Hyden, Miron & Foster, PLLC Law Blog

Wednesday, February 24, 2016

Health Insurance Subsidies ay Affect Tax Refunds for Millions

How will Obamacare directly affect you’re your tax return?

The government-subsidized health program instituted by the Obama administration has allowed millions to obtain health insurance. Most of those who signed up for Obamacare, however, were unaware of the long-term tax consequences involved. For many, it is now coming to light that the income estimate they provided to the government when signing up for the program may affect their tax refund.

Those people who underestimated their income during the application process may be receiving too much of a subsidy. This problem even exists for those who estimated correctly at the time but are now making more money. If a person is receiving too much of a subsidy, he or she will have to pay back this money to the government. Where will this refund come from? Out of your income tax refund.

This can be a major problem for those expecting to receive a certain amount back in their tax refunds. Because the tax-related risks are just now becoming apparent for many, it is unlikely that the people affected by this situation were able to use tax planning to lessen the blow. One way to diminish the amount a person might owe is to report the difference in income to the government right away. This will likely lead to higher insurance premiums throughout the year, but will reduce the amount owed at tax time.

The amount that the government can request back from any one taxpayer or family is capped for most. Only those who make over four times the federal poverty level will be liable for an uncapped amount. The IRS can also use any means to collect the amount owed, including tax liens and levies. This means that if a person does not receive enough in his or her tax refund to cover the liability, he or she will have to pay the amount out of pocket.

If you are interested in tax planning in relation to Obamacare or concerned about tax planning for any other reason, you should speak with a qualified Little Rock, Hot Springs and Conway tax planning attorney today.

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