Dallas, Texas, MAY 11, 2015 – At the start of January 2014, the Affordable Care Act required each individual to have basic health insurance coverage known as ‘minimum essential coverage’ or MEC. If they did not, they were to pay an additional tax referred to as ‘a shared responsibility payment’ or SRP. Exemptions, which may only be obtained from a health care exchange or from the IRS, are available under the ACA, but only for the MEC requirement.
According to a new government report, however, delays in the reporting for employer’s group health Insurance and insurer of health insurance information have impeded the IRS’s ability to determine whether taxpayers and their dependents have the basic health insurance requirements as mandated under the Affordable Care Act’s individual mandate.
The report, conducted by the Treasury Inspector General for Tax Administration’s office, recommends making it easier for taxpayers to find out if they owe a “shared responsibility payment” by having the IRS offer an online tool to taxpayer’s that would allow them to input the necessary data and then calculate and how much they would owe. Such a tool is already available toIRS examiners and works well at estimating the payment. The TIGTA report suggests this same tool be provided on IRS.gov to taxpayers. While the IRS has agreed with TIGTA’s recommendation, plans to provide the online tool for estimating the shared responsibility payment have not yet progressed further.
TIGTA found that the Treasury Department has played a part by delaying employer and insurer reporting of group health insurance information until March 2016. The IRS, an arm of the treasury department, has thus not developed processes and procedures to verify compliance with the MEC requirements for the 2015 filing season.
“Many taxpayers are unfamiliar with their obligations under the Affordable Care Act,” said TIGTA Inspector General J. Russell George in a statement. “As an obligation to taxpayer’s who will have to pay, the Internal Revenue Service should provide an online tool to assist them in calculating the amount of the shared responsibility payment owed.”
To help tax examiners, the IRS developed a tool to compute the SRP as tax examiners assess MEC compliance on tax year 2014 tax returns, identified through normal examination compliance activity. The TIGTA report indicated that it found this tool to accurately compute the SRP and recommended the tool as helpful to taxpayers. They also recommended it should be made available on IRS.gov.
Additionally, the IRS plans to use information obtained during the 2015 filing season to develop post-processing compliance strategies to be used in future years.
“We would note that, for the 2015 filing season, when there is no apparent error on a tax return, the IRS will use its normal post-filing compliance processes to verify exemptions claimed,” wrote IRS Affordable Care Act director Carolyn A. Tavenner, in response to the report. “Our plans include the use of information obtained during the 2015 filing season to develop post-processing compliance strategies which will then be used in subsequent years.”
The TIGTA recommended also that the director of the IRS’s Affordable Care Act Office add the online SRP calculation tool to IRS.gov for the 2016 filing season, as a continued effort to provide taxpayers with self-assistance interactive tools. The IRS agreed with this recommendation and plans to assess the feasibility and cost of providing the tool.
The IRS also has plans for dealing with taxpayers who qualify for an exemption from the individual mandate.
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