WASHINGTON - Taxes? Who wants to think about taxes around Labor Day?
But if you count on your tax refund and you're one of the millions getting tax credits to help pay health insurance premiums under President Barack Obama's law, it's not too early.
Here's why: If your income for 2014 is going to be higher than you estimated when you applied for health insurance, then complex connections between the health law and taxes can reduce or even eliminate your tax refund next year.
Maybe you're collecting more commissions in an improving economy. Or your spouse got a better job. It could trigger an unwelcome surprise.
The danger is that as your income grows, you don't qualify for as much of a tax credit. Any difference will come out of your tax refund, unless you have promptly reported the changes.
Nearly 7 million households have gotten health insurance tax credits, and major tax preparation companies say most of those consumers appear to be unaware of the risk.
PROS & CONS
Using the federal income tax system to promote social policy goals is a time-honored strategy for policymakers of both political parties.
Some pros and cons of using the tax system to help people pay premiums for private health insurance, as the Affordable Care Act does:
PRO: Could build support for the health overhaul because tax credits have greater political popularity than traditional government spending programs.
CON: Complicates tax filing for many lower-to-middle income people, who may not be able to afford tax-preparation services.
PRO: Avoids the social stigma of Medicaid, the safety-net health care program for low-income people. (Separately, the health law also expands Medicaid.)
CON: Requires people who get the tax credits to accurately project their incomes for the coming year, a real challenge for those who may not have stable employment.
PRO: The Internal Revenue Service has a lot of experience administering tax provisions that serve a social policy agenda, from mortgage deductions for home ownership to child care tax credits that help families.
CON: It constitutes mission creep for the IRS, straining the agency when an estimated $385 billion a year in taxes owed, or more, goes uncollected.
"More than a third of tax credit recipients will owe some money back, and (that) can lead to some pretty hefty repayment liabilities," said George Brandes, vice president for health care programs at Jackson Hewitt Tax Service.
Two basic statistics bracket the potential exposure:
The average tax credit for subsidized coverage on the new health insurance exchanges is $264 a month, or $3,168 for a full 12 months.
The average tax refund is about $2,690.
Having to pay back even as little as 10 percent of your tax credit can reduce your refund by several hundred dollars.
Tax giant H&R Block says consumers whose incomes grew as the year went on should act now and contact HealthCare.gov or their state insurance exchange to update their accounts.
They will pay higher health insurance premiums for the rest of this year, but they can avoid financial pain come spring.
"As time goes on, the ability to make adjustments diminishes," warned Mark Ciaramitaro, H&R Block's vice president of health care services. "Clients count on that refund as their biggest financial transaction of the year. When that refund goes down, it really has reverberations."
The Obama administration says it's constantly urging newly insured consumers to report changes that could affect their coverage.
But those messages don't drive home the point about tax refunds.
"What probably isn't clear is that there may be consequences at tax time," said Ciaramitaro.
Aaron Albright, a spokesman for the Health and Human Services department, said the administration plans to "ramp up" its efforts.