accounting tax services

Incorrect Tax Forms Cause Major Headaches for 800,000 Americans

One of the biggest changes facing tax filers this year is proving that they have health care coverage due to the requirements of the Affordable Care Act (AFA). Additionally, filers must also prove that their income qualifies them for subsidy payments, which they have already been receiving. Unfortunately, some serious errors by government officials have just made this process even harder. Over 800,000 filers in 37 states, who thought they were prepared to file, have been notified that the government sent them incorrect paperwork. Even worse, at least 50,000 people who have already filed their taxes using the wrong documentation will have to file amend returns once they receive the corrected form.

The Problem

1095 form errorThe error only affects individuals and families who obtained health care coverage through the HealthCare.gov federal exchange and received subsidies. Subsidies are granted by the government to help individuals under certain income limits pay for their health insurance premiums. The 2014 subsidies were based on the projected household income at the time of enrollment. The government recent mailed out 1095-A forms, which report the average benchmark premium in an individual’s area and the amount of subsidy that they qualified for. The premium amount is how the government determines the amount of premium tax credit filers are eligible to receive. A blog post on the HealthCare.gov website stated that the initial 1095-A forms contained 2015 premium benchmarks instead of the ones for 2014. Speaking on behalf of the Centers for Medicare and Medicaid Services, Andrew M. Slavitt said that they do not know how or why the mistake occurred. Officials estimate that individuals will receive a corrected Form 1095-A in the first week of March.

Unfortunately, it wasn’t just the federal health care exchange that had reporting issues. James F. Scullary, a spokesman for the California healthcare exchange, said that they were in the process of sending out over 100,000 corrected forms to households in that state.

The Impact

Affected households were notified via email and phone calls as soon as the error was detected. Filers can also login in to their HealthCare.gov accounts, where they will see a message indicating whether they were affected. Additionally, they can call the federal customer service center at 800-318-2596. The 50,000 tax filers who have already filed their income tax returns will receive special instructions from the Treasury Department as to how they can file amended returns.

These errors are particularly difficult for lower-income families who received subsidies for their heath care premiums. Many of these families rely on their annual tax refunds to pay critical household bills. Waiting to file taxes until a new form is mailed out places them in a tough financial position.

Healthcare Enrollment Extended

In related news, millions of households who are still uninsured are also getting surprises when they file their taxes. Steep penalties are subtracted from a household’s tax refund if they cannot prove that they had health insurance coverage for 2014. The penalty is $95 per adult or 1 percent of income. In 2015, the fees rise to $325 per adult or 2 percent of income. To help mitigate these penalties, President Obama announced a special enrollment period for healthcare that runs from March 15th to April 30th. This allows uninsured individuals to sign up for healthcare on HealthCare.gov and not have to pay penalties for 2015. These individuals are still responsible for paying the penalties for not having insurance during the 2014 year. Only taxpayers who live in states with a Federally-facilitated Marketplace (FFM) are eligible to take advantage of this special enrollment period.

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