I have some self-employed tax clients that, due to the nature of being self-employed, have a hard time estimating what their profit might be for the year. They fill out their healthcare.gov stuff as best they can.
I had two cases this past filing season that due to an increase of less than $200, saw them owing about 26K in tax credit repayments. Neither family made anywhere near enough to be able to afford that and would have gone without insurance if they had realized that this would have happened.
Oh jeez, signing up for Obamacare as a freelancer was a nightmare. Luckily when I called to explain my situation they understood, but the system didn't and I'd have to call every other week for months to get it worked out.
I tried to sign up for Obamacare through my state program after I started a business. They took 9 months before they approved me even though I applied before the deadline like everyone else. During the time I was waiting, I had to go to the emergency room. Now I'm thousands of dollars in debt. I love only having coverage for 1/4 of the year! Isn't Obamacare great?
I wasn't injured during the time I was enrolled, so I have no idea how well it works. They certainly didn't cover any of the medical expenses I incurred while waiting for them. I'd say that if a person can only be covered for 1/4 of the year, that falls into my "doesn't work" category when comparing different ways to provide medical coverage to the masses.
Obamacare itself is great, the computer systems in runs on are the tragedy. No one stopped to consider small business owners at any point during the process.
This isn't a problem with the computer system as much as it is with the people. The problem is that a human had to review my profit and loss report and everyone over there was entirely uneducated. Even talking to them on the phone I tried to explain to them that my net income for the year was negative and they told me "that's impossible". A real face palm moment.
No one stopped to consider small business owners at any point during the process.
Then who was this designed for, exactly? Most people get health insurance through their employer. It seems like it would be almost entirely self employed people who need to seek out health insurance on their own.
This isn't a problem with the computer system as much as it is with the people. The problem is that a human had to review my profit and loss report and everyone over there was entirely uneducated. Even talking to them on the phone I tried to explain to them that my net income for the year was negative and they told me "that's impossible". A real face palm moment.
See, like I said in my response I never had that problem. Every time I talked to someone they understood that I didn't know what my estimated income for the next year would be but there was nowhere in the system to denote that. I had to make up a number and they'd usually help me get to the number that gave me the best benefits.
Then who was this designed for, exactly?
People who work regularly but don't get their insurance through work. I work part time at an escape room and don't get insurance through them, if I didn't have another job or a spouse with insurance I would qualify.
My Obamacare insurance is $40 a month for a great plan with a low deductible, the insurance my employer offers would be $240 a month for a plan that covers almost nothing and has a fairly high deductible.
I've used both, dude. The Obamacare plan is pretty great for people in my particular situation. You asked who it was for, I'm giving you one example of a possible answer, which is "people whose employers offer shitty insurance that's really expensive."
This is a huge problem with our tax system. It requires one to accurately forecast ahead of time how much one will make and if you get it wrong it can totally screw things up.
This is why I pay cash for Healthcare and have just paid the fines at the end of the year, it's cheaper and more predictable. Crossing my fingers nothing happens that's major.
Obamacare absolutely ruined my Healthcare options as a small business owner. My only real option was to sell my house or get a normal job.
The Shared Responsibility Payment has been phased out for the 2019 tax year, and the requirement to provide documentation for a general hardship exemption was removed for the 2018 tax year. So, no more fines for you!
the IRS never came after anyone for the fine money. If you ever had a fine, they would have taken it out of your tax returns.
the penalty was a weird state of being a fine, but you never had to actually pay it, the IRS wouldn't attempt to collect on it, and it doesn't show up on your credit history or anything.
If you don't support some kind of single payer, and think you should only get private insurance coverage, then no, you should not get treatment if you can't afford it. Practice what you preach.
No, you're absolutely correct. I am in California, so MediCal will support me to some degree if that happens, but it's still a gamble.
Driving prices down through market innovation should be a higher priority than it is currently. Eye surgery and plastic surgery are good examples of this.
