The IRS is failing to properly administer subsidies to individuals on Obamacare, according to a newly released report by Treasury Inspector General for Tax Administration (TIGTA). The IRS administered nearly $11 billion in Obamacare tax credits in 2014, however according to the report an undisclosed number of individuals received subsidies after they were ineligible to.
As the report notes, the IRS is unable to verify whether individuals enrolled in Obamacare are eligible for a Premium tax credit (PTC). As the report states:
“the IRS will be unable to ensure that all taxpayers claiming the PTC bought insurance through an Exchange as required.”
In part, this is because the agency did not receive enrollment data from several exchanges in a timely manner. As the report notes, both federal and state exchanges have failed to provide information to the IRS:
“CMS indicated that it would not send approximately 1.7 million (40 percent) of the approximately 4.2 million Federal Exchange enrollment records to the IRS until mid-February. In addition, six of the 15 State Exchanges had not provided enrollment data to the IRS as of January 20, 2015.”
According to the TIGTA report, the IRS failed to properly address and monitor repayment of PTCs that occurred when it was later found an individual did not qualify for the credit. As ATR’s Ryan Ellis correctly predicted during Testimony before the House Ways and Means Committee Subcommittees on Health and Oversight last year, the failures of HealthCare.gov, poor record keeping by the government, and individual error have combined to create a flawed and confusing process for correctly receiving the PTC.
This convoluted process has forced that the majority of enrollees to repay part of their subsidy during tax season because of discrepancies between expected income and actual income. A report released by H&R block this year found that up to 52 percent of PTC recipients have to pay back as much as 17 percent of their subsidy.
In addition, TIGTA found that the IRS and Health and Human Services (HHS) regulations do not ensure that the IRS is able to confirm whether an individual is eligible to receive a subsidy. In addition, procedures have not been established for exchanges to notify the IRS when an individual is ineligible to receive subsidies after enrollment.