Obamacare Taxes: IRS "determining who to audit and who not to."
On Wednesday, March 5, Treasury Inspector General for Tax Administration J. Russell George tesified before the House Appropriations Committee. As part of his exchange with lawmakers, Mr. George was asked about the tax implications of Obamacare.
As reported by POLITICO's Rachael Bade:
“It is unprecedented in recent history, the amount of responsibility the IRS is being given in an area that most people don’t think of as an IRS function,” George said. Americans, he added, will have more questions about their taxes because of health care penalties or credits, flooding already busy call-in and walk-in tax help centers. “This is going to lead to problems, sir.”
And these resource issues are bound to spill over into tax fraud enforcement, where the IRS will have to do a cost-benefit analysis when determining which tax fraudsters to chase.
“They have to determine what enforcement mechanisms they’ll employ … how they go about determining who to audit and who not to,” George said.
You might already know about the twenty new or higher taxes in Obamacare. What you might not know is that the non-partisan Government Accountability Office (GAO) says that the IRS has 47 new taxes and regulations to administer in overseeing Obamacare.
The IRS is not capable of doing all this, as the quotation above confirms.
Here is the list:
- Prohibits group health plans from discriminating in favor of highly compensated individuals.
- Establishes a temporary reinsurance program to provide reimbursement for a portion of the cost of providing health insurance coverage to early retirees.
- Imposes a penalty on health plans identified in an annual Department of Health and Human Services (HHS) penalty fee report, which is to be collected by the Financial Management Service after notice by the Department of the Treasury (Treasury).
- Requires state exchanges to send to Treasury a list of the individuals exempt from having minimum essential coverage, those eligible for the premium assistance tax credit, and those who notified the exchange of change in employer or who ceased coverage of a qualified health plan.
- Provides tax exemption for nonprofit health insurance companies receiving federal start-up grants or loans to provide insurance to individuals and small groups.
- Provides tax exemption for entities providing reinsurance for individual policies during first 3 years of state exchanges.
- Provides premium assistance refundable tax credits for applicable taxpayers who purchase insurance through a state exchange, paid directly to the insurance plans monthly or to individuals who pay out-of-pocket at the end of the taxable year.
- Provides a cost-sharing subsidy for applicable taxpayers to reduce annual out-of-pocket deductibles.
- Outlines the procedures for determining eligibility for exchange participation, premium tax credits and reduced cost-sharing, and individual responsibility exemptions.
- Allows advance determinations and payment of premium tax credits and cost-sharing reductions.
- Authorizes IRS to disclose certain taxpayer information to HHS for purposes of determining eligibility for premium tax credit, cost-sharing subsidy, or state programs including Medicaid, including (1) taxpayer identity; (2) the filing status of such taxpayer; (3) the modified adjusted gross income of taxpayer, spouse, or dependents; and (4) tax year of information.
- Provides nonrefundable tax credits for qualified small employers (no more than 25 full-time equivalents (FTE) with annual wages averaging no more than $50,000) for contributions made on behalf of its employees for premiums for qualified health plans.
- Requires all U.S. citizens and legal residents and their dependents to maintain minimum essential insurance coverage unless exempted starting in 2014 and imposes a fine on those failing to maintain such coverage.
- Requires every person who provides minimum essential coverage to file an information return with the insured individuals and with IRS.
- Imposes a penalty on large employers (50+ FTEs) who (1) do not offer coverage for all of their full-time employees, offer unaffordable minimum essential coverage, or offer plans with high out-of-pocket costs and (2) have at least one full-time employee certified as having purchased health insurance through a state exchange and was eligible for a tax credit or subsidy.
- Requires information reporting of health insurance coverage information by large employers (subject to IRC 4980H) and certain other employers.
- Offers tax exclusion for reimbursement of premiums for small-group exchange participating health plans offered by small employers to all full-time employees as part of a cafeteria plan.
- Subjects new group health plans to certain Public Health Service Act requirements and imposes the excise tax on plans that fail to meet those requirements. (Conforming amendment)
- Authorizes IRS to disclose certain taxpayer information to the Social Security Administration (SSA) regarding reduction in the subsidy for Medicare Part D for high-income beneficiaries. (Conforming amendment)
- Requires the independent institute partnering with the National Academy of Sciences (NAS) to implement a key national indicator system to be a nonprofit entity under section 501(c)(3).
