Of all the companies worried that the Affordable Care Act will be bad for business, H&R Block may lay claim to the most unusual gripe.
The firm prepares millions of tax returns, one of every seven that are filed to the Internal Revenue Service. The vast majority of its consumers receive a refund. Last year, its 26.5 million customers got back $50 billion.
The Affordable Care Act could change that: It charges a tax penalty to Americans who do not carry health insurance. And that has H&R Block worried that some of those refunds will be eaten up – and a lot of customers will point a finger at the company.
Eighty-five percent of our customers get a refund, said Kathy Pickering, who directs the H&R Block Tax Institute. That refund could be offset by the penalty. And if that happens, theyre going to be understandably angry.
Last year, the company started thinking about how to curtail those types of surprises; it did research to understand how much consumers knew about the law, what they liked and what they didnt.
During this tax season, H&R Block is rolling out a no-charge health-care review assessment of the subsidies and penalties that taxpayers are likely to face in 2014.
The health laws subsidies for insurance coverage and penalties for not carrying a plan wont start in 2014. But the income that will determine how much an individual or family will receive is on the returns being filed this year.
H&R Block does not disclose the average income of its customers but does say that many are low- to middle-income. Most who earn less than 400 percent of the poverty line – just about $45,000 for an individual – would be eligible for a tax subsidy.
Do consumers have any idea? H&R Blocks research suggests they do not: The company found, in a survey conducted last year, that 77 percent of Americans had no idea that the income tax return theyre filing right now will determine how much of a subsidy they receive in 2014.
Forty-four percent of those ages 18 to 34 were unaware that they would face a penalty for not having coverage.
We found that most people didnt understand what the Affordable Care Act would mean for them, Pickering said. Thats when we decided this year to move forward with this education effort.
Starting with this tax season, H&R Block started running advertisements in print and on television, trying to build awareness of the new services it offers. One features a tax adviser, Ana Maria Costenza, who notes that the Affordable Care Act means big changes and that she has read all 900 pages of the law. (Pickering confirmed that she did read the entire law – It took weeks, she said – although not all of H&R Blocks other 89,999 tax preparers may have done a similar deep dive.)
Your 2012 tax return helps establish your eligibility for assistance in paying for health insurance, one fact sheet reads. Dont delay, its important to file your return on time with professionals who understand the new rules.
Not much will change for H&R Block consumers who already have health coverage. But for those who dont, the company will offer a tax and health-care review.
One review was drawn up for a fictional family of four, who had an income of $40,000 in 2012. That family would be eligible for a subsidy and, if it bought health insurance on the exchange, H&R Block estimates it would cost $170 per month.
If they decided to forgo coverage, they would face a penalty of $285 in 2014. That would increase to $975 in 2015. The Congressional Budget Office estimates that 6 million Americans will pay this fine.
The reaction to those numbers, Pickering said, is similar to public opinion of the Affordable Care Act: very split.
Some are excited to hear that the health-care law is finally happening and that this is really the start for them, she said. Others see this as one more penalty that theyll have to face, just something else from the federal government. Its pretty representative.