Delays in employer and insurer reporting of health insurance information have reduced the IRS’s ability to determine whether taxpayers and their dependents have basic health insurance as required under the Affordable Care Act’s individual mandate, according to a new government report.
The report, from the Treasury Inspector General for Tax Administration, recommends the IRS instead offer an online tool that would make it easier for taxpayers to find out if they owe a “shared responsibility payment” because they lack “minimum essential coverage” under the health care law, and how much they would owe. Such a tool is already available to IRS examiners and appears to work well at estimating the payment. The TIGTA report suggests the same tool be provided on IRS.gov to taxpayers. The IRS agreed with TIGTA’s recommendation and plans to look into providing an online tool for estimating the shared responsibility payment.
Beginning in January 2014, the Affordable Care Act required each individual to have basic health insurance coverage known as minimum essential coverage, or MEC, or pay an additional tax which is referred to as a shared responsibility payment, or SRP. The ACA allows for exemptions from the MEC requirement. The exemptions can be obtained from a health care exchange or from the IRS.
TIGTA found that the Treasury Department has delayed employer and insurer reporting of health insurance information until March 2016. Therefore, the IRS has not developed processes and procedures to verify compliance with MEC requirements for the 2015 filing season.
However, the IRS will assess MEC compliance on tax year 2014 tax returns that it identifies through its normal examination compliance activity. To help tax examiners, the IRS developed a tool to compute the SRP. TIGTA said it found that this tool accurately computes the SRP. In addition, TIGTA believes the tool would be helpful to taxpayers and should be made available on IRS.gov.
In addition, the IRS plans to use information obtained during the 2015 filing season to develop post-processing compliance strategies to be used in future years.
“As many taxpayers are unfamiliar with their obligations under the Affordable Care Act, the Internal Revenue Service should provide taxpayers with an online tool to assist them in calculating the amount of the shared responsibility payment owed,” said TIGTA Inspector General J. Russell George in a statement.
TIGTA recommended that the director of the IRS’s Affordable Care Act Office add an online SRP calculation tool to IRS.gov for the 2016 filing season, in a continued effort to provide taxpayers with self-assistance interactive tools. The IRS agreed with the recommendation and plans to assess the feasibility and cost of providing the tool.
The IRS also has plans for dealing with taxpayers who qualify for an exemption from the individual mandate.
“We would note that, for the 2015 filing season, when there is no apparent error on a tax return, the IRS will use its normal post-filing compliance processes to verify exemptions claimed,” wrote IRS Affordable Care Act director Carolyn A. Tavenner, in response to the report. “Our plans include the use of information obtained during the 2015 filing season to develop post-processing compliance strategies to be used in subsequent years.”
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