The Affordable Care Act, or Obamacare, has had its share of controversies, from a near-catastrophic website rollout to more than 40 delays in various components of the law. The problems have been pronounced, highly public, and have overshadowed the law’s benefits.
The problems aren’t over yet, and forewarned is forearmed.
A new Obamacare challenge is about to wash over taxpayers across America in a tsunami of documentary requirements that it’s safe to say are mostly unanticipated by the public. Expect, as described so accurately in Star Wars, a “disruption in the force,” when people begin to experience the challenges of dealing with the number and complexity of Obamacare’s record-keeping and reporting requirements.
The Wall Street Journal on Oct. 7 published an Associated Press story with a headline that aptly describes the situation as tax preparers, planners, and taxpayers head into tax preparation season: “Obamacare exemptions: Too complicated to claim?”
The story described many of the requirements, among them, “Some involve sending in the application – by mail – and supporting documents, such as copies of medical bills, police reports, obituaries, and utility shut-off notices – even news articles. Consumers will have to dig up the documentation – it's not like filing the W-2s they get from employers.”
Fail to provide accurate documentation and penalties are a distinct possibility.
And another thing: Not being able to prove you were insured in 2014 for three or more months means you may face the “individual shared responsibility” payment (in other words, a fine, tax, penalty, or however you prefer to label it) due when you file your taxes. To compute the penalty, figure 1 percent of your 2014 income or $95 per adult, whichever is higher. The penalty for uninsured dependents is $47.50 per dependent under 18, with a cap of $285 per family.
Clearly, the penalties are far less than the cost of insurance, another factor about which many people may not be aware and which may ultimately lead to vast numbers of Obamacare scofflaws. But we’re getting ahead of ourselves. It’s anyone’s guess how the IRS will deal with potentially millions of taxpayers who find themselves lost in the labyrinth of Obamacare reporting requirements.
If the IRS brings the hammer down on taxpayers trying to find their way out of the bureaucratic maze, the IRS runs the risk of increasing public unhappiness with a law that polls consistently show has never been wildly popular generally.
At the same time, if enforcement is seen to be lax, with a “we’re going to take this more seriously next year” message from the IRS, it’s setting up a time bomb of taxpayer-frustration to go off in 2016 if enforcement becomes firmer. Complications must be expected when one of the most massive pieces of social legislation in American history is implemented. The Affordable Care Act, when the size of the law is combined with its accompanying rules, totals tens of thousands of pages.
What this means is that there are two ways to approach the upcoming tax season: I’ll deal with it when it gets here, or, I’m going to find out everything I can now to put my records in order to try not to run afoul of the law and its mandates.
Taxpayers trying to do this alone, without some sort of professional help, are inviting a challenge. That’s just a fact of life.
In an upcoming blog post we’ll delve into what businesses can expect to happen on the Obamacare front after the 2014 mid-term elections.
Remember those delays mentioned at the beginning of this post? Some are coming due post-election.
The next few tax seasons, not just that of the 2014 tax year, promise to be a bumpy ride.Share