The U.S. Treasury Inspector General for Tax Administration (TIGTA) has released its latest Semiannual Report to Congress, which covers April 1 to Sept. 30 and cites the Affordable Care Act (ACA) as the IRS’ most significant undertaking. While the report recapped many of the agency’s challenges, including the implementation of the Foreign Account Tax Compliance Act (FATCA), TIGTA gave the health care legislation its own section to completely explain the ACA’s effect.
“One of the most critical challenges currently confronting the IRS is the implementation of the Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act of 2010 (Affordable Care Act or ACA), which represents the largest set of tax law changes in more than 20 years,” said Inspector General J. Russell George.
George went on note the span of the ACA’s reach, explaining that its implementation will require the collaboration of several inspectors general and departments, such as the Office of the Inspector General and Department of Health and Human Services. This coordination is aimed at monitoring and evaluating the ACA’s implementation.
What TIGTA found in its reports
The Semiannual Report recapped findings from several TIGTA reports relating the the ACA’s implementation. Here are some key points from each:
- One report noted the IRS needs more safeguards in place to protect federal tax information that is submitted to the agency through the health care exchanges under the ACA. TIGTA noted the IRS did not require a security assessment from insurance providers that operated on the exchanges and recommended the agency put systems in place for having these providers conduct independent security assessments.
- In April, TIGTA released a report stating the IRS needed to update its medical device excise tax program under the ACA, noting that reported revenues from the tax fell short of projections from the Joint Committee on Taxation, among other issues. One of TIGTA’s suggestions was that the IRS should better identify noncompliant manufacturers.
- Under the ACA, the IRS imposes a fee on prescription drug importers and manufacturers that sell to certain government agencies. While the IRS published guidelines regarding the fee, TIGTA suggested the agency clarify regulations for Form 8947, Report of Branded Prescription Drug Information, to reduce taxpayer confusion.
- The IRS fields requests for Advance Premium Tax Credits and Income and Family Size Verification information. By March 31, the IRS responded to millions of requests, with a 99.97 percent accuracy rate. While the number of inaccurate responses was small, they still slowed down the process.
What to glean from the Semiannual Report
Although some of the issues noted in TIGTA’s report to Congress focused on only individual tax information reporting challenges under the ACA, it does indicate the extent to which the IRS must adjust to implement the health care law. In addition to TIGTA’s reports on how the ACA is changing tax legislation, IRS Commissioner John Koskinen recently noted the implementation of the individual ACA reporting requirements, which are only a small part of the new reporting responsibilities, present such an undertaking for the agency that they could delay the 2015 tax season.
While these are issues the IRS must tackle, the challenges indicate large employers, self-insured companies and insurance providers must take steps to understand their reporting obligations before the official start of ACA reporting for businesses in the 2016 tax season. With the IRS operating on a tight budget, lacking the full-time staff to field all questions and working out the kinks of the health care law, affected organizations should have a process in place before the 11th hour.
Check out our education section for more about ACA reporting requirements for insurers, large employers and self-insured employers.
