Executives at H&R Block Inc. (NYSE:HRB) are hoping the Obama administration will get tough on individual health insurance mandate enforcement for the 2015 tax year.
A lack of PPACA tax documentation requirements for 2014 hurt business.
Executives at the tax preparation firm, H&R Block, talked about the effects of poor compliance with the Patient Protection and Affordable Care Act (PPACA) “shared responsibility” requirements Monday, during a conference call with securities analysts.
The firm reported $487 million in net income for the 12-month period that ended April 30 on $3.1 billion in revenue, compared with $500 million in net income on $3 billion in revenue for fiscal year 2014. At press time, the company had not yet broken out results for the fourth fiscal quarter.
Earnings were somewhat weaker than the company had hoped, in part because of the number of taxpayers who came in with PPACA tax problems was lower than expected.
H&R Block trained its tax preparers to help clients handle the tax filing requirements for PPACA exchange coverage, PPACA exchange plan tax credits, and the PPACA individual mandate.
Company surveys showed that the company’s clients would be about twice as likely as other taxpayers to have extra PPACA-related tax work, and that about 25 percent of the clients would have to fill out premium tax credit forms, or forms related to failures to meet PPACA coverage standards.
Instead, only about 16 percent of the 2014 tax filing clients filled out extra PPACA forms. A majority of those PPACA-affected taxpayers had to apply for an exemption from the PPACA coverage mandate, or else pay a penalty amounting to 1 percent of income.
Mark Ciaramitaro, a vice president at H&R Block, said the number of clients who needed help with PPACA individual mandate forms may have been low because PPACA reporting and documentation requirement delays encouraged consumers to lie about their health coverage.
The Internal Revenue Service (IRS) required exchanges to send Form 1095-A to consumers who used premium tax credits, to help with the administration of the PPACA premium tax credit program. But the IRS put off requiring insurers to send 1095-B coverage notices and employers to send 1095-C coverage notices.
Consumers had no easy way to document whether they had individual coverage or employer coverage. To get out of paying the penalty on the uninsured, a taxpayer could simply check a box on the tax return stating that the taxpayer had had adequate coverage throughout 2014.
“The IRS had really limited mechanisms in place to really enforce compliance,” Ciaramitaro said during the earnings call. “A lot of people used the checkbox process as a way of avoiding [PPACA] related penalties.”
William Cobb, H&R Block’s president, predicted that the number of tax preparation clients who need help with PPACA forms will increase substantially in early 2016, when the IRS requires consumers to use 1095-B and 1095-C forms to substantiate whether they met PPACA coverage standards in 2015.
See also: How PPACA tax worries hit your clients