IRS May Never Recoup $350 Million in Obamacare Tax Credit Overpayments

A quirk in the law means the IRS will never be able to recoup nearly $350 million in overpayments on Obamacare tax credits last year, and one top senator says he is worried that fraudsters will exploit the loophole to wring more cash out of the government.

Most customers in the health care law’s insurance exchanges get taxpayer-funded subsidies to help cover their premiums, and the amount is based on their expected earnings. At the end of the year, they are supposed to square their anticipated earnings with what they actually made. Because most exchange members received higher incomes — through promotions or better jobs — they have to repay the IRS.

The Affordable Care Act sets a cap on the top repayment amount, so consumers don’t get sticker shock at tax time. But Senate Judiciary Committee Chairman Chuck Grassley, the Iowa Republican who has emerged as a key watchdog on Obamacare, said some exchange customers could intentionally misestimate their earnings, breach the cap and then avoid having to pay it all back.