In early 2015, one of the Affordable Care Act mysteries was the lack of confused exchange plan users begging tax preparers for help with ACA tax forms.
Executives from Kansas City, Missouri-based H&R Block Inc. and its competitors suggested that the lack of consumer ACA-related tax form business could be the result of exchange plan user comfort with the ACA tax forms; conscious efforts to avoid paying more taxes or filing more forms; or massive lack of consumer understanding of ACA tax and tax reporting rules.
Hints of consumer ACA tax confusion show up in transcripts from a series of public forums the National Taxpayer Advocate held at different locations around the country earlier this year.
Congress created the Taxpayer Advocate Service to give consumers a voice at the Internal Revenue Service. Local taxpayer advocates represent taxpayers at the local level. Nina Olson, the national taxpayer advocate, tries to monitor the IRS and point out consumer relations problems at the national level.
Olson’s office pointed out earlier this year, for example, that some consumers ended up getting Form 1095-A ACA exchange plan coverage information notices for 2014 simply because they contacted an ACA exchange, without even applying for coverage.
Olson may provide details on how ACA-related individual tax matters have gone in 2016 in a few weeks, when she sends her 2016 annual report to Congress.
Here, meanwhile, is a look at what tax preparers, Olson and others said about ACA-related tax concerns at the taxpayer advocate forums. The comments are drawn from a batch of forum transcripts that were posted on the advocate service section of the IRS website in late December.
In Baltimore, a financial services support group director said many people still lack ready access to the web. (Image: Thinkstock)
1. Relying too much on the Internet for communications may backfire.
At a forum in Baltimore, Robin McKinney, the director of Maryland Cash Campaign, a nonprofit group that helps low-income working families do their tax returns, said many of the group’s clients lack access to the Internet.
Some people may have smart phones, but many of the low-income working people who lack Internet access use prepaid cell phones that come without data plans, McKinney said.
“Data plans are getting increasingly more expensive, also,” she said.
Consumers may be able to get access at public libraries and other public places, but “just from a security standpoint, if it’s all done through public access, you know, what’s the security both on the IRS side and then also in those places?” McKinney asked. “I think there’s a lot that would need to be done to protect people’s identity.”
2. Many ACA exchange plan users have a hard time with eligibility verification procedures.
McKinney said some of her group’s clients who used public exchange plan coverage received notices asking them for additional documents.
“Most did not understand this notice, and they didn’t know what they needed to do to resolve it,” McKinney said. “A significant number of those folks came to [our] tax sites and needed help recreating that form to figure it out.”
Tax preparers may need access to sensitive documents to help people resolve eligibility verification problems, but, if those preparers get access to the documents, “there’s just incredible room for fraud in those situations,” McKinney said.
3. Some consumers ended up paying money back to the premium tax credit because of confusion about income reporting.
At a forum in Red Oak, Iowa, an unidentified tax preparer said some of her clients tried to “do the right thing” by getting health coverage.
“They understated their income because of lack of knowledge, basically,” the preparer said. “They did not know they had to include their Medicare or their Social Security in state. So, therefore, a lot of them ended up in payback situations and they simply could not understand it. And it was very often people who could not even afford to pay back… People who had no insurance whatsoever got by better than those people who tried.”
Mark Meadows said his own mother called him about a friend with an ACA-related tax bill. (Photo: Meadows’ office)
4. The confusion is affecting some very nice people.
Rep. Mark Meadows, R-N.C., said at a forum in his district, in Hendersonville, North Carolina, that his own mother called him about a friend at church who received an ACA-related tax bill for $1,500.
In some cases, Meadow said, he believes bills like those are the result of people being re-enrolled in new health plans by the exchange automatically, without their knowledge. “So, do not automatically assume that they have fudged on their income,” Meadows said.
5. The rules governing individual mandate penalty exceptions confuse even the volunteer tax preparers.
Bob Smith, a volunteer tax program coordinator in Hendersonville, spoke at the same forum where Meadows spoke.
The ACA individual shared responsibility provision requires many people to get what the government classifies as solid health coverage, or minimum essential coverage, or else pay a penalty.
The ACA itself and the Obama administration have created a number of exceptions from the penalty, such as exceptions for people who cannot find affordable coverage, are incarcerated, or belong to a health care cost sharing program.
“For volunteers, it is a heavy burden on us to sort through all of the exceptions that we can come up with that are available for a person who may be subject to the shared responsibility payment,” Smith said. “The worst being the affordability exception.”
Another group of North Carolina tax preparation volunteers came up with a shared responsibility exception eligibility flowchart, Smith said.
“If I didn’t have that, and my preparers didn’t have that, I’m afraid we would be lost in the entire Affordable Care Act procedures, because of the nuances of everything,” Smith said.
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