The Internal Revenue Service (IRS) is starting to estimate how well public exchange plan users are following the new health insurance premium tax credit reporting rules.
Early numbers suggest that the answer is, “Not very well.”
John Koskinen, the IRS commissioner, talks about consumers’ Patient Protection and Affordable Care Act (PPACA) premium tax credit compliance in a letter sent to members of Congress and published on the Web.
Drafters of PPACA tried to help poor and moderate-income workers pay for health coverage using a tax credit system based on the older Earned Income Tax Credit income subsidy program. Consumers who buy qualified health plan (QHP) coverage through a PPACA exchange can choose whether to get the tax credit after the end of the tax year, when they file their income taxes, or during the tax year.
The IRS pays advance premium tax credit (APTC) money directly to the health insurers that issue the QHP coverage. Consumers who get APTC money can use the money to reduce the amount of cash they have to pay out of pocket for health coverage while the year is still under way.
Consumers who give an exchange high income estimates when they sign up for tax credits may end up getting less APTC help than they should. Those consumers can get money back from the IRS when they file their income taxes, and report on their APTC use on IRS Form 8962.
Consumers who, intentionally or unintentionally, lowball their income when they sign up for tax credits and get too much APTC help during the tax year are supposed to pay the extra money back to the IRS at the end of the tax year.
Some members of Congress wondered, when the Obama administration was setting up PPACA tax credit administration systems, how well the government would be able to enforce APTC payback compliance.
See also: PPACA Stars at IRS Budget Hearing
H&R Block Inc. (NYSE:HRB) reported in June that it was seeing signs of poor compliance with the APTC tax filing requirements.
See also: H&R Block sees large PPACA liar market
Officials at the U.S. Treasury Department, the parent of the IRS, noted that the IRS is providing information about PPACA-related 2014 tax return processing based on early, incomplete data, and much more quickly than it would normally provide tax filing data, because of strong congressional interest in PPACA tax issues.
Koskinen himself lets his numbers speak for themselves. He does not come to any conclusions about APTC users’ compliance levels in his letter.
For a look at what the numbers say, read on.