Tax returns and Obamacare: a perfect storm?

Tax returns and Obamacare: a perfect storm?
Internal Revenue Service Commissioner John Koskinen testifies on Capitol Hill in Washington. (Susan Walsh / AP)

In my Wednesday column, I wrote that Congress keeps asking the Internal Revenue Service to do more work even as Congress cuts the IRS budget.

One consequence of that budget squeeze is a precipitous decline in service the IRS gives taxpayers. The agency now answers fewer than 50% of the phone calls it gets from citizens, a level IRS Commissioner John Koskinen calls "miserable."


It’s going to only get worse over the next two weeks – not only because April 15 is approaching, but also because this year brought new reporting requirements under President Obama’s healthcare law.

“This really looks like a perfect storm,” Brookings Institution scholar Elaine Kamarck warns. “We face a terrible combination: the addition of new forms for ACA [the Affordable Care Act, popularly known as Obamacare] and the subtraction of IRS capacity to help.”

And those new forms are – like many IRS forms -- daunting.

Taxpayers whose health insurance came through their employer, or through Medicare or Medicaid, don't have to worry; all they need to do is check a box on their tax return confirming that they had health insurance. (That covers more than 80% of us.)

But about 10 million taxpayers who got insurance via Obamacare, with tax credits to absorb part of the cost, must file a new form to tell the IRS whether the credits were too high, too low or just right.

That's where the trouble could arrive. The two-page form, Form 8962, is pretty complicated. The instruction booklet is 22 pages long.

Even worse, the federal government and several states, including California, sent thousands of taxpayers erroneous information about the subsidies they received (via another form, Form 1095-A). The IRS says if you already filed your return based on incorrect information, you don't need to file again – but you may want to check to see whether you're due a bigger refund.

There's one more group of people likely to feel extra-grouchy this year: those who decided not to buy health insurance at all. Under Obamacare's individual mandate, many of them will be assessed a penalty which will either reduce their tax refund or add to their tax bill. They can apply for exemption from the mandate – but that will take (of course) another form, Form 8965.

Surprisingly, Koskinen told me, there hasn't been a flood of complaints about the new filing burden.

"We monitor the call centers, and there's been no significant problem," he said.

One reason, he suggests, is that more than 90% of taxpayers rely on either tax preparers or software to fill out their forms, so they aren't feeling much pain.

Or, perhaps, pain is what we've come to expect when April 15 approaches.

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