H&R Block CEO Foresees Problems with Obamacare Tax Forms

H&R Block president and CEO Bill Cobb is expecting problems next tax season due to the Affordable Care Act, now that the Internal Revenue Service has released draft versions of the forms that will be needed, and pointed out that many taxpayers will no longer be able to file a simple Form 1040EZ.

In a conference call Wednesday to report on the company’s fiscal first-quarter 2015 financial results, Cobb noted that many of Block’s customers will be facing additional complexity on their tax returns next tax season.

“We’re looking forward to the upcoming tax season as we continue to demonstrate our value and expertise to our Tax Plus strategy and as our clients begin to face complexities in their tax situations resulting from the Affordable Care Act,” he said. “While there is a lot of work to do, I am confident that we’re poised to take advantage of the long-term opportunities that lie ahead.”

Cobb noted that Block is updating its systems to handle the Affordable Care Act. “From an operational perspective, we’re in the midst of preparing our network for the changes resulting from the Affordable Care Act, updating our systems, training our people and finalizing our strategy for 2015,” he said. “As most of you know the IRS released many of the draft forms in late July, offering the industry a first glimpse of how the law will be implemented from a tax perspective. Additional worksheet and instructions are anticipated which will enable us to gain a fair understanding of how ACA will impact tax returns.”

He pointed out that the IRS’s draft forms for the Affordable Care Act are complex and time-consuming, and many taxpayers who used to be able to file simple tax forms such as the 1040EZ no longer will be able to do so (see IRS Releases Draft Forms for Obamacare).

“As expected the forms are very detailed and can present significant complexity depending on the filers covered status during year, income levels and household composition,” said Cobb, according to the Washington Examiner and a transcript of the call on Seeking Alpha. “Depending on these situations, there are instances where filers may need to file multiple new tax forms and complete additional worksheets. Second, while 1040EZ filers maybe not necessarily be the primary demographic impacted by the ACA, those that received an advanced tax credit will no longer be eligible to file their returns on a 1040EZ. Third, many filers who did not have qualified health insurance coverage for the full year will either face a tax penalty or will be eligible for an exemption. Depending on the type of the exemption, the process to claim it could be quite cumbersome and time consuming.”

Filers whose households are covered by qualified health insurance plans will be able to test their coverage status on their tax returns without the need to provide additional documentation, Cobb noted. He sees opportunities to help tax clients cope with the complexities of health care reform, but it may take a long time beyond next tax season for that to happen.

“After analyzing the early drafts of these new forms, we continue to believe that healthcare reform will impact our claims and in turn presents an opportunity for H&R Block to demonstrate our value,” he said. “As we said all along, however, it’s going to take a few years for the opportunity presented by health care reform to develop. This is a long-term play and we’re making smart investments now to ensure we’re prepared to serve our clients and meet their needs when they turn to us for help in understanding how the new law impacts them. We believe we’ve committed more resources of this initiative than any in the tax industry. And I am confident we’ll offer unmatched value as Americans seek assistance.”