Rest Assured: Tax Filings Will Be Verified Under Health Reform Rule Change

The health reform regulations that the Department of Health and Human Services issued July 5 do not eliminate requirements to verify the income of people seeking advance payments of premium tax credits to help them purchase health coverage in 2014, Centers for Medicare and Medicaid Services Administrator Marilyn Tavenner confirmed this week.  The new marketplaces that the federal government and states will establish under health reform will check income information against tax filings, Social Security data, and current wage information, just as we said on Monday.

Some people who apply, and are eligible, for premium tax credits may not have a history of filing taxes — and for good reason.  But a health reform critic suggested yesterday that that reality creates a gap in the verification requirements.  Let’s be clear:  it does not.

In 2014, advance payments of premium tax credits will be based on a projection of income for 2014.  Prior-year tax returns are a starting point for determining future income, but they are not the end point.  There are many reasons that individuals who will qualify for premium tax credits in 2014 may not have filed in the past.  Young people starting out in the workplace may have been claimed on their parents’ returns.  People whose earnings were below the threshold may have gotten a new job or a raise.

Regardless of such factors, anyone who receives premium tax credits is required to file taxes for the year that he or she receives advance payments so that the IRS can reconcile the advance payments with that person’s actual income for the year.  If someone who receives credits in 2014 does not file a 2014 return, they won’t be eligible for premium tax credits in future years (and, of course, they will be subject to the usual federal penalties for failing to file a tax return they were supposed to file).