The White House is gearing up for what’s likely to be the most headache-inducing tax season yet as the struggling Internal Revenue Service begins enforcing the more than 40 new Affordable Care Act tax provisions. Many are crucial to the success of the health care law.
The IRS is responsible for enforcing the individual mandate, which requires everyone to have health coverage or pay a penalty. It’s also in charge of the premium tax credit, which is given to people who get federal subsidies under the health care law. These, along with the employer mandate, will be a trial run for the IRS. Will it be prepared to play such a huge role in the implementation of Obamacare?
The agency’s new responsibilities come just as Congress slashed its budget by $346 million this year. The IRS’s budget—which is no stranger to cuts—is now at about $10.9 billion--$1 billion less than it was five years ago.
IRS officials have constantly warned lawmakers that cutting the agency’s budget will result in a hellish filing season for taxpayers. IRS Taxpayer Advocate Nina Olson estimated that the cuts and staffing reductions mean IRS agents will only be able to answer 43 percent of the calls the agency receives from taxpayers this year, she said in her annual report.
IRS Commissioner John Koskinen also warned that the agency will likely face furloughs this year because of the cuts. But on top of its usual responsibilities, the agency will now have to be prepared for its new role policing Obamacare penalties and subsidies.
The White House, meanwhile, is asking Congress, to beef up the IRS’s budget. In the president’s $4 trillion budget proposal for 2016, he requests $13.9 billion for the IRS---roughly $3 billion more than this year—in order to help the agency take on its new responsibilities.
So, what changes for taxpayers this year? When filing taxes this year, taxpayers will be required to check a box identifying whether or not they have health coverage to comply with the health law’s individual mandate. Those filing for exemptions will have to fill out a separate form. There are at least 33 exemptions that people can claim and file for and the IRS will need to verify every single one.
Then there are the penalties. People who did not have coverage and do not apply for exemptions will need to pay the penalty—which is 1 percent of their annual income or $95—whichever is greater. To pay the penalty, people will need to fill out a form, which identifies when they were without coverage. The penalty will either be added to a person’s tax bill, or deducted from their refund.
Don’t forget about the subsidies. People receiving insurance subsidies for health coverage will also need to fill out new forms and answer questions about their current income, since the amount of subsidies they received this year was determined based off of their 2013 tax return—meaning their income could be different. If they made less than before, they may receive a larger subsidy included in this year’s tax return, but if their income has increased since they applied and qualified for subsidies, they might end up owing the government money—the IRS is in charge of processing all of that.
Indeed, there is plenty for the IRS to do, not to mention it’s normal enforcement and collections responsibilities. So it’s not hard to understand why the agency is begging Congress to increase its budget. At the same time, the GOP-controlled Congress is hesitant to give the agency more money, especially after the agency targeted conservative groups last summer and spent millions on lavish conferences.
Still, Koskinen, who was not at the agency during that time, has vowed to get back in Congress’s good graces…though it doesn’t appear to be happening anytime soon.
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