Tax preparation firms like H&R Block and Liberty Tax Service are looking forward to the tax season – and they’re anticipating a boost in business from customers who are unsure about how the Affordable Care Act (ACA) might impact their taxes.
As reported by LifeHealthPro, an insurance industry newsletter, the potential challenge for taxpayers who might otherwise do their own taxes centers around whether they purchased health coverage from a qualified health plan through the public health insurance exchange. And, most importantly, whether they used the ACA premium subsidy program – the advanced premium tax credit (APTC) – to pay for their coverage.
Under the ACA, if a taxpayer doesn’t provide information about whether he or she has the required “minimum essential coverage” – and doesn’t qualify for an exemption from the mandated penalty – then he or she is supposed to add a penalty payment to the income tax payment for the year. For most taxpayers impacted by the penalty, it will amount to one percent of income.
On a conference call with securities analysts, John Hewitt, chairman of Liberty Tax, said he expects his company to get $40 for each digital ACA Form 8962 that Liberty helps its customers complete. He also expects about one-quarter of Liberty customers to file an ACA form. On the revenue side, Hewitt is predicting a 2.5 to 3.0 percent increase in fees for Liberty in 2015 and even more in 2016.
H&R Block president Bill Cobb also sees more customers in his firm’s future. “Those who received an advanced tax credit will no longer be eligible to file their returns on the 1040EZ,” he said.