Tax preparers now ACA advisers

By Robert Pear / New York Times News Service

The tax connection

Major provisions of the Affordable Care Act — the requirement for people to carry insurance and for larger employers to offer it, as well as the subsidies to help pay for it — were written as amendments to the Internal Revenue Code. H&R Block highlights the connection on its website: “The name you trust for all your tax needs now also offers friendly, unbiased help when it comes to choosing health insurance.”

Iris Burnell, an adviser at Jackson Hewitt Tax Service, has prepared scores of returns in the past few months, as she does every year before the April 15 filing deadline. But many of her consultations this year have also included educating clients about the tax implications of the Affordable Care Act.

“Many people don’t realize that it’s the law, and you have to have insurance,” said Burnell, the manager of a busy storefront tax preparation office in D.C. “They still think there’s a way to worm out of it. When I ask if they have insurance, they hem and haw. They are in a wait-and-see mode.”

Burnell has been trying to change those attitudes. Avoiding the politics of the health care law, she shows consumers what it means in dollars and cents. “It won’t be real until it hits you in the pocketbook, in the purse,” she said.

The tax system provides both the carrot and the stick for people to obtain coverage. Tax preparers like Jackson Hewitt and H&R Block say they have helped tens of thousands of people apply for tax credits to help defray the cost of private insurance bought through the exchanges.

In addition, the big tax service companies and makers of tax preparation software like Intuit’s TurboTax are calculating potential penalties for those who do not have insurance.

“Despite all the attention to the Affordable Care Act, many people … are still confused about the law, the tax credits, the penalties,” said Mark Ciaramitaro, vice president for health care enrollment services at H&R Block.

Stan Dorn, a health policy expert at the Urban Institute, said: “It makes a huge amount of sense to involve tax preparers in the process of enrolling uninsured individuals into subsidized coverage. They are in the business of filling out forms for consumers. And they already collect 90 percent of the information needed to get help paying for health coverage.”

Jackson Hewitt, H&R Block and Intuit offer their clients what amounts to a health insurance checkup. H&R Block calls it a tax and health care review. Jackson Hewitt calls it an “ACA X-ray.” Intuit has a “health care subsidy calculator.”

In addition, the tax preparation services teamed with online insurance brokers to help clients sign up for health coverage. Jackson Hewitt has been working with GetInsured, H&R Block with GoHealth and TurboTax with e-Health.

The online tax tools make clear that, for some consumers, premiums are substantially higher than the penalty for going without coverage this year.

If, for example, a husband and wife, each 33 years old, live in Florida with no children and have a household income of $60,000 a year, TurboTax’s subsidy calculator tells them: “The lowest-cost health insurance will cost you $363 out-of-pocket per month. Alternatively, you’ll pay a penalty of $33 per month.”

At H&R Block, Ciaramitaro said, premiums of more than $100 a month appeared to create “a psychological barrier for many clients.”

Consumers can receive premium tax credits in advance, in monthly installments, before they file their tax returns, and they can receive the full credit even if they do not owe any federal income taxes.

Four-fifths of people buying insurance on the exchanges qualify for subsidies, expected to average $4,400 a year for each person who receives assistance in 2014.

The tax credits are paid directly from the Treasury to insurance companies on behalf of consumers. People with lower incomes generally receive larger tax credits. If their incomes go up, they may be entitled to less assistance.

Two provisions of the health care law will hit taxpayers at this time next year. Some will owe penalties for having been uninsured. And some will find that they owe money to the IRS because they received too much in tax credit payments.

“A substantial number of people will be surprised,” said Catherine Livingston, who was the health care counsel at the IRS from 2010 to 2013. “If you have an increase in income this year, it could mean that you will owe money to the government when you file your tax return next April. Or you may receive a smaller refund.”

Consumers should notify the health insurance marketplace if their income or family size changes.