Update: IRS Form 8962 appears to have snagged fewer than 60K in the end

On Sunday, I noted that the "IRS Form 8962" chickens, which I've been wringing my hands about since last October, had finally come home to roost:

About 1.4 million households that got financial help for health insurance under President Barack Obama's law failed to properly account for it on their tax returns last year, putting their subsidies at risk if they want to keep coverage.

...IRS said the more than 1.4 million households that have failed to properly account for their 2014 tax credits include:

  • About 316,000 households that got tax credits paid to them in advance but did not file any return at all last year. Before the healthcare law, many low-income people were not required to file taxes. Now they must do so if they got a subsidy. But if taxpayers don't realize it, that can create mix-ups.
  • Some 976,000 households that got tax credits and filed 2014 returns, but omitted a new form that is the key to accounting for their subsidies. Called Form 8962, it was introduced for the 2015 tax filing season.
  • About 147,000 households that had requested extensions to file their 2014 taxes, but never followed through.

The good news (of sorts) is that the Treasury Dept. came up with a rather, um, innovative way of resolving most of the problem:

Friday night, a Treasury spokeswoman said that for this year, the IRS will only flag people who do not file a return at all to have their tax credits turned off. Nonetheless, the spokeswoman said it is important for all individuals to file the proper tax paperwork.

However, I wasn't sure whether this included the 147K who requested extensions or not, and the fact that these numbers are for households, not individuals, made it sound like there could still be up to 225,000 people who're going to lose their APTC/CSR financial assistance this year, which is still a pretty huge number.

Fortunately, The Hill's Peter Sullivan has provided an update which hacks the problem down further still (h/t to Rick Gundlach for the link):

About 43,000 ObamaCare enrollees are bearing the full cost of their insurance plans after losing the tax credits that are meant to make coverage more affordable.

Those enrollees no longer receive ObamaCare tax credits because they failed to file a tax return for 2014, according to the Department of Health and Human Services (HHS). The number has never before been released.

...The precise number of people who are losing federal subsidies is unclear, ­because even family plans are counted as a single applicant. The number also does not include the 12 states and the District of Columbia that operate their own insurance exchanges.

...HHS told The Hill that by Jan. 1, because some people fixed the problem and some people had dropped coverage altogether, “less than 25 percent” of the 172,000 applicants were enrolled in ObamaCare without tax credits. That translates to around 43,000 enrollees.

OK, this doesn't include the state-based exchanges; assuming proportionate numbers, we should be talking about roughly 57,000 people nationally.

While it's no comfort to those 57K, this is still a heck of a lot better than 225K, and a whole lot better than 1.4 million or more. In addition, even these 57,000 appear to still have some time to square things with the IRS:

People who are enrolled in an insurance plan can become re-eligible for tax credits by filing their 2014 returns. 

The "gimme" for the other million-plus people is also reiterated and clarified:

Other people who failed to follow an ObamaCare tax rule are getting something of a pass from the administration this year.

 Those people filed their 2014 tax returns but failed to attach a form that compares their tax credits to their income to make sure they received the right amount of tax credit. 

The IRS said Friday that about 976,000 households failed to attach the extra form, known as Form 8962, as of the end of October.

A Treasury representative said Monday that the administration is only cutting off tax credits to people who failed to file a tax return at all. The representative said the allowance for failing to file the second form is for this year only.

OK, so this is sort of like last spring's "#ACATaxTime" special enrollment period, in which people who had missed the deadline in 2014 and had to pay the nominal first-year fee were given an extra 6 weeks around tax filing season to get enrolled for 2015. Around 214,000 did so...but HHS has already announced that this was a one-time thing.

Anyway, 57,000 people losing their tax credits certainly isn't a good thing, but it's not nearly as bad as I feared, and to be frank, they did kind of bring it on themselves. Again, I understand being confused about tax forms if you've never had to file one before, but these are federal tax CREDITS. You'd think they would realize that they might have to file a federal tax RETURN, even if they need a lot of hand-holding to do so.

Anyway, I'm glad this appears to be resolved with minimal negative impact; hopefully everyone will be more aware this coming April...