- . Imposes a fee through 2019 on specified health insurance policies and applicable self-insured health plans to fund the Patient-Centered Outcomes Research Trust Fund to be used for comparative effectiveness research.
- Imposes a 40 percent excise tax on high cost employer-sponsored health insurance coverage on the aggregate value of certain benefits that exceeds the threshold amount.
- Requires employers to disclose the value of the employee’s health insurance coverage sponsored by the employer on the annual Form W-2.
- Repeals the tax exclusion for over-the-counter medicines under a Health Flexible Spending Arrangement (FSA), Health Reimbursement Arrangement (HRA), Health Savings Account (HSA), or Archer Medical Savings Account (MSA), unless the medicine is prescribed by a physician.
- Increases tax on distributions from HSAs and Archer MSAs not used for medical expenses.
- Limits health FSAs under cafeteria plans to a maximum of $2,500 adjusted for inflation.
- Imposes additional reporting requirements for charitable hospitals to qualify as tax-exempt under IRC 501(c)(3) and requires hospitals to conduct a community health needs assessment at least once every 3 years and to adopt a financial assistance policy and policy relating to emergency medical care.
- Imposes a fee on each covered entity engaged in the business of manufacturing or importing branded prescription drugs.
- Imposes an annual fee on any entity that provides health insurance for any U.S. health risk with net premiums written during the calendar year that exceed $25 million.
- Allows the deduction for retiree prescription drug expenses only after the deduction amount is reduced by the amount of the excludable subsidy payments received.
- Increases the threshold for the itemized deduction for unreimbursed medical expenses from 7.5 percent of Adjusted Gross Income (AGI) to 10 percent of AGA (unless taxpayer turns 65 during 2013-2016 and then threshold remains at 7.5 percent).
- Denies the business expenses deductions for wage payments made to individuals for services performed for certain health insurance providers if the payment exceeds $500,000.
- Imposes an additional Hospital Insurance (Medicare) Tax of 0.9 percent on wages over $200,000 for individuals and over $250,000 for couples filing jointly.
- Limits eligibility for deductions under section 833 (treatment of Blue Cross and Blue Shield) unless the organizations meet a medical loss ratio standard of at least 85 percent for the taxable year.
- Allows an exclusion from gross income for the value of specified Indian tribe health care benefits.
- Allows small businesses to offer simple cafeteria plans—plans that increase employees’ health benefit options without the nondiscrimination requirements of regular cafeteria plans.
- Establishes a 50 percent nonrefundable investment tax credit for qualified therapeutic discovery projects.
- Requires employers to provide free choice vouchers to certain employees who contribute over 8 percent but less than 9.8 percent of their household income to the employer’s insurance plan to be used by employees to purchase health insurance though the exchange.
- Imposes a tax on any indoor tanning service equal to 10 percent of amount paid for service.
- Excludes from gross income amounts received by a taxpayer under any state loan repayment or loan forgiveness program that is intended to provide for the increased availability of health care services in underserved or health professional shortage areas.
- Increases the maximum adoption tax credit and the maximum exclusion for employer-provided adoption assistance for 2010 and 2011 to $13,170 per eligible child.
- Extends the exclusion from gross income for reimbursements for medical expenses under an employer-provided accident or health plan to employees’ children under 27 years.
- Imposes an unearned income Medicare contribution tax of 3.8 percent on individuals, estates, and trusts on the lesser of net investment income or the excess of modified adjusted gross income (AGI + foreign earned income) over a threshold of $200,000 (individual) or $250,000 (joint).
- Imposes a tax of 2.3 percent on the sale price of any taxable medical device on the manufacturer, producer, or importer
- Amends the cellulosic biofuel producer credit (nonrefundable tax credit of about $1.01 for each gallon of qualified fuel production of the producer) to exclude fuels with significant water, sediment, or ash content (such as black liquor).
Clarifies and enhances the applications of the economic substance doctrine and imposes penalties for underpayments attributable to transactions lacking economic substance.
- Increases the required payment of corporate estimated tax due in the third quarter of 2014 by 15.75 percent for corporations with more than $1 billion in assets, and reduces the next payment due by the same amount.