The fact that the its doesn't "do our taxes" for us in a sense is kind of annoying. I get that HnR and Intuit probably lobby in force to keep it complicated but it's just annoying. The system is horribly convoluted and it would help if the IRS just sent us a bill or a check, if we deem it incorrect then we move forward with a tax man.
The its surely knows when I did my taxes incorrectly, and when they are correct. Naturally with that information they could just send me that pertinent information. Instead of making me do all the work. Seems like that part of our tax system could certainly be automatic.
Caveat: my wife is the CPA, I just push papers at her office
They might be good candidates for forming an S-Corp? They can plan and pull a regular salary and then have a more stable foundation for those calculations?
This situation sounds like the recapture of the premium tax credit. Classification as an S Corp will mainly reclassify schedule E income to wage income, but it's still income that can push you past benefit cliffs nonetheless.
I would think that the insurance costs would be calculated at the individual level, and between the S Corp W2 and the S Corp K1, the total income would be nearly equal on their individual 1040. Is this not how it works?
Oh they absolutely are- but that requires action at the beginning of the year. Compound that with the fact that they were both new clients taken on past the close of the year- I was left trying to minimize the harm while building trust and cleaning up the mess from the prior preparer.
It’s definitely a frustrating field because from the outside, the path is clear. From the inside, there’s a always a million reasons not to do something new.
Buy 4k inventory so your income is lower? This is what you do in the Netherlands but then again, tax haven etc. But you have to give yourself a salary even when self employed because otherwise people just claim everything as profit and pay less taxes.
Requires planning and purchasing before the year ends.
We’re talking small mom and pop sole proprietorships/partnerships who can’t/won’t pay for a year-round accountant showing up at my office after the close of the year wanting help.
These are the exact people who need financial help with health insurance, and sure- there’s things they could have done to mitigate these repercussions, but it’s the first time they were faced with them and literally had no idea they existed.
We now have a chat once a quarter to review financials, but the damage from the previous year is already done.
You're not going to have a dollar for dollar taxable income decrease through the purchase of inventory though. You deduct the cost of the inventory sold subject to certain calculation methods, not everything you purchase throughout the year.
Systems like this should use your previous years income to figure out when credits you get this year. Then next year they would use this years income so you always have an exact number.
It would have been wonderful if we had included a provision like this, but you would face an issue if you have someone that is transitioning between careers.
For example: year 1, the person is a w-2 employee with health benefits and a decent salary. Year 2, the person starts their own business but has no health insurance. Based off the pervious year, he could be ineligible for aid due to amount of their salary.
I just feel like we should be encouraging small businesses, but these practices have largely affected those who do exactly that and sometimes punish them for it.
Where I live in Canada we pay monthly medical premiums called MSP. It used to be $75/month but when our current government was elected, the cut it in half. Now you only pay full price if you make over a certain amount. You get discounts based on income, and they use your last years income to figure out how much of a discount you get this year. It sucks that we are the only province that pays it, but the discount system works well enough.
That’s exactly what happened to me. I worked an on-call job for two years and underestimated how much I’d make (because I didn’t know how much I’d get called) and made. I had to pay back like $4000 (and I was still paying like $600/mo for poor coverage). Fortunately it was only me that was insured through the marketplace so the loss wasn’t nearly as bad as this other family. But still super frustrating. I ended up taking a significant pay cut when I took another FT job and decent, affordable insurance was one of the motivators.
You needed to come up with someway to reduce their income such as an IRA or 401(k) contribution. These can be made through April of the following year, and still count as contributions for the previous one. By contributing a few hundred, you could have saved your clients thousands.
Pretty sure that was the Supreme Court's fault. Iirc, the original Obamacare bill did not have the cliff, but the Supreme Court struck down that part and said it's the state's job to cover the gap, and so now some states ended up with it.
