Obama Admin: Late Tax Filers Risk Losing ACA Subsidies for 2016
The Obama administration is urging households that received subsidies to help them purchase exchange coverage but have not yet filed complete tax returns for 2014 to do so or risk losing the subsidies next year, the AP/Washington Times reports (Alonso-Zaldivar, AP/Washington Times, 8/24).
About 1.8 million households that received subsidies to help them purchase coverage through the Affordable Care Act's exchanges could lose that help in 2016 because they have not filed or had issues filing their tax returns for 2014. Such households account for about 40% of the 4.5 million total households that received the subsidies last year. Low-income families unaccustomed to the complicated tax-filing process might not be aware that subsidies are tied to tax returns.
Earlier this month, the Department of Treasury said that of the 1.8 million households that might lose subsidies in 2016:
- About 760,000 filed taxes but left out Form 8962, which is used to track ACA subsidies;
- About 710,000 did not file a tax return for 2014, even though they were legally required to do so; and
- About 360,000 requested an extension (California Healthline, 8/5).
2015 is the first year consumers are subject to the individual mandate and any related penalties.
IRS in mid-July sent letters to individuals who had not yet filed their tax returns, suggesting that filing the return within 30 days "will greatly reduce the risk of an interruption" in receiving the subsidies.
Meanwhile, the AP/Times reports that processing the subsidy-related tax return information can be time-consuming for CMS and IRS. For example, there are privacy safeguards on tax returns and IRS is restricted in what information it can share with other agencies. In addition, HealthCare.gov cannot receive real-time updates on tax return information. According to the AP/Times, the lags mean that that even if an individual who has not filed a return does so in October, the information might not be processed in the exchange system until later.
To address this issue, the administration has said affected individuals will be able to attest that they have filed their returns. Doing so will allow them to continue receiving subsidies in 2016. According to the administration, the system will eventually be able to determine whether such individuals actually filed returns. Individuals who attested to filing and are later found to have not actually filed could be in violation of perjury laws, the AP/Times reports.
In addition, HealthCare.gov will review IRS data in late December (AP/Washington Times, 8/24).This is part of the California Healthline Daily Edition, a summary of health policy coverage from major news organizations. Sign up for an email subscription.