Treasury Inspector General for Tax Administration
June 20, 2012
TIGTA - 2012-24
Contact: David Barnes
WASHINGTON -- The method that the Internal Revenue Service (IRS) uses to estimate the resources it will need to implement the tax provisions of the new health care law needs improvement, according to a new audit report publicly released today by the Treasury Inspector General for Tax Administration (TIGTA).
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.
TIGTA conducted this 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.
“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 J. Russell George, the Treasury Inspector General for Tax Administration. “The role of the IRS in ACA implementation will be critical.”
TIGTA found that: 1) appropriate plans have been developed to implement most tax-related provisions of the ACA, and 2) 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. The IRS has not projected staffing needs beyond Fiscal Year 2013, and due to this lack of documentation, TIGTA was precluded from providing an opinion on the adequacy of staffing requests to support implementation of ACA tax provisions.
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 their 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.
Read the report.
Note: The difference between the date TIGTA issues an audit report to the Internal Revenue Service and the date TIGTA publicly releases the report is due to TIGTA's internal review process to ensure that public release is in compliance with Federal confidentiality laws.
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