| | | Obamacare boosts likelihood of audit: H&R Block CEO
By Nicole Goodkind 52 minutes ago
It's officially busy season for auditors, and this year, things will be even busier than usual. The introduction of the Affordable Care Act, or Obamacare, has brought one of the largest changes to the tax code in nearly 20 years. That means more complicated taxes for many Americans. For the first time, those who do not have health insurance will either have to pay penalties or file for an exemption.
The numbers are still vague, but the government estimates that 3 to 6 million Americans will be required to pay an insurance-related penalty and another 2 to 25 million will be eligible to file for an exemption against that penalty. For many households, the penalty will clock in at around 1% of income and will be due with tax filings by April 15th.
The 7 million Americans who purchased health care through an exchange will receive an advanced tax credit which needs to be reconciled against annual income. "People make the mistake of thinking it's a subsidy," H&R Block ( HRB) CEO William Cobb explains. "It's actually an advanced credit that needs to be reconciled. If you made more money or you owe money, it will actually be a [deduction] to your refund."
While it's still very early in tax season, Cobb predicts that these new complicated tax procedures will drive more business into the offices of accountants. Those who have never had to pay taxes before and receive Obamacare will now have to file, he points out.
As years progress, Cobb believes that Obamacare will continue to complicate the tax system. "It's an annual decision," he says. This year he sees many choosing to pay the penalty even if they might qualify for an exemption but "next year the penalties ratchet up. They go from 1 to 2% of adjustable gross income, and the [$95] flat-rate penalty triples." More people will be signed up for exchanges by the end of 2015 as well; government estimates are at around 10 million.
Cobb warns that the change in taxes due to Obamacare will likely increase the number of successful audits the IRS completes. "I try to tell everyone that this is an easy one for the IRS to catch," warns Cobb. "It's 'Did you have insurance or didn't you?' They'll know, and it's just one or two forms."
The IRS currently audits 1-in-104 people per year. Cobb believes that number will most certainly increase.
finance.yahoo.com |
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