For the vast majority of people here in Minnesota and across the U.S., the thought of sitting down to do prepare a tax return is nothing less than cringeworthy. That's because it will likely require sorting through significant paperwork and trying to decipher otherwise arcane language courtesy of the Internal Revenue Service.
Indeed, it's precisely for these reasons that many people are now more than happy to continue putting off filing their tax returns until as close to the April deadline as possible and look with envy upon those who have already completed this seemingly herculean task.
Interestingly enough, however, recent reports show that those taxpayers who have yet to file their tax returns and who secured health insurance on the federal exchange in 2014 may actually find themselves at something of an advantage over those who have already filed.
That's because the IRS has determined that close to 800,000 people received erroneous tax statements -- referred to as 1095-A forms -- from the exchange. These statements use variables such as taxpayer income and the cost of local premiums to calculate the amount of tax credits to which consumers are entitled.
According to the IRS, an incorrect value for local premiums was the principal error on the thousands of 1095-A forms.
While corrected 1095-A forms are due to be mailed to taxpayers in just a matter of weeks, things may be slightly more difficult for the close to 50,000 people who have already filed their tax returns using this faulty information.
Regarding these people, the IRS has indicated the following:
- Those who originally determined that they owed taxes using the incorrect 1095-A form, but later discover that they owe even more taxes via the corrected 1095-A form will not be required to pay the difference to the IRS.
- Those who originally determined that they were entitled to a refund using the incorrect 1095-A form, but later discover that they are entitled to even more money via the corrected 1095-A form may file an amended return to secure the additional funds.
- Those who originally determined that they were entitled to a refund using the incorrect 1095-A form, but later discover that they were not entitled to that large of a refund via the corrected 1095-A form will be required to reimburse the government.
It will be interesting to see if this situation works itself out or whether further action by the Treasury Department proves necessary.
Source: The Wall Street Journal, "IRS won’t collect additional taxes from filers who used incorrect forms," Stephanie Armour, Feb. 24, 2015