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10 Percent of Health Law Subsidy Recipients Got Right Amount, IRS Says

By Rebecca Adams, CQ Roll Call

July 22, 2015 -- Only 10 percent, or 300,000 people, who obtained health law marketplace subsidies initially received the correct amount, IRS Commissioner John A. Koskinen told lawmakers in a letter and briefing last week.

The remainder are supposed to return the extra amount or can get refunds from the IRS.

The Affordable Care Act provides federal tax credit subsidies to people whose income is up to four times the federal poverty limit. But it's paid to health insurers in advance, based on what people who get the subsidies guess that they will earn in the coming year. 

Republicans have said the payments are vulnerable to fraud and errors because the money goes out in advance as discounts to reduce insurance costs.

About half of the people who got subsidies and later filed new IRS paperwork received more money than they were entitled to receive, said Koskinen. The average overpayment that taxpayers had to repay was $800.

Another 40 percent did not get as deep a discount on their coverage as they could have through the subsidies, so they received refunds when they filed taxes. The average amount the IRS sent back was about $600.

The agency chief also said that about 7.5 million people had to pay a penalty under the law's individual mandate for not getting health insurance. Another 12 million people escaped the fine by claiming an exemption. Koskinen noted that about 300,000 people who paid the penalty could have gotten a health care coverage exemption, and the IRS is sending them letters hinting that they should take another look at their returns and consider amending them.

Almost 1.2 million of the estimated 4.8 million people who were supposed to file a form to either get back money that the IRS owes them or to pay back the federal government still haven’t sent in a tax return, Koskinen said. About 360,000 of them got an extension that gives them until Oct. 15 to file their tax returns.

Separately, another 760,000 people that got subsidies did file their tax returns but did not send in a new form that taxpayers are supposed to complete to check to make sure their subsidies are correct.

"We are committed to learning from this experience so that we can improve our processes," Koskinen wrote.

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