Consumers seem to have fewer problems with Affordable Care Act tax rules these days, but consumers who do have ACA tax problems may end up drifting through procedural fog.
Nina Olson, the country’s national taxpayer advocate, talks about what she sees as Internal Revenue Service abuse of “unreal audits,” or audit-like examinations conducted outside of the formal IRS audit framework, in a new annual report she prepared for Congress.
The “distinction between ‘real’ and ‘unreal’ audits has real-world consequences that impact taxpayer rights, including the right to challenge the IRS’s position and be heard, the right to appeal an IRS decision in an independent forum, the right to finality, and the right to a fair and just tax system,” Olson writes in the report.
The IRS strategic plan calls for increased use of unreal audits, Olson writes.
“It is therefore crucial for the IRS to reevaluate and revise its current guidance about what constitutes an audit, through the lens of the Taxpayer Bill of Rights,” Olson argues.
(Related: Life Near the ACA Cut-Off Cliff)
Olson says that one area in which the IRS has made heavy use of unreal audits is in asking taxpayers about conflicts between the information on their Form 8962 premium tax credit filings and information in ACA public exchange programs’ Form 1095-A reports on taxpayers’ use of advance premium tax credit subsidies.
When the IRS looks into the discrepancies, “there are situations where the IRS is essentially conducting a ‘real’ audit under the guise of an ‘unreal’ audit, thereby circumventing statutory protections against repeat examinations,” Olson writes.
Congress created the taxpayer advocate position, and the Office of the Taxpayer Advocate, through a provision in the Taxpayer Bill of Rights 2 bill. Former President Bill Clinton signed that bill into law in 1996.
The taxpayer advocate’s office has hundreds of case advocates helping consumers with IRS problems. The advocate is supposed to give Congress annual reports on what the case advocates are seeing out in the field.
In the new annual report, Olson discusses many topics, including problems with IRS use of private debt collection agencies, reductions in IRS employee training, and cuts in IRS walk-in center assistance.
A copy of the report section that refers to unreal audits, and to ACA-related case advocate activities, is available here.
Here are five ACA and unreal audit highlights, for insurance agents and brokers, from Olson’s report.
(Photo: Allison Bell/TA)
1. The number of ACA-related tax filing problems appears to be falling.