Category Archives: Tax History

2016 Insurance Subsidy: Did you file your 2014 Tax Return?

money in hand, obamacare, insurance subsidy, acaDo not lose your insurance subsidy in 2016 just because you have not filed your 2014 tax return! If you are one of the over 1 million individuals who received an Obamacare health insurance premium subsidy last year and you have yet to file your 2014 tax return, you are risking your opportunity to receive the insurance subsidy in 2016.

Insurance Subsidy and the Preliminary Tax Credit

The insurance subsidy is paid by the government to your insurer to reduce the premiums you owe. It is actually an advance payment of the premium tax credit (PTC) based upon your “estimated” income for the year. Your actual PTC is based on your “actual” income as determined on your tax return. If the advance PTC (subsidy) was less than the actual PTC as determined on your tax return, you are entitled to the difference. On the other hand, if your actual PTC is less than the advance amount, you may owe Uncle Sam some or all of the difference.

Whether you are entitled to additional PTC or owe some back cannot be determined without filing your return. The IRS estimates that 710,000 individuals who received an advance PTC have yet to file a 2014 return or did not file an extension. Add that to the approximately 360,000 taxpayers who received an advance PTC and have filed an extension, and there are over 1 million individuals who need to reconcile their 2014 PTC who have not yet filed.

The Marketplace will determine eligibility for advance PTC for the 2016 coverage year during the fall of 2015. If you have not filed your 2014 return yet, you can substantially increase your chances of avoiding a gap in receiving this help if you file your 2014 tax return as soon as possible. This is true even if you have an extension until October 15th.

Obamacare Forms are not Easy

Navigating the complicated Obamacare forms developed by the IRS is difficult for many taxpayers. Most taxpayers seek professional assistance, and they should because accuracy is key. The IRS is currently sending letters to individuals who received advance PTC subsidies and have yet to file. The letter encourages taxpayers to file within 30 days of the date of the letter. This is to avoid a gap in receiving advance payments of the PTC in 2016.

It is Never a Good Ideal Not to File

Always file your returns, even if you owe and cannot pay. The IRS just gets more aggressive as time goes on. So whether you:

  1. Do not feel you can do your own return
  2. Are afraid you may owe some of the PTC back, or
  3. Think you may be subject to penalties for failing to have health insurance coverage

We encourage you to give Alex Franch, BS EA a call at 781-849-7200. There are penalty exceptions for being uninsured. If you owe a Premium Tax Credit repayment there is a possibility it can be reduced, and it may all work out in the end. Procrastinating is not going to change the outcome, but it could put your 2016 advance Premium Tax Credit at risk. Who knows, you may even be entitled to more PTC and a refund.

You can read more about the Premium Tax Credit here.

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What Do Barack Obama and Ronald Reagan Have in Common?

By: Alex Franch, BS EA

On paper, presidents Barack Obama and Ronald Reagan could not be more different. But despite their political differences, they do have something in common regarding their approach to taxes.

The History of Federal Income Tax

medium_536344029In the olde tyme days before Ronald Reagan, Federal tax brackets remained static from year to year. Therefore, if your pay merely kept up with inflation, you would find more and more of your income subject to higher and higher tax brackets. This reduced your purchasing power because the real value of your income had remained unchanged. This was a big problem in the 1970s when inflation was quite high. What was the solution? Congress would step in every few years and would raise the tax brackets. This allowed everyone in Congress to pat themselves on the back for across the board tax cuts every few years, even though all they were really doing was keeping taxes the same.

President Reagan

In 1981, President Reagan signed into law (as part of a broad tax overhaul) the indexing of the Federal tax brackets, the standard deductions, and the personal exemptions, to take effect in 1984. Every year after that, taxpayers would see a small tax cut before adjusting for inflation. Most of the tax changes under the early Reagan years settled into their current structure by 1986.

History of the Alternative Minimum Tax

In 1982, President Reagan enacted the present day Alternative Minimum Tax or AMT. The AMT is a separate tax rate that is parallel to the Federal Income Tax. Long story short, you get to pay whichever is higher. President Reagan must have forgotten about 1981, because AMT was not indexed to inflation. This lapse trapped more and more people every year. AMT was ‘patched’ eleven times from 1986 to 2012 under presidents Bush 41, Clinton, George W, and Barack Obama. For the record, the predecessor to AMT goes back to the prehistoric days of 1969.

What Similarities are there between Barack Obama and Ronald Reagan?

medium_15364657104In 2013, President Obama signed the American Taxpayer Relief Act of 2012. This bill, in spite of putting in place the “fiscal cliff,” delaying everyone’s tax returns, and being a symbol of dysfunction in DC, took a page out of President Reagan’s book and indexed AMT to inflation.

The Short Answer?

Barack Obama and Ronald Reagan both indexed tax brackets to inflation.

What about your thoughts?

Do you have any thoughts on this subject matter? Maybe you know of a few other similarities you want to talk about, please feel free to leave your comments below or post to our Facebook or Google+ page. Perhaps you want to know how this indexing affects your income tax bracket?

Tax Season is Here!

Time flies and before it slips away, call Alex at 781-849-7200 for your appointment.

Other Notes:

Read about the Permanent AMT Patch of 2012 here.

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photo credit: nordique via photopin cc
photo credit: myglesias via photopin cc

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