Scammers Can Mine for Gold in Obamacare Tax Credits
Printer-friendly versionPDF version
a a
 
Type Size: Small
The Fiscal Times
December 4, 2013

The troubled website HealthCare.gov may finally be working – but Obamacare has bigger problems ahead.

This time, the challenges are connected to the Internal Revenue Service, a key player in the law’s implementation. The IRS is tasked with enforcing tax penalties as well as issuing tax credits and subsidies to low and middle-income Americans who purchase health insurance under the Affordable Care Act.

Related: Why Your Tax Returns Aren’t Safe with the IRS

This will require obtaining and storing sensitive taxpayer information to determine who will receive these benefits and how much they will receive. Though the IRS can accurately determine eligibility, it lacks a fraud detection strategy, which means millions of tax dollars are vulnerable to tax cheats looking to cash in on the subsidies, according to a watchdog report released Tuesday.

The IRS “may not be capable of identifying ACA refund fraud or schemes under its existing security controls and anti-fraud programs,” the report by the Treasury Inspector General for Tax Administration (TIGTA) said. “It is important for the IRS to thoroughly consider fraud threats and risks that could impact new ACA systems.”

These subsidies are available to all Americans earning up to $46,000 a year or families of four earning up to $94,000 and can be immediately applied to health-insurance premiums. Just 30 percent of those who signed up for health insurance through the exchanges in October qualified for the subsidies, according to Avalere Health, an advisory firm. That is likely to increase, along with enrollment numbers. The same firm estimates that by the end of next year, 84 percent will qualify for the subsidies.

That will be a big job for the IRS, which, according to a separate TIGTA report, also has software flaws in the data system that stores sensitive taxpayer information.

“The Obamacare premium subsidies are a fraudster’s dream come true,” said Sen. Orrin Hatch of Utah, the top Republican on the Senate Finance Committee. “The very nature of these credits — pay first, verify a person’s income later — will lead to potentially hundreds of billions of dollars of improper payments.”

This is just the latest in a swath of IRS audits that raise questions about the agency’s ability to enforce key provisions of Obamacare as well as safely store even more taxpayer information.

The interim IRS chief, Danny Werfel, defended his agency’s efforts to implement Obamacare. “The IRS has a strong, effective system in place for administering the Premium Tax Credit,” Werfel said in a statement. “We have a proven track record of safely and securely transmitting federal tax information and we have a robust and secure process in place to deliver this important credit for taxpayers.”  -   Follow Brianna Ehley on Twitter @BriannaEhley

Top Reads from The Fiscal Times:

 

Washington Correspondent Brianna Ehley, based in D.C., covers Congress, government agencies and spending issues, health care, and tax and economic policy for The Fiscal Times.