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December 17, 2013


The IRS and Obamacare: TIGTA audit urges fraud prevention steps

One of the threads we are following in this blog is the role Congress has tasked the IRS to play in the implementation of the Affordable Care Act (ACA).

This role includes much more than imposing (fairly light) tax penalties on people who do not comply with the so-called “individual mandate” to buy health insurance. After all, the IRS is also responsible for calculating tax subsidies based on income that are supposed to help people buy health insurance.

In this post, we will discuss concerns that the IRS’s systems for detecting fraud need to be improved in order for this whole process to work as intended.

Two weeks ago, the Treasury Inspector General for Tax Administration (TIGTA) released an audit of the systems that the IRS will use to calculate ACA subsidies.

The audit found that the IRS may lack sufficient fraud detection capacity to prevent possible tax refund fraud or other fraudulent schemes related to the ACA.

In response, the IRS’s chief technology officer contended that improvements had already been made in the agency’s data-security systems since the audit was concluded. He acknowledged, however, that more needs to be done to prevent tax refund fraud.

The subsidies for purchasing insurance under the ACA will be issued in the form of a tax credit. Given the amount of tax refund fraud that has occurred in recent years, it is only natural that TIGTA would be calling attention to what the IRS needs to do in order to avoid excessive instances of ACA subsidy fraud.

Source: Bloomberg, “IRS Needs Changes to Avoid Health Law Fraud, Audit Says,