Tax Filing Problems Plague ACA Subsidies, Group Says

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By Mindy Yochelson

Aug. 19 — Problems with tax filings are jeopardizing the Affordable Care Act subsidies of about 40 percent of households that received them in 2014, according to an analysis of Internal Revenue Service data by the American Action Forum.

Some of the taxpayers failed to file the appropriate form, while others didn't file any tax paperwork, according to the analysis, which was based on a letter to Congress from IRS Commissioner John Koskinen.

Those receiving the subsidy may choose to have advance premium tax credit (APTC) payments made directly to their insurance provider to reduce their premiums throughout the year. They then must file a tax return to reconcile the APTC with the actual premium tax credit to which they were entitled based on their household income.

First Year of Change

In the July 17 letter, Koskinen said this is the first year that taxpayers saw changes to their income tax returns related to the individual shared responsibility provision and the premium tax credit provision.

Of the 4.5 million taxpayers with APTCs, 2.7 million filed tax returns through the end of May and were processed.

However, some taxpayers who received APTCs have yet to file their tax returns, the letter said.

Of these, 360,000 taxpayers filed for an extension and have until Oct. 15 to file their tax returns.

This is two weeks before open enrollment for 2016, the American Action Forum (AAF), a center-right policy institute, said in its analysis.

No Form Attached

Another 760,000 filed their returns but didn't attach a form to reconcile subsidies.

“This form is a necessary (if confusing) addition to the tax filing process, as preliminary data indicates that 90 percent of taxpayers incorrectly estimated their 2014 income,” the AAF said.

The third group of missing tax filings emanates from the 710,000 taxpayers who didn't file any tax paperwork. “This omission is to be expected in many cases, as low income individuals receiving subsidies may never have been required to file a return in years past,” the AAF said. “Nonetheless, this error endangers future subsidy eligibility for these 710,000 American households.”

Under Department of Health and Human Services regulations, “taxpayers must meet this obligation in order to maintain their eligibility for APTC to help pay for Marketplace coverage in 2016,” Koskinen said. “We are urging these taxpayers to file an electronic tax return to reconcile their APTC within 30 days.”

‘Baffling' Combination

“The legislative marriage of two of life’s most baffling necessities—taxes and health insurance—has naturally resulted in some confusion,” the AAF said. “Notably, nearly half of those purportedly helped by the ACA are now on the verge of losing those benefits—a testament to how complicated the law really is.”

Koskinen said the IRS will continue to reach out to those who didn't file.

“This is the first year for this new provision, and we expect that taxpayers will continue to better understand this process as it becomes more routine,” the IRS letter said.

To contact the reporter on this story: Mindy Yochelson in Washington at

To contact the editor responsible for this story: Janey Cohen at

The analysis is available at