Don't Mess With Taxes

Are you worried about Uncle Sam's involvement in your health care?

That concern, which was probably the first argument against health care reform, still worries some folks.

And the extent of Internal Revenue Service participation in implementing some provisions of the Patient Protection and Affordable Care Act, also referred to as Obamacare, has some folks on guard.

Not to worry, says the IRS.

Yes, the tax agency will get confirmation from insurers about the health care coverage that individuals have. But that's it, swears the IRS.

Photo by 123light via iStock

"It is important to note that the information that insurers provide to the IRS will show the fact of insurance coverage, and will not include any personal health information," Steven T. Miller, IRS deputy commissioner for services and enforcement, told a recent House Ways and Means Oversight Subcommittee hearing.

Miller was a witness at the hearing called by the subcommittee's chair Rep. Charles W. Boustany (R-LA) to examine at least some of health care reform's 47 tax or tax-related provisions. Some of the tax components already are in effect; others will become effective over the next 18 months.

Tracking coverage: The minimum coverage requirement, popularly -- or unpopularly depending on your opinion of health care reform -- known as the individual mandate, is one of the law's main components.

And it comes with the added baggage of being enforced by the IRS.

Beginning in 2014, this provision will require individuals who can afford health insurance coverage (and who aren't eligible for exemptions) to either purchase minimum essential coverage or make a payment -- the famous tax cited by the Supreme Court in upholding the law -- when they file their annual tax returns.

In order to prove acceptable coverage, individuals will get a statement from their insurers verifying that they have health care.

The IRS also will get a copy of the insurance info, just as it does with the third-party reporting of W2 or 1099 info that taxpayers receive each year.

"In most cases, taxpayers will file their tax returns reporting their health insurance coverage, and/or making a payment, and there will be no need for further interactions with the IRS," Miller said. "The IRS process for verifying coverage will be very similar to the one that the IRS has used for years to verify wages and withholding."

No enforcement actions: Miller also told lawmakers that he wanted to "clear up one misconception."

IRS revenue agents, those agency employees who are specially trained on more complicated aspects of the tax code, will not in most cases work on resolving any issues with the health coverage reporting, said Miller.

Rather, he told the Ways and Means panel, any follow-up inquiries about coverage "will generally be performed by written correspondence, and will allow taxpayers time to gather the information needed to respond, or get help in understanding the details of the provision."

And there will not be any IRS levies, liens or criminal charges filed if individuals don't pay the tax required when they don't have acceptable health care coverage. The health care law specifically prohibits such enforcement activities in these situations.

Obviously the IRS will adhere to the no-enforcement provisions. You can be sure all the anti-Obamacare people will make sure of that.

But as to how well -- and smoothly for taxpayers -- the agency will handle the confirmation process, especially if Congress continues to hold very tightly to the IRS purse strings, is something we will just to wait and see about when the processing of 2014 tax returns begins.

The rest of the testimony: Miller was joined by several other witnesses at the W&M Oversight hearing on Sept. 11. If you are looking for a little leisure time reading, in addition to his testimony you can read the prepared remarks of:

• Fred Goldberg, Jr., former IRS commissioner and now a partner at Skadden, Arps, Slate, Meagher & Flom
• Kathy Pickering, executive director of The Tax Institute at H&R Block
• Scott A. Hodge, president or The Tax Foundation
• Seth T. Perreta, partner at Crowell and Moring, representing the American Benefits Council
  

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• Don't fall for health care tax rumors
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• Possible property tax problems for states
  that reject Obamacare expansion plans