The Internal Revenue Service needs to do a better job of estimating its staffing needs for implementing the Affordable Care Act, according to a new government report.
The report, by the Treasury Inspector General for Tax Administration, found that the method used by the IRS to estimate the resources it will need to implement the tax provisions of the new health care law needs improvement. The IRS projected its staffing needs for implementing health care reform to be 1,278 full-time equivalents in fiscal year 2012 and 859 full-time equivalents in fiscal 2013. But the IRS has not projected its staffing needs for the health care reform law beyond fiscal 2013. The lack of documentation to support the staffing requirements needed to implement the Affordable Care Act precluded TIGTA from providing an opinion on the adequacy of staffing requests to support implementation. “The IRS did not analyze each provision to determine the amount of staffing necessary to implement the provision,” said the report.
“Because this affects millions of taxpayers and includes the largest set of tax law changes in more than 20 years, it is imperative that the IRS appropriately plans for the implementation of ACA tax provisions,” said TIGTA Inspector General J. Russell George in a statement. “The role of the IRS in ACA implementation will be critical.”
On the positive side, the report acknowledged that the IRS’s planning efforts for the tax provisions of the health care reform law appeared to be adequate. The Patient Protection and Affordable Care Act of 2010 and the Health Care and Education Reconciliation Act of 2012, collectively referred to as the ACA, were both signed into law in March 2010 and together contain over 500 provisions. Over 40 of these provisions added to or amended the Internal Revenue Code, and provide incentives and tax breaks to individuals and small businesses to offset health care expenses.
They also impose penalties, administered through the Tax Code, for individuals and businesses that do not obtain health care coverage for themselves or their employees. The IRS’s role is to implement and administer the various tax provisions included in the ACA—a major challenge as the ACA is the largest set of tax law changes in more than 20 years and affects millions of taxpayers. Revenue provisions contained in the legislation are designed to generate $438 billion3 to help pay for the overall cost of health care reform. Additionally, new reporting requirements have been established. Another intended purpose of the ACA is to make health insurance more affordable and available through incentives.
TIGTA conducted the audit because the IRS is responsible for overseeing a significant part of the legislation that includes, but is not limited to, administration of additional taxes, penalties, and fees on individuals and employers; determinations of various exemptions from those taxes; and oversight of new information reporting requirements. The new taxes, fees and penalties account for approximately $438 billion. TIGTA’s overall objective was to assess the IRS’s overall planning to implement the tax provisions of ACA.
TIGTA found that appropriate plans have been developed to implement most tax-related provisions of the ACA, but at the same time the IRS would benefit from improving the quality of its resource estimation process. The IRS’s plans for implementation of ACA tax provisions addressed tax forms, instructions and most of the affected publications, as well as employee training, outreach and guidance to taxpayers and preparers, computer programming and data needs.
TIGTA recommended that the IRS perform an analysis to evaluate the resources necessary to efficiently implement the provisions and ensure that this process is documented.
In response to the report, IRS management agreed with the recommendation. The IRS plans to complete, by the end of fiscal year 2012, an evaluation of the major ACA provisions for which implementation has not been completed and evaluate the resources needed for implementation, especially any with specialized skills.
“As with any large-scale, multi-year endeavor, we will continue to adapt and refine our approach over time,” wrote IRS deputy commissioner of services and enforcement Steven T. Million in a letter responding to the report.
The Supreme Court is expected to hand down a decision later this month on the constitutionality of the Affordable Care Act and its individual mandate. If part or all of the law is ruled unconstitutional, the IRS would need to adjust its planning and staffing needs accordingly.
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