Treasury Inspector General for Tax Administration
Office of Audit Recovery
Act
HEALTH COVERAGE TAX CREDIT RECOVERY
ACT PROVISIONS WERE TIMELY IMPLEMENTED, BUT PROGRAM CAPACITY IS LIMITED
Issued on September 24, 2010
Highlights
Highlights of
Report Number: 2010-41-122 to the
Internal Revenue Service Commissioner for
the Wage and Investment Division.
IMPACT ON TAXPAYERS
The
Health Coverage Tax Credit (HCTC) is a refundable tax credit and was created to
assist certain workers who lost their jobs due to foreign trade and retirees
who receive payments from the Pension Benefit Guaranty Corporation. Our review identified that processes were
developed to ensure HCTC payments were timely and accurately processed. All payments TIGTA reviewed were sent to the
Health Plan Administrators on time to ensure the continuity of the individual’s
health coverage.
WHY TIGTA DID THE AUDIT
The American Recovery and
Reinvestment Act of 2009 (Recovery Act) included provisions to help
make health coverage more affordable. These
provisions are expected to improve the availability of health coverage to
eligible individuals and their qualifying family members. In Calendar Year 2008, the Internal Revenue Service
(IRS) processed 159,012 payments totaling $121.8 million, which included
$44.1 million in payments from individuals and $77.7 million in Federal
Government subsidies. Our overall
objective was to evaluate the efficiency and effectiveness of HCTC payment
processing.
WHAT
TIGTA FOUND
The IRS timely and accurately implemented provisions
relating to the Advance Monthly Payment Option included in the Recovery
Act. Our review identified that the IRS
increased the Federal Government portion of health insurance premiums paid from
65 percent to 80 percent. The IRS also
implemented processes to enable individuals to request reimbursement for
premiums paid while enrolling in the Advance Monthly Payment Option.
Although TIGTA found that payments were timely and
accurately processed, the IRS will face challenges if there is a significant
increase in the number of monthly enrolled participants. Current IRS systems are built to support only
57,000 enrolled participants in any given month. In addition, TIGTA identified that
eligibility indicators for 3,661 individuals in Calendar Year 2009 could not be
posted to the respective individuals’ IRS tax account. HCTC Program management noted that a business
decision was made to not resolve these unpostable conditions because they
represent less than
1 percent of the accounts for which an indicator is added. Not establishing a process to resolve
unpostable situations can have a negative impact on these individuals and
result in taxpayer burden.
WHAT TIGTA RECOMMENDED
TIGTA recommended that the Commissioner, Wage and
Investment Division, develop a process to ensure the accuracy of Health Plan
Administrators’ information on the IRS financial system and HCTC financial
system; ensure individuals participating in the Advance Monthly Payment Option
receive accurate Health Coverage Tax
Credit (HCTC) Advance Payments (Form 1099-H) payment information; and identify
and resolve unpostable records to ensure eligibility indicators are added to
individuals’ tax accounts.
The
IRS agreed with two of the three recommendations. The IRS disagreed with our recommendation to
ensure individuals receive accurate Forms 1099-H. IRS management indicated that individuals receive
accurate Forms 1099-H and the form is for information only. Notwithstanding IRS management’s response,
TIGTA found that some individuals did receive inaccurate
Forms 1099-H. Form 1099-H needs to be
accurate because individuals receiving Forms 1099-H use this information when
preparing their tax returns.
READ THE
FULL REPORT
To view the report,
including the scope, methodology, and full IRS response, go to:
http://www.treas.gov/tigta/auditreports/2010reports/201041122fr.html
Email Address: inquiries@tigta.treas.gov
Phone
Number: 202-622-6500
Web Site: http://www.tigta.gov