Could the ACA Having an Impact on Tax Preparation Fees?
The burden of tax is increasing in the lives of millions of people. They are in pain. They are worried. They are feeling confused when new taxes like the recent Affordable Care Act in the form of mandatory health insurance are introduced. Some simply pay taxes without much hue and cry; others juggle them through loans, even bankruptcy. And with ACA that started in 2014, they are finding the cage of tax once again closing tightly around them. This time it feels as though there is no work around or way out except for a few who are below poverty line.
ACA, popularly known as Obamacare, requires individuals living in the US to have health insurance for themselves and their dependents. Their coverage is indicated on their form 1040 while filing taxes. Those who fail to get health coverage for more than 3 months are required to pay a penalty based on their income level. The people who are eligible for an exemption from this mandatory insurance program are the ones that meet certain income criteria or are considered too poor to afford the premium.
Health insurance payments are often the biggest source of emotional agony for people struggling in this bad economy. To make matter worse, people are now facing a slightly increase in their tax filing fees because of this. The IRS has been preparing to brace itself for a big wave of questions regarding the healthcare act and accounting firms are advised to do the same. Not to mention adding significant time to answer clients’ questions about the ACA is itself a burden if they are not charging the extra fees.
For some it is a small increase, probably $15 per return, for others with forms 8962 and 8965, the charge could be anywhere from $50 to $100 extra. When you add up all the forms, a seemingly free service may end up costing you a bundle. If you are filing yourself online, the same service can be purchased for a fraction of the cost.
What is more frustrating, hence increased responsibility for many tax preparers are the time-consuming process and challenges involved in the filing. Some firms have already priced returns according to their schedules, and they have developed new price for new and additional forms as well. For them it is so exciting to see people that are able to recognize the magnitude of work involved in processing their taxes.
What is important to note here is the progression of the process. If they have multiple forms to fill or have a complicated tax situation, more money alone won’t fix that problem; other resources need to be utilized as well. As they develop a firmer foundation of clarity, it may be time for them to consider those fees as reasonable and worth the price. As with so many issues that affect tax filing, ACA is one such thing that needs careful calculation.
This is true even if you pay off the taxes online. It is true even if you pay more than what is required by the government. It is true if you have obtain incentives from the government in the form of subsidy as well. The ACA tax filing always wins. Sometimes, the process is as easy as pie and other times clients are required to wait for their 1095-A as proof of coverage that may further delay returns.
Simplifying the Process
The ultimate goal for tax firms during this tough time is to simplify the process entirely, but most firms can’t achieve this goal without charging the additional cost. Instead, they are tending toward working systematically. There are hundreds of software out there for reducing the complexity of Affordable Care Act filing, but firms are limited by the amount of new clients that take on to service properly at least for now. Some are even sending messages and mailing letters to their current clients saying that their rate would go up for two hours of extra filing time.
Many people will be seeing rate increase in cases where they do not have insurance and require documents as proof of eligibility for exemption. Some may be thinking of selecting “yes” regardless of whether they carry insurance or not but beware that IRS is well-equipped to figure out any false information on file.
Not all preparers are foreseeing surge in fees. There are lot of hype on advertisements that are being circulated trying to prepare tax payers into paying additional fees. The big tax firm companies have one thing in common – they charge their fees by the form. Then there are firms that will not jack up their prices for preparing taxes. They will have a fixed price that will cover a whole lot of forms irrespective of whether the person has paid health premiums or not.
The ACA is not a simple topic to cover when it comes to tax preparation issues. Like most tax pros, you probably find yourself spending excessive time sending out paper tax forms. This is valuable time you could be interacting with clients, so here’s some advice. This is the 5th tax season I’ll be using eFile4Biz.com to efile 1099 forms for my clients. Five years ago, I just became fed up of spending my time mailing forms. This provider is an industry leader for a reason. They also integrate with all the well-know accounting software titles used by tax pros. Their video on how to file 1099 online with them is shown below for your convenience.