tax document snafu bungles filing season for advisers, CPAs

As many as 800,000 taxpayers received tax documents with erroneous information

Feb 20, 2015 @ 1:36 pm

By Darla Mercado

Accountants and advisers whose clients purchased health care coverage via the insurance marketplace are scrambling upon finding out that 800,000 people received erroneous tax information.

Early Friday, the website, home of the federal insurance marketplace, posted a blog titled, “Is Your Form 1095-A Correct?” Those who purchased health care coverage in 2014 through the exchanges are supposed to receive a Form 1095-A in the mail, which has details necessary to file a federal income tax return for 2014.

It turns out that some of those forms listed the monthly premium amount of the second lowest cost Silver health care plan for 2015 instead of 2014, according to the blog post. The erroneous information is located in Part III, Column B of Form 1095-A.

As many as 800,000 taxpayers are affected by the error.

Though this doesn't mean that the tax credit for filers is incorrect, it's a printing error that made its way on the form, according to the blog. Corrected forms are expected to be available by early March, and taxpayers with erroneous forms are encouraged to wait to file their federal income taxes for 2014. Separately, 100,000 taxpayers in California's state-run exchange also received erroneous Form 1095-As.

As a result, advisers and accountants with clients who applied for coverage last year are now scrambling to contact clients and learn more about the development. This latest hurdle is only the icing on the cake for what's shaping up to be a difficult tax season for freelancers and independent contractors who already have additional health care-related paperwork.


“I've seen 1095-As come in from people who have insurance through the exchange here in New York, so I'm not sure if these are same [affected forms] or not,” Barry C. Picker, a certified public accountant at Picker & Auerbach, said. “I was about to give someone a tax return and they were getting a decent refund. Now, I don't know if I have to hold off and wait a few weeks to see if he gets a new 1095-A.”

He will be meeting with that client this weekend. A representative from New York's health care marketplace noted in an e-mail Friday afternoon that there were no systemic errors in the production of the 1095-As in the Empire State.

Those who have already filed their taxes using incorrect data from a 1095-A will likely have to file an amended return, which can't be done electronically. Those who find that they will owe money if they file an amended return may be reluctant to rectify the issue, Mr. Picker said. Meanwhile, those who are due a refund after filing an amended return may find that the money will take months to arrive.

“Someone in that situation can very well be losing out by having to wait that many months to get their money back,” Mr. Picker said. “With this [1095-A] being brand new this year, it's hard enough and last-minute gotchas aren't appreciated.”

Working with Form 1095-A has also been cumbersome for Jimmy Williamson, senior partner and a CPA at MDA Professional Group. He first heard of the development Friday morning after receiving a phone call from this reporter.

Clients have already run into problems obtaining their 1095-A and determining whether they're eligible for tax credits for coverage or owe money, he said. In Alabama, where Mr. Williamson is based, Blue Cross and Blue Shield is a major provider of health care coverage available on the federal exchanges. Some clients have had difficulty obtaining their 1095-A, as it was unclear whether Blue Cross or the federal exchange would be providing that information, Mr. Williamson said.

Clients must use Form 1095-A in order to file Form 8962 and claim a premium tax credit.

“People are having trouble getting the marketplace identifier and ID numbers [for Form 1095-A],” Mr. Williamson said. “This is what you need to have in order to fill out Form 8962.”

There have also been problems with software used to determine whether clients are eligible for the credit in the first place. One of Mr. Williamson's clients purchase health care via the exchange because he was on Social Security Disability but still too young for Medicare. Initially, the software indicated that the client owed $300 to the federal government, but then it turned out he was eligible for a premium tax credit of $160.


Working with Form 1095-A has been fraught with growing pains for advisers, accountants and their clients, but there are some valuable takeaways from this latest round of difficulties.

Naturally, clients who are freelancing, between jobs or retiring early need to get their advisers into the conversation when applying for health care subsidies.

Most of all, be sure that clients keep copies of their enrollment documentation.

“We don't have many who go to the exchange,” said Ted Sarenski, a CPA, personal financial specialist and CEO of Blue Ocean Strategic Capital. “But what they did initially should agree with the 1095-A: If you didn't keep good records, you can't verify it, and then you'd have to wait and see.”


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