taxpayers then use that documentation to complete Form 8962, which will ask details about insurance, subsidies and income. If you weren’t covered for the entire year, you will have to break down the payment assistance payments by month.