Tuesday, April 02, 2013

Tax Subsidy Blues (An Opus in Ooopsies)

One of the lesser-known pieces of The ObamaTax puzzle is that one "pre-qualifies" for any subsidy to which one might be entitled. That is, one signs up for one of the Exchange policies and part of that process is declaring guestimating one's 2014 annual income. It is partially upon that criterion that one's eligibility for a subsidy is based.

Here's a question:

What happens if you guess wrong?

Aye, therein lies a rub:

"Millions of people who take advantage of government subsidies to help buy health insurance next year could get stung by surprise tax bills if they don't accurately project their income ... What happens if you or your spouse gets a raise and your family income goes up in 2014? You could end up with a bigger subsidy than you are entitled to."

When you enroll in an Exchange Plan (since these are guaranteed issue, it is not an "application") any subsidy is based on your income. And since you probably won't know your 2013 total annual income in October, you can either guesstimate it or rely on your 2012 return.

But what if your 2013 income ends up being greater than your 2012 (hey, it could happen!)? That could spell trouble:

"If that happens, the law says you have to pay back at least part of the money when you file your tax return in the spring of 2015."

And who knows what your financial condition will be almost 2 years from now?

The ObamaTax: The gift that keeps on giving taking.
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