Confused IRS Tax Rules Threaten Obamacare Rollout
Business + Economy

Confused IRS Tax Rules Threaten Obamacare Rollout


Last month, Gallup conducted a survey to determine small business attitudes toward the Affordable Health Care Act, better known as Obamacare. The results were not encouraging for backers of the law.

The polling firm determined that as many as a quarter of small business employers were restricting job openings to part-time workers. Nearly half said Obamacare would be bad for their business, compared to only 9 percent who said it would be a good thing. More than half believed they would be forced to reduce the quality of the health care they provide.


But small businesses aren’t the only ones concerned about Obamacare implementation. Dave Du Val, vice president of tax services at, said tax preparers are worried the IRS won’t be prepared.

“The expectation is that the forms will not be ready on time and our clients will have to wait until the middle of tax season to file,” Duval said in an email to The Fiscal Times. “When this happens, there is a rush to get everything done at the last minute, and this leads to mistakes, which can then lead to problems that may come up one or two years later when the IRS questions the entries on the return.”

Chris Hesse, chair of the American Institute of Certified Public Accountants’ S Corporation Technical Resource panel, added that regulations on how CPAs should report information to the IRS related to the law are not expected to be finalized until the end of 2014.


He said this could lead to confusion over how the law will be implemented – and a lack of guidance on best practices for CPAs could lead to chaos. These concerns prompted the AICPA to send a 34-page letter to the IRS on Monday outlining a list of concerns about Obamacare.

“There’s guidance there, but it’s not regulatory guidance. You can make up your own rules, but they still have to be within the code,” he said. “How are CPAs supposed to interpret those kinds of comments or apply rules where the regulations are issued but aren’t technically in force?”

This is just a snapshot of the turmoil the tax preparation industry expects come tax season. Accountants don’t trust the IRS to be prepared. Small businesses – many of which will be required to give health care insurance to work forces of 50 or more people – openly oppose it. And the public trust in the IRS continues to erode as more information emerges on the targeting of conservative groups.


In addition, there’s a growing concern among the accounting community that many tax preparers don’t fully understand what’s required under Obamacare.

Howard Rosen, an accountant at Conner Ashin St. Louis and a member of the BKR Association, said that many CPAs are beginning to work with small businesses with a workforce near the 50-person threshold, as well as with wealth individuals whose taxes will go up. But learning about how the IRS will enforce Obamacare’s provisions, along with determining exactly how the IRS will determine income – AICPA’s letter was dominated by these questions – has not yet been etched in stone.

“We are truly learning as we go. We have the basics down,” he told The Fiscal Times, adding that he’s attending a class in Baltimore on the law next month. “There’s a decent understanding of the law. I wouldn’t call it a good understanding.”

Kenneth Laks, a CPA at AVZ & Company and also a member of the BKR Association, said accountants have been adjusting to changes since the law was passed. But many simply aren’t aware of just how much is going to change during next year’s tax season.

“My take on it is it’s certainly not going to be a smooth ride,” he said, noting the expected confusion in states that refuse to set up insurance exchanges. “There are a lot of people who are very unaware of what’s happening and what other things are coming. There are so many little nuances people aren’t aware of. The average preparer is not prepared.”

Attorney Paul M. Hamburger of Proskauer, a global law firm, said on Monday, “The degree of complexity and challenges facing companies is really unprecedented – particularly in the health plan area.”

“There’s tremendous confusion and uncertainty about, for example, the pay-or-play, shared responsibility mandate governing who your full time employees are and what strategies you can employ to minimize your exposure to various penalties,” he added. Hamburger is co-chair of his firm’s employee benefits section.

Even before Obama signed the law, Hamburger’s firm began assembling a 50-60 member task force to advise clients, conduct seminars and update a health care reform website.

Steven Friedman, co-chair of the employee benefits practice group at Littler Mendelson, the largest U.S.-based law firm representing management in employee benefits and labor law, said one unfortunate consequence of the law is that many small businesses are postponing hiring or putting off expansion, to avoid having to meet the health insurance requirements of the new law

“If a business is close to having 50 full time employees, but is under that level, there’s a pretty good chance they don’t want to hire that 50th additional person who will put them over the limit,” Friedman said.