Tax refund checks can be the most anticipated deposit into your bank account during the entire year. People plan home improvements, spend it on trips, or save it away for other costs throughout the year. And when it’s possible to file income taxes early, people often receive their refund before tax season is even over, allowing them to get that financial boost earlier in the year.
According to the IRS, the average tax refund in 2014 was $2,792. That’s not a huge windfall, but it is enough to make quite a statement in many people’s bank accounts. But this year, a coding error at Healthcare.gov means that about 800,000 people received incorrect health care information for filing their taxes, resulting in erroneous tax filings and the likelihood that thousands of people will have to wait several months before seeing their refund check.
The error in statements occurred on about 20% of the forms sent to people who signed up for coverage in 2014 and received tax credits to offset the cost of their premiums, according to a report from the Wall Street Journal. The tax credits are tied to the cost of premiums and to income from the past year. The statements sent to taxpayers are used to determine if the tax credits are the correct amount: People who received too large a credit must tack more on to the taxes they owe the government, and those who received too little can claim a larger refund.
But the statements contained an incorrect local premium amount: Some of the forms generated in January contain data for 2015 coverage, not 2014 coverage for the correct tax year. It’s not easy for individuals to know if their statement is one of those affected, according to the Journal: Federal officials have estimated that 50,000 people had already filed their taxes when the error was caught. For the other 750,000 people affected, the federal government is asking people to wait to file their taxes until they receive a corrected form.
But those forms might not be sent out until early March, according to one Forbes report. That’s well into the tax filing season, and everything begins to turn into a bottleneck: Lines at tax filing centers get longer, and so does the virtual line to wait for your refund.
Taxpayers with incorrect forms should already have been contacted through Healthcare.gov by a call and an email from Marketplace. There is a bright spot for those who already filed with incorrect data: The IRS announced February 24 that it won’t require people to refile their taxes if they technically owe more. People who should get a higher refund or should owe less to the government have the option of filing an amended return to claim that money. It’s not convenient, but it was uncertain when the error was announced whether those 50,000 people who had filed early would have to go through the process all over again. “The IRS will not pursue the collection of any additional taxes from these individuals based on updated information in the corrected forms,” a Treasury spokesman said.
The tax filing headache is another snag following the first year of the health care law. This is the first year that the coverage has an integral part in the income tax filings, as people had to pay a fine if they weren’t insured in 2014. Payments of $95 or 1% of income (whichever is higher) are due with tax filings this spring. It’s safe to say the announcement error wasn’t ideal timing, especially given that it came just days after President Barack Obama and Health and Human Services Secretary Sylvia Mathews Burwell announced more than 11.4 million people had either re-enrolled or signed up for health care for the first time this year.
The error announcement also happened on the same day the Health and Human Services Department issued a “special enrollment period” until February 22, which was intended to allow people to continue enrolling who had experienced technical glitches or long phone queues for the call center. Politico notes that several Democratic legislators and others have urged Burwell to create another extended filing deadline for around the April 15 tax deadline, when people will see the assessed fines on their tax returns for the first time.
But despite Republicans being quick to criticize the error and uncertainty about how many of those enrollees will actually pay their premiums, Obama was optimistic about the plan. “The Affordable Care Act is working,” Obama says in the video. “It’s working a little better than we anticipated.”
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