Enrolling in ACA Workplace Coverage can be Costly, but can be an Avoidable Tax Hit to Employees

At the time they are hired, employers should remind their employees to adjust their income with the Healthcare Marketplace if they are retaining their Affordable Care Act coverage. Also, marketplace premium assistance should be turned off when employees are enrolling in workplace benefits. There are a significant number of tax filers unaware that they have accrued an Advance Premium Tax Credit (APTC) or subsidy.

Tax returns are being held by the IRS due to missing a Form 8962, Premium Tax Credit, which is required to reconcile the advance premium tax credit. Taxpayers may be unaware they still had marketplace coverage due to being automatically re-enrolled by Healthcare.gov or a state marketplace. Some low-cost plans require no additional contribution by the individual, as the APTC is transmitted directly to the health plan. Some enrollees are not using the marketplace coverage because they have workplace benefits.

If the employee’s income is not adjusted with the marketplace after hiring, he or she will have to repay some or all APTC and this will result in a smaller refund or additional tax owed. The latest IRS figures indicate that 51 percent of filers had hit the income cap and this results in no APTC. Taxpayers had to repay an average of $860 to the government.

If the taxpayer is unaware he or she still had marketplace coverage, the taxpayer is responsible for repaying APTC even though the subsidy went to the insurance carrier and marketplace health plan was not used. There are numerous cases of modest income taxpayers owing thousands of dollars back to the government. The marketplace matching records with the employer usually occurs only at first enrollment with the marketplace and not when the employee enrolls into employer coverage.

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