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Regulation and Compliance > Federal Regulation > IRS

Watchdog waiting for IRS PPACA fraud systems

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The investigators charged with keeping tabs on the Internal Revenue Service have no way to tell how well they can detect health insurance premium tax credit fraud.

J. Russell George, the Treasury inspector general for tax administration testified about the concern yesterday at a hearing on the 2015 U.S. Treasury Department budget request organized by a Senate Appropriations Committee subcommittee. 

The Patient Protection and Affordable Care Act created a “refundable tax credit” that moderate-income consumers can pay for “qualified health plan” coverage bought through the public exchanges.

Exchange system managers and IRS officials have argued the design of the program should limit tax fraud, because premium tax credit cash is supposed to go directly to carriers, not the consumers.

But George said the IRS is planning to use two systems to fight any PPACA tax credit fraud that occurs.

As of yesterday, the systems remain under development, George said, according to a written version of his testimony posted on the Senate Appropriations website.

“Until these new systems are successfully developed and tested, TIGTA remains concerned that the IRS’s existing fraud detection system may not be capable of identifying Affordable Care Act refund fraud or schemes prior to the issuance of tax refunds,” George testified.

George noted tax-related PPACA provisions, such as an increase in the employee share of the Medicare tax and an increase in the threshold taxpayers use when deciding whether they can itemize medical expenses, are already affecting the 2014 tax filing season. 

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