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$690 Million in Surprise Bills: 415,000 California Taxpayers Face Owing Thousands in Health Insurance Subsidies – How to Avoid the Shock?

Thousands of Californians Face Surprise IRS Bills Due to Excess Health Subsidies

Experts Advise Regular Updates to Avoid Subsidy Overpayments

According to CALMATTERS every year, thousands of Californians get a nasty surprise during tax season. They find out they owe the IRS hundreds or even thousands of dollars because they received too much in health insurance subsidies from Covered California. This issue comes from a reconciliation process required by the Affordable Care Act. The federal government gives subsidies based on estimated income, but if someone underestimates their earnings or doesn’t report changes in household size, they get more subsidy money than they should. When they file their taxes the government asks for the excess money back. In 2021, nearly 415,000 California households had to pay back about $690 million in total. This hits low-income families particularly hard.

These unexpected tax bills often happen because people have trouble estimating their annual income accurately. This issue is even worse for freelancers and those with fluctuating earnings. To avoid these surprises, experts recommend regularly updating your income and dependent information with Covered California. Checking in with an insurance agent who typically offers free services can also help. Mid-year reminders and staying in touch with Covered California ensure your subsidy amount is correct helping you avoid a big bill at tax time.

READ ALSO: Vast stretches of California lose maternity care as dozens of hospitals shut labor wards

$690 Million in Surprise Bills: 415,000 California Taxpayers Face Owing Thousands in Health Insurance Subsidies – How to Avoid the Shock? (PHOTO: CalMatters)

Covered California Plans Remain Valuable Despite Potential Repayment Risks

Even with the risk of large repayment bills many Californians still find Covered California plans valuable. The savings on monthly premiums are often more than the lump-sum payments they might owe at tax time. Experts suggest keeping some savings aside to handle any unexpected charges. Also, if you overestimate your income and get fewer subsidies than you qualify for you might get a refund. Understanding how the reconciliation process works is crucial for Californians. This knowledge helps them get the most benefits while avoiding financial surprises. Staying informed and proactive can help ensure they make the most of their health insurance without the shock of owing money later.

READ ALSO: The single largest cut in Gavin Newsom’s new budget hits California health care providers

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