Treasury Inspector General for Tax Administration
April 25, 2013
TIGTA - 2013-17
Contact: David Barnes
Washington – The Internal Revenue Service (IRS) continues to make progress in its implementation of some key elements of the Affordable Care Act (ACA), but it could expand the use of employer-provided health care information to ensure employer, health insurer, and taxpayer compliance with the ACA, according to a new report publicly released today by the Treasury Inspector General for Tax Administration (TIGTA).
The ACA establishes new information return reporting and sharing requirements for third parties such as employers and health insurers. The reported information will be used to administer the Advance Premium Tax Credit, the individual mandate to obtain health insurance, and the employer minimum essential coverage requirement.
TIGTA reviewed whether the IRS is effectively implementing the ACA reporting requirements in Sections 1502, 1514, 9002, and 9010. Section 1502 requires businesses and individuals to file a health insurance report beginning in 2015. Section 1514 requires large employees to report on the availability of minimum essential coverage beginning in 2015. Section 9002 requires large employers to report the total dollar value of health insurance coverage sponsored by the employer for Calendar Year 2012 on Forms W-2 that are distributed in January 2013. Section 9010 requires health insurance providers to file a net premiums report in May 2014.
The IRS is making progress in implementing these information reporting requirements, TIGTA found. However, the implementation plan for Section 9002 that requires the inclusion of employer health coverage on Form W-2, Wage and Tax Statement, does not address how the IRS will use the information or how the IRS will ensure employer compliance with this information reporting section.
According to TIGTA’s report, the creation of separate implementation plans and the assignment of responsibility to different offices may result in the IRS not evaluating these provisions collectively to ensure that it is requesting all the information needed to effectively verify employer, insurance provider, and individual compliance with the Affordable Care Act.
“The IRS must ensure that all the information needed to accurately and effectively administer these provisions is provided by employers, insurers, and taxpayers,” said J. Russell George, the Treasury Inspector General for Tax Administration. “By doing so, the IRS can significantly improve its ability to manage the responsibility placed on employers, insurers, and taxpayers who must comply with the various Affordable Care Act requirements, and also improve its ability to accurately administer ACA fees, penalties, and tax credits.”
TIGTA recommended that the IRS update the implementation plan for Section 9002 to identify the actions needed to verify that employers are accurately reporting the total dollar value of health insurance coverage provided to an employee. The IRS should also ensure that all information necessary to maximize the IRS’s ability to verify that compliance with other tax-related sections within the ACA is requested from third parties and processes are developed to use the information effectively.
The IRS agreed with TIGTA’s recommendations. IRS officials informed TIGTA that the IRS has updated the Compliance Plan for Section 9002 to include steps for verifying reporting compliance. Additionally, the IRS also indicated that executive oversight ensures that the overall planning for all Affordable Care Act provisions, including the ones affecting information reporting, is coordinated.
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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