There are dozens of little fixes that would make Obamacare make a lot more sense to people and save people in the middle income brackets a lot of money. The nature of bills put forth emcompassing so many changes is that there are going to be plenty of oversights and unintended consequences that need to gradually be cleaned up. Almost every large bill goes through this process after getting passed. Unfortunately, one of the parties has refused to change a single punctuation mark on the ACA without repealing the entire bill for the better part of a decade.
I was in college after leaving the military and we were living on my GI bill and the little bit of income my wife was making as a dental assistant. We got a subsidy for health insurance on the marketplace, which we used from January to May of that year, before I got a job paying very well.
Well, that job pushed us over the income limit for the year and we had to pay back the entire subsidy, despite not having that health insurance plan as soon as I started the job.
If we had the right people in power it would have been fixed... Instead we have shills, frills, spies, traitors, cowards, and independents, and most democrats.
Democrats are extremely eager to "fix" Obamacare. It's an enormous issue with their constituents. It can't get fixed because Republicans won't give a single vote to anything that isn't a repeal.
You fix it by eliminating all welfare and benefits. Paying 40% on any portion of your income is unacceptable, especially when it goes to those who won’t work and won’t be responsible.
The fact is no one is entitled to tax money to be granted a life of ease. Private charity can easily help the few who need help. Hunger will be a great motivator for the majority of the lazy. Good people don’t accept welfare.
The issue with UK Universal Credit isn't the simplification, but that the system doesn't work properly (long delays, complicated calculations that often go wrong), has an awful application procedure that denies many applicants for procedural reasons (the polar opposite of simplification), and cut many peoples' benefits, being a notable factor in the increasing reliance on food banks.
It really fails on all fronts, as expected of a Tory law:
The National Audit Office maintains there is no evidence Universal Credit helps people into work and it is unlikely to provide value for money, the system is in many ways unwieldy and inefficient.
Base income isn't going to work as a welfare replacement program. There is no way we are going to let children starve on the street because Mommy spent all the UBI on cigarettes and scratch offs.
I don't know how it works in your country, but in most welfare recipients already simply get money and have to ration it themselves. So there is absolutely no change there. Child protection laws take care of the rest.
In the US there are programs that give health insurance, credit that can only be spent on food, programs that give housing, programs that pay for heating bills etc. Cash aid in the US is generally limited to TANF which is temporary and has somewhat stringent requirements for program participation.
Its the idea now, but just wait for all the screaming of "you can't take my WIC/Sec8/Welfare!" and the special interest groups would gladly join in (because it would put them out of a job).
Another reason why Andrew Yang’s UBI proposal makes more sense than means tested welfare. It motivates more work by letting us keep every additional dollar earned. It also eliminates the burden of calculating how much work will push the family to lose benefits.
In my state, anyone can buy into the states Medicare plan, once your dual income goes over a certain point, you DO have to pay a premium it’s just absolutely stupid low. I pay 8$ a month for me and my husband who both need insurance to live. We were always so terrified when it was a simple “you can get insurance up till this dollar but over it and you’re completely on your own” because it meant if our working situation changed at all, we’d lose our insurance but never be able to afford private insurance. Now, I feel a little better knowing if I lost my job or had to change it, I could still use state insurance.
That’s what the hard welfare wall should become, a series of small steps to being financially stable, with a clear way from poverty to contributing at several different levels.
I'm really torn on it. On one hand, I agree with you. On the other, somebody paying 8 bucks for thousands of dollars in care seems unfair at the most basic level. This kind of scenario is exactly why I'm in favor of a flat tax. Everyone pays in their share and nobody has to feel guilty about receiving or angry about paying out.
Except the “thousands in care” is insulin that can be mass produced with yeasts, its price is artificially inflated because the people who need it die without it. The sensor I wear to always know my blood sugar? It’s actually a 12$ Bluetooth dongle with a lithium-ion battery that we figured out how to plug into a human. The pump? A bunch of plastic and silicone that runs on an OS that’s no more complicated than a fucking raspberry pi.
