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TIGTA sees big PPACA tax credit reporting gap

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A major Patient Protection and Affordable Care Act (PPACA) exchange plan subsidy program may have a tax filing compliance rate of less than 50 percent.

See also: For tax preparers, PPACA may bring a paperwork feast

The government paid about $11 billion in advance premium tax credit (APTC) subsidies to help consumers pay for PPACA public exchange plan coverage in fiscal year 2014, which ended Sept. 30, 2014.

All of the consumers who received the APTC subsidies, including those who paid too much in income taxes overall, and were supposed to get money back from the IRS, were supposed to file tax returns for 2014 and give the IRS information about the APTC support they had received.

As of March 26, 2015, the IRS had received Form 8962 Premium Tax Credit filings from just 1.4 million taxpayers. Those forms covered just $4.4 billion of the APTC subsidy payments, officials at the Treasury Inspector General for Tax Administration (TIGTA) say in a report on IRS APTC verification systems.

Some of the APTC users may have filed 8962 forms later, but, because many exchange plan users qualify for income tax refunds, or, in some cases, the Earned Income Tax Credit (EITC), a high percentage of APTC users may have already filed their tax returns by March 26.

The IRS decided to let employers and insurers wait until the 2015 plan year to file reports on coverage, in part because of concerns that employers and insurers needed more time to adjust to the new requirements.

The IRS was hoping to use coverage reports from the PPACA exchange programs to verify taxpayers’ APTC filings, and to see whether some APTC users had failed to send in their 8962 forms. 

See also: CMS: No PPACA exchange delays

The exchanges themselves ended up having trouble meeting their own exchange coverage reporting requirements. The IRS thought it would start getting exchange data in June 2014. By January 2015, when the tax filing season for 2014 started, the IRS had data from only nine of the 15 state-based exchanges, and data for only about 60 percent of the consumers who used the federal exchanges.

See also: GAO: Many PPACA exchanges missed a tax credit reporting deadline

Most of the processes the IRS developed to verify APTC filings in spite of the lack of information from insurers, employers and exchanges seemed to work reasonably well, TIGTA investigators found.

Earlier, tax-preparation firms talked about noticing possible signs of low PPACA premium tax credit reporting compliance rates.

In June, for example, an executive at H&R Block (NYSE:HRB) said the number of consumers coming in for help with PPACA-related tax forms was about 36 percent lower than the company had expected.

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


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