Obamacare’s tax law adjustments created new hurdles for the Internal Revenue Service and its watchdog, such as identifying nearly $120 million of related discrepancies, according to a report.
“One of the most critical challenges currently confronting the IRS is the implementation of the [Affordable Care Act], which represents the largest set of tax law changes in more than 20 years,” said Treasury Inspector General for Tax Administration J. Russell George in a report released this month.
TIGTA’s $1.8 million budget increase in 2015, according to a spokesman, was at least partly due to the additional responsibilities.
One addition, called the medical device excise tax, requires manufacturers, producers and importers to collect taxes on medical devices for the IRS and began Jan. 1, 2013.
Within the first six months, TIGTA identified about $117.8 million of unpaid medical device taxes. The missing money stemmed from inaccurate paper-filed forms overlooked by the IRS, according to the report.
Additionally, the IRS cannot identify how many medical device manufacturers registered with the Food and Drug Administration are noncompliant, because requirements to register with the FDA and to pay the tax differ, according to a July report.
Also, the FDA does not record the manufacturers’ IRS identification number.
During the same six months, the IRS erroneously issued more than 200 fines totaling about $700,000 related to medical device taxes, though the period was considered a penalty-relief. The IRS reversed the fines and apologized, according to TIGTA.
Obamacare’s state-run marketplace exchanges also created challenges for the IRS.
TIGTA identified policy deficiencies that allowed security weaknesses within the exchanges. As a result, after being shared with the states, an individual’s private tax return information may be jeopardized.
For example, the documentation the IRS requires to release tax information “does not provide sufficient evidence” that the exchanges have tight enough oversight, according to TIGTA.
Because some components of Obamacare overlap, TIGTA and the Department of Health and Human Service’s inspector general developed a multi-year strategy to assess implementation and will coordinate future projects.
Ensuring the integrity of the exchanges is the HHS IG’s top priority for fiscal 2015.
