Jul 112012

Now that the U.S. Supreme Court has ruled affirmatively on the new healthcare law and its most controversial measure, the individual mandate, the IRS must prepare to enforce the new legislation while still maintaining its customary obligation of collecting the taxes necessary to run the federal government.  Some have called into question if the problem-stricken agency can handle this new obligation, as well as whether the IRS has maintained adequate transparency in preparing for the role.

As the IRS seeks funding to build a system to oversee the healthcare mandate, Republicans suspect the agency is already diverting resources away from collecting taxes in order to prepare for the mandate’s enforcement.  “Knowing the complexity of the health law, there’s no question that the IRS is going to struggle with this,” said Rep. Charles Boustany Jr., R-La., chairman of the House Ways and Means oversight subcommittee.  “The IRS wants more resources.  Well, we need to start digging down into what are they doing with the resources and personnel.”

The new law requires the IRS to provide tax breaks and incentives to help pay for health insurance as well as to impose penalties on those taxpayers who do not purchase insurance and on some businesses that do not offer it to their employees.  This will require new guidance in the form of regulations, as well as new forms and publications.  The IRS may also launch a new informational program to explain all of the upcoming changes to taxpayers and tax professionals.

All of this comes at a time when the IRS is facing increasing challenges on the tax-collection front.  For example, tax-related identity theft is quickly getting out of control, the IRS whistleblowing program has suffered a participation fall-off, 6 million returns were delayed this year because of a computer programming glitch, and the IRS is getting slammed by the Taxpayer Advocate for increasing the use of impersonal and confusing automation in its dealing with taxpayers.

The IRS and Congress are not even close in their opinions regarding how many new employees will be needed to implement the new legislation nor what their function will be.  A 2010 House Ways and Means Committee report says that the IRS may need as many as 16,500 additional auditors, agents and other employees “to investigate and collect billions in new taxes from Americans.”  However, an IRS spokesman has stated that “the 2012 budget calls for about 1,200 employees for the IRS to implement the (Affordable Care Act), and the vast majority of those employees are needed to build technology infrastructure to support payments like the new tax credits for individuals and small businesses.”

According to the Treasury Inspector General, the healthcare law “includes the largest set of tax law changes in more than 20 years;” and while no one is disputing that tax law changes are under the purview of the IRS, it remains to be seen whether the agency will be capable of handling the onslaught.   In the meantime, if you have questions regarding your individual or business tax compliance requirements under the new law, contact a Florida tax attorney who can assist you with your inquiries.