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You’re About to Pay Up for Obamacare

TAX SHOCK

Hundreds of thousands who received subsidies under the Affordable Care Act may have underestimated their incomes in 2014. Now many of them are learning they owe the government money.

By Anna Gorman, Kaiser Health News

Roberta and Curtis Campbell typically look forward to tax time. Most years, they receive a refund—a little extra cash to pay off credit card bills.

But this year they got a shock: According to their tax preparer, they owe the IRS more than $6,000.

That’s the money the Campbells received from the federal government last year to make their Obamacare health coverage more affordable. Roberta, unemployed when she signed up for the plan, got a job halfway through the year, and Curtis changed positions. The couple’s total yearly income became too high to qualify for federal subsidies. Now they have to pay all the money back.

“Oh my goodness, this is just not right,” said Roberta Campbell, who lives in the Sacramento suburb of Roseville. “This is supposed to be a safety net health care, and I am getting burned left and right by having used it.”

As tax day approaches, hundreds of thousands of families who enrolled in plans through the insurance marketplaces could be stuck with unexpected tax bills, research suggests. One H&R Block study found that as many as half the people who received subsidies owe at least some money back.

The result is frustration and confusion among some lower- and middle-class taxpayers, whom the Affordable Care Act was specifically intended to help. The repayment obligations could dissuade people from re-enrolling and provide more fuel to Republicans continuing push for a repeal of the law.

The problem is that many consumers didn’t realize that the subsidies were based on their total year-end income and couldn’t reliably project what would happen over the course of the year, said Alyene Senger, research associate at the Heritage Foundation, a conservative think tank.

“How do you know if you are going to get that promotion?” she said. “How do you know what your Christmas bonus is going to be?”

In addition, Senger said the government didn’t go out of its way to publicize the tax consequences of receiving too much in federal subsidies. “It isn’t really something the administration focused on heavily,” she said. “It’s not exactly popular.”

Even if enrollees support Obamacare, they now are realizing that those positive life changes—a pay raise, a marriage, a spouse’s new job—can turn out to be a liability at tax time.

“We are definitely seeing some pain,” said Jackie Perlman, a principal tax research analyst at H&R Block.

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