Upfront Affordable Care credit hits some tax refunds
Three out of five who received the Advance Premium Tax Credit to buy health insurance see smaller tax refunds now, according to H&R Block.
Tax filers who obtained money-saving tax credits upfront to buy health insurance are now finding they have to pay back an average $579 this tax season, according to data from H&R Block.
H&R Block reported Tuesday that about 60% of its clients who enrolled in a state or federal health insurance marketplace and received the Advance Premium Tax Credit are now paying back a portion when they file their returns. The average paid back is $579 so far this year, compared with $530 last tax season.
The issue of repaying the advance premium credit has been a point of frustration for many consumers.
At the same time, more than one in three taxpayers who claimed the Advance Premium Tax Credit actually overestimated their income and ended up qualifying for a bigger credit. This group is receiving an additional refund — more than $450 on average.
On Monday night, the tax-time trouble with the advance credit came up in a question posed to Democratic presidential candidate Hillary Clinton at the Fox News Democratic Presidential Town Hall in Detroit.
A Fox News transcript of the town hall reported that a father in the audience at Detroit's Gem Theatre stated: "I have a single adult son who earned $29,000 dollars last year (and) purchased insurance through the healthcare.gov website. His policy cost approximately $240, and when he filed federal taxes this year, he owed the federal government $141 dollars because the tax break he got from the website was overestimated."
No one likes that kind of news, especially on a tight budget. Clinton responded by saying: "Well, first of all, we have to go at the mistakes that you just referenced that your son has experienced. I've heard about those."
Block also noted that 60% clients so far this year must repay a portion of the Advance Premium Tax Credit because their household income was higher than what they estimated at enrollment. That compares with 52% in the tax season last year.
For many filers, this often means a far smaller tax refund or that they might owe more in taxes now.
Mark Ciaramitaro, vice president of tax products for H&R Block, said some consumers are having a difficult time calculating their credit when they enroll in the Marketplace, including difficulty in deciding which household members should be counted in the credit.
"Often when they have change in their income they rarely if ever go back to the Marketplace to update," Ciarmitaro said.
Experts say people need to realize early on that they should report changes in income and other changes in one's life, such as a marriage, throughout the year. See HealthCare.gov to report "income and life changes."
In addition, some consumers want to get as much advance premium credit as they can upfront in order to control their monthly costs for health care. They understand, Ciaramitaro said, that they could have to get a smaller refund in the future.
The H&R Block data showed that tax refunds are also being reduced for households that did not obtain qualified health insurance coverage. The penalty has gone up for those without coverage and households, according to Block, are paying $383 on average compared with $172 last year.
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The analysis by H&R Block — which includes both do-it-yourself filers who prepare their own returns online and those who pay for assistance at Block offices — involves data through March 5.
H&R Block also reports that its clients don’t appear to be experiencing any widespread issues related to delayed or incorrect 1095-A forms. That issue had cropped up last season and may be resolved.
But Block noted, that being said, ACA-impacted taxpayers tend to wait longer to file than non-impacted taxpayers.
Also the giant tax preparation firm noted that 1095-B and 1095-C forms from insurance companies and employers are not required to be sent until March 31, which may be adding to taxpayers’ confusion.
Contact Susan Tompor: 313-222-8876 or stompor@freepress.com. Follow Susan on Twitter @Tompor.