* Millions may need tax help for healthcare
* New tax filers may become customers
By Patrick Temple-West
WASHINGTON, July 10 While some see the new U.S.
healthcare law as a source of controversy, tax preparation
companies see it as an opportunity, hoping it will bring in
millions of new and confused customers.
Under the Affordable Care Act, most of those who sign up for
health insurance will receive a federal tax credit. At the same
time, the U.S. government will impose a tax on most people who
do not obtain health insurance.
Either way, more Americans are likely to need help with
their taxes, even though the Internal Revenue Service aims to
keep the new rules as simple as possible. As a result, the
upheaval in the tax code promises to be the biggest in 20 years.
Jackson Hewitt Tax Service is examining how it can weave the
healthcare requirements into its tax preparation business, Chief
Tax Officer Mark Steber said.
H & R Block Inc, another tax preparation company,
and tax software company Intuit Inc are both looking to
capitalize on the new filing challenges individuals will face,
said Vishnu Lekraj, a senior analyst with Morningstar Inc.
A spokesman said H & R Block is working with the IRS to get
customers ready for the changes. Intuit declined to comment.
The IRS does not know how many new people will start filing
taxes as a result of the healthcare law, a Treasury Department
New customers for tax preparation businesses could include
people who, for lack of income, have not needed to file tax
returns in the past. People applying for healthcare benefits in
2013 may ha v e to file tax returns for 2012.
The Urban Institute, a think tank, estimated in March that
about 11 million people would be eligible for government
subsidies to buy their own health insurance coverage if the law
started this year.
Families with annual income between $22,350 to $89,400 will
be eligible for a federal tax credit to reduce the insurance
cost. The Congressional Budget Office estimates that 4 million
people will snub the law and pay a penalty in 2016 rather than
buy health insurance.
For individuals forgoing coverage, the tax starts small,
just $95 in 2014. But that penalty increases to $695 or up to
2.5 percent of their taxable income in 2016.
The IRS cannot seize assets as part of its healthcare
enforcement efforts, but it can withhold a taxpayer's refund.
Many questions remain unanswered, and the rule-writing
process could trigger a political spat as members of Congress
question how the IRS will implement the law.
"How can anyone expect this agency to be able to handle this
massive new law?" Republican Senator Orrin Hatch said in an
e-mail statement to Reuters. "I will be pressing the IRS for
Until now, the IRS has tried to keep tax-filing expenses low
for individuals, curbing the profit potential for H & R Block
and Intuit, Morningstar's Lekraj said. That may change.
"Anytime there is more complexity in an industry that
someone has to participate in you are going to have an
opportunity for middlemen to make a lot of money," Lekraj said.
While details are still being worked out, the IRS could
decide to levy fines on taxpayers who receive a federal tax
credit for insurance costs one year but fail to file a tax
return the next year -- an added incentive for people to file
A ruling by the Supreme Court last month added confusion for
people on Medicaid, the state-federal healthcare program for the
poor, whose numbers are set to expand under the healthcare law.
The ruling allows states to opt out of the Medicaid
expansion, and six states -- Florida, Louisiana, Mississippi,
South Carolina, Texas and Wisconsin -- already have said they
will do so.
People in those states who cannot get the broader Medicaid
coverage could turn to their states' health insurance exchanges
for coverage. Tax businesses are seeking details on what
documents people will need to file to get access to state
The Department of Health and Human Services is rolling out
an application process for the state exchanges, a department
spokesperson said. The department will begin testing the
application with consumers in the coming months.