Tax Tip of the Week | No. 232 | An Update on the Affordable Care Act

Tax Tip of the Week | January 15, 2014 | No. 232 | An Update on the Affordable Care ActHealth and taxes converge, equaling headaches for all

If the website headaches weren’t enough, now there appear to be problems with the health care reform tax credits.The IRS needs to strengthen systems development controls with the new tax credits, according to a new report from the Treasury Inspector General for Tax Administration (TIGTA).Beginning in January, eligible taxpayers who purchase health insurance through the Health Insurance Marketplace (an Exchange) may qualify for and request a refundable tax credit through the Premium Tax Credit (PTC) Project. These credits can be used to help pay health insurance premiums. The credit is claimed on the taxpayer’s Federal tax return at the end of each coverage year. Because it is a refundable credit, taxpayers who have little or no income tax liability can still benefit. The PTC can also be paid in advance to a taxpayer’s health insurance provider to help cover the cost of premiums. This credit is referred to as the Advanced Premium Tax Credit.The IRS’s implementation plan for ACA Exchange provisions includes providing information that will support the Department of Health and Human Services and the Exchanges.TIGTA found that improvements are needed to systems development controls for:•    Security•    Fraud detection and mitigation in accordance withapplicable guidance•    Configuration and change management•    Interagency test management processTIGTA recommended that the IRS develop an action plan for resolving security test issues and that the Internal Revenue Manual be updated to provide specific guidance on how to identify and mitigate potential fraud risks with the design, development, and testing of the new information technology systems that must be implemented to meet ACA requirements.

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