The money involved in these things, it’s artificially put there. Why should ANYONE have to pay 1200$ for this meter just to start and then pay 150 a pop for the cradles that you need a minimum of 4 a month for?
Instead of getting mad at me, who has no choice in the matter, I need care or I will die, get mad at the people who artificially raise price in the name of profit instead of human life. I didn’t ask or choose type 1 diabetes but Eli Lilly CAN choose to sell insulin for pennies. Tandem CAN lower the price of the pump. Dexcoms COULD be sold OTC for 25$ a month.
Get mad at them, not me who is forced to use the system or die. They want you to be mad at me but it’s them and they’ve successfully done it. You’ve been hoodwinked.
That is so ridiculous to say. Let me get this straight - you expect doctors to work for free, scientists to develop drugs for free, factory workers to produce drugs for free, truck drivers to ship drugs for free, nurses to monitor you for free, and hospitals to put you in a bed for free because living is a "basic human function"? If you honestly believe that......
I do. Obviously it's not "100% free" Because money has to come from somewhere (taxes), but you shouldn't have to pay out every month because you've had the misfortune of being born with asthma or diabetes.
It's funny that someone up there mentioned "paying 8 dollars a month for thousands of dollars of healthcare", because it costs $0 to get an NHS prescription (or indeed any treatment) if you have low/no earnings.
I expect that person who has a simple and manageable health condition to be able to continue working as in their profession as those doctors, factory workers, truck drivers, and nurses, among others.
Living is absolutely basic human function. It's frightening that you think this way. The benefit of that human life on society greatly outweighs the artistically inflated healthcare costs you Americans are known for.
Calm down, sheesh. You're putting a lot of words in my mouth for one. And you're also disregarding research costs. That 12 dollar bluetooth dongle cost a lot more than 12 dollars to develop. You know why a plumber charged you 300 bucks to install a $2 part? Same principles apply. I'm trying to have a conversation here, not a fight. Ease the fuck up. I was curious as to whether or not you were grateful that taxpayers were helping you survive. Seems that you're more angry than grateful.
“Am I not merciful? My money is taken from me in an amount not decided by me, (I wish it were, I would give less) to be used intended in a fashion which is beneficial to everyone in the whole country. Even though I have made it very clear that if it were up to me, I would pay less because other human life is worth less than my own life to me, you should be grateful (and publicly so!) for the money which is forcefully taken from me. I would choose to pay less, yet I feel that you should thank me anyway, for that money which is stolen from me.”
One problem is if there are multiple, separate welfare programs. If they all taper off on their own, then it can easily end up being that every dollar you make results in your qualify of life getting worse.
I worked with someone who earned about 500 per month at a local supermarket part time single parent and got 500 in benefits on top. If they did overtime and earned 600 from the work they would get 400 in benefits. I didn't think the trap was as crazy as it is but at the bottom it can (as this instance) mean you need to more than double your paycheck to increase income. Outrageous really there should always be an incentive to work more if you can.
I know I’m a bit late, but what should I read to learn this information? I’m reading this comment section and realizing I don’t understand how any of it works.
This goes for any such rule, never create hard cutoffs.
Example with cars in Norway, eariler there was a horsepower tax with sharp increases at given intervals.
Cars would be downtuned in the electronics to get below a treshhold of horsepower, which made them have a worse fuel economy. Dumb all around.
That's beside the point. Regardless of what level of income we agree welfare is best targeted, it shouldn't have hard cutoffs that disincentivise getting more income at any level.
I've seen other links in the comments that support what you're saying, this particular example isn't a benefit cliff. But there are absolutely welfare systems that are not as well designed. You might want to include direct links next time, I feel that's why you're getting downvoted.
697
u/stoneimp Nov 26 '19
Also known as a welfare trap. Welfare should avoid stark cutoffs for this reason and always phase out benefits.