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What agents have to know about IRS PPACA problems

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The Internal Revenue Service (IRS) seemed to handle processing of the first big wave of individual tax returns containing Patient Protection and Affordable Care Act (PPACA) information reasonably smoothly this spring.

See also: IRS faces PPACA service squeeze

But officials at the Treasury Inspector General for Tax Administration (TIGTA), an agency that keeps tabs on the IRS, says the IRS has plenty of PPACA administration problems of its own.

How well the IRS sets up and runs its PPACA programs may affect how likely an agent or broker’s individual clients are to get caught if they fib, how likely individual clients are to get caught up in bureaucratic nightmares through no fault of their own, and what might happen once the employer coverage reporting and “play or pay” mandate provisions take full effect.

See also: How the IRS is Catching Taxpayers Who Underreport Retirement Income (Forbes)

For a look at what TIGTA officials have said about the state of IRS PPACA implementation in a new report, and a major IRS effort to upgrade its ability to take in PPACA information, read on.


1. The public exchanges have been slow to get plan enrollment and premium data to the IRS.

The 2015 tax filing season — the period when individuals were supposed to file returns for 2014 — started Jan. 20.

The exchanges operated by the Centers for Medicare & Medicaid Services (CMS) for its parent, the U.S. Department of Health and Human Services (HHS), sent the IRS only about 60 percent of the 4.2 million monthly exchange periodic data (EPD) records they were supposed to send the IRS for 2015 filing season by Jan. 20, TIGTA officials say.

CMS was promising to send the IRS the other 40 percent of the records by mid-February.

Only nine of the 15 state-based exchanges that provided data for TIGTA had sent their EPD information by Jan. 20. Four of the state-based exchanges were promising to get the EPD information to IRS by mid-February. 

Two of the state-based exchanges could not tell the IRS when they would be sending the IRS the required data.

The IRS had contingency plans for verifying individual taxpayers’ premium tax credit (PTC) information without the EPD data, but, “without the required enrollment data from the exchanges, the IRS will be unable to ensure that all taxpayers claiming the PTC bought insurance through an exchange, as required,” officials say. 

See also: IRS offers 1095-A glitch relief


2. The IRS is not yet consistently reconciling monthly EPD filings with information from the annual Form 1095-A exchange coverage summary data.

A public exchange is supposed to send EPD data to the IRS every month, and it’s also supposed to send coverage summary data to the IRS on 1095-A’s every year.

TIGTA officials told the IRS that the IRS should change its computers to routinely compare the EPD information with the 1095-A information when processing returns.

The IRS argued that it generally gets the EPD information earlier, that the EPD information is more complete, and that there’s no reason to reconcile the EPD information with the 1095-A information for every return.

TIGTA officials insist that routinely matching EPD and 1095-A data would improve the efficiency of the IRS PPACA return verification process. 

See also: 3 PPACA premium tax credit program weak points



3. The IRS rules for suspending premium tax credit payments for people with exchange application problems are incomplete.

TIGTA officials blacked out most of this suggestion of their report. But, apparently, the gist is that the IRS has a system for withholding tax credit payments for exchange plan users who may be in the United States illegally, but it does not have rules in place for withholding tax credit payments for people who seem to have lied about their income, their address, their dependents or other matters unrelated to immigration.

See also: Exchange plan users face calls about ‘inconsistencies’


4. Exchanges had no way to see whether or not applicants had access to employer-sponsored minimum essential coverage. 

The IRS put off requiring insurers to send 1095-B coverage notices to insured and employers to send out 1095-C health benefits notices to employees until 2015.

The IRS responded to the lack of coverage notices by letting taxpayers “document” that they had enough health coverage to avoid paying the individual mandate penalty for 2014 by simply checking a box on their tax returns.

See also: H&R Block sees large PPACA liar market

In the exchange market, lack of access to 1095-C forms made it difficult for exchanges to verify whether applicants really qualified for exchange plan subsidies, TIGTA officials say.

Exchanges had no good way to determine whether an applicant had access to the kind of group coverage that should have disqualified the applicant from receiving premium tax credits, officials say.

Even for the 2015 tax year, the 1095-B and 1095-C forms will not generally be available until March 2016, which is after most taxpayers file their tax returns, and after most tax return processing is already completed, officials say.

Planning tools

5. The IRS is setting up an information reporting system that could eventually ease some PPACA problems.

The agency has developed an Affordable Care Act Information Returns (AIR) program that will give software developers a system they can use to help insurers file 1095-B returns and employers file 1095-C returns electronically.

The AIR program will also help transmitters develop systems clients can use to send 1094-B insurer summary returns and 1094-C employer summary returns.

The IRS has asked software developers to get login credentials.

In the near future, AIR program managers will have the developers apply for ACA Information Return Transmitter Control Codes, and it will make the AIR system available for testing sometime this summer, according to the program’s website.

See also: PPACA three R’s programs: Insurers cry out


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