More Unilateral Changes to Obamacare Tax Rules May be Coming

Fearing outrage on the part of taxpayers who are flummoxed by the Obamacare tax rules, the Obama administration will once again seek to change the law to protect their political arses.

Up to 20 million taxpayers are already exempt from the Obamacare penalty for not carrying mandated health insurance. They include low-income taxpayers living in states that did not expand Medicaid and those with hardship exemptions like a death in the family or divorce.

But for the estimated 8 million taxpayers who are expected to be charged the penalty, there is no relief. These are the people who are likely to get an unwelcome communication from the IRS in the mail informing them that the penalty will be deducted from their refund or that they owe the IRS.

There are also expected to be 3-4.5 million taxpayers who owe the IRS for overpayment of subsidies. This explanation from Timothy Jost, health care expert, is the stuff of nightmares:

Timothy S. Jost, an expert on health law at the Washington and Lee University School of Law who supports the Affordable Care Act, said: “It will be very easy to find people who are unhappy with the new tax obligations — people who have to pay a penalty, who have to wait forever to get through to somebody at the I.R.S. or have to pay back a lot of money because of overpayments of premium tax credits.”

Taxpayers normally report income and compute taxes annually. But the health care law is different. Consumers may be subject to tax penalties for any month in which they had neither insurance coverage nor an exemption.

The calculations will be relatively simple if all members of a household had coverage for every month of 2014. They can simply check a box on their tax return. But lower-income people often have changes in employment, income and insurance. If any members of a household were uninsured in 2014, they must fill out a work sheet showing coverage month by month, and they may owe penalties.

To claim tax credits, consumers need to fill out I.R.S. Form 8962, which includes a matrix with 12 rows and six columns — a total of 72 boxes, to compute subsidies for each month of the year.

Federal officials have authorized more than 30 types of exemptions from the penalty for not having insurance. One is available to low-income people who live in states that did not expand Medicaid. Another is available to people who would have to pay premiums amounting to more than 8 percent of their household income. The government will also allow a variety of hardship exemptions and in most cases will require taxpayers to send in documents as evidence of hardship.

And getting that exemption to avoid paying the penalty will be no picnic either:

Health plans are classified in five categories, such as gold, silver and bronze, based on how comprehensive the coverage is. To calculate their tax credits, consumers need to know the cost of their own health insurance policies, but must also know the cost of a benchmark plan, the second-lowest-cost silver plan. To claim an exemption if the available coverage was unaffordable, they also need to know the premium for the lowest-cost bronze plan in the area in 2014.

The only way to fix this is to scrap all 20,000 pages of IRS Obamacare regulations and start over using someone who has to fill out their own tax forms to write new ones. What a godsend to the tax prep companies! Millions of people will be unable to figure out what they owe or if they owe money to the IRS, driving them into the warm embrace of H&R Block, Jackson Hewitt, and other tax preparation companies.

How can anyone defend this? The complexity, the unilateral and capricious changes to the law in order to avoid political blowback, and the simple unfairness to all Americans who are subjected to this nightmare — what will it take to get people so enraged at this law that they demand that most of it be scrapped and the rest radically altered?

I am reminded, after watching the excellent, but flawed mini-series Sons of Liberty this past week, of something Sam Adams once wrote:

If you love wealth greater than liberty, the tranquility of servitude greater than the animating contest for freedom, go home from us in peace. We seek not your counsel, nor your arms. Crouch down and lick the hand that feeds you; May your chains set lightly upon you, and may posterity forget that you were our countrymen.