Taxpayer Advocate: IRS must address new health care laws

Tuesday - 1/18/2011, 9:31am EST

Nina Olson, National Taxpayer Advocate, IRS

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By Suzanne Kubota
Senior Internet Editor
FederalNewsRadio.com

In taking a look at the most serious problems encountered by taxpayers for her 10th annual report to Congress, taxpayer advocate Nina Olson found big trouble looming on the horizon.

Olson told Federal News Radio the problem is in part of the recent directive to administer major aspects of the new health care law.

While most of the bill comes into effect in 2014, Olson sees a problem now with the Individual Responsibility Requirement, where taxpayers will have to certify on their returns that they're covered by health insurance.

"What this does is it forces the IRS to work very closely with other federal agencies like HHS and these new health care exchanges that are going to be set up in each state to be able to receive the information that these entities are making as to whether a taxpayer is eligible for a subsidy or has a hardship exception from this penalty, and then the IRS is in the position of implementing it, so that's sort of new. You know, we're not making the decisions ourselves, we're just implementing the decisions that others are making."

In light of the IRS's expanded responsibilities, Olson's report recommends that the IRS "revise its mission statement to recognize explicitly its dual roles as tax collector and benefits administrator," according to an IRS news release.

Olson made clear to the Federal Drive working with other agencies isn't a bad thing. It's just not going to be all that easy.

I think that's how we have to really look at this. That, in some ways, this is a good thing in the sense that all of these agencies are going to have to figure out how to communicate with one another and share information, or at least the minimum necessary information, without violating taxpayers' privacy and their confidence that when they file their tax returns, that information isn't going across the whole federal government. You know that's a primary concern of the IRS. It will take time, partly due to systems issues. Systems don't talk to one another, they don't have communication back and forth. We're going to have to build those.

Part of the problem, said Olson, is that if the taxpayer is penalized for not having insurance, even though the IRS won't be the agency making the decision about the penalty, the taxpayer will be calling the IRS. "And yet, we can't make the decision. We can't review the decision, change the decision. We are going to have to find a way to get that taxpayer seamlessly and easily to the decision maker so that can be reviewed."

The good news, said Olson, is that the agency learned about the new responsibility in 2010 and has until 2014 to plan for changes.

Overall, said the taxpayer advocate, the "IRS is doing much better than in the last 10 years."

For other big issues in this year's report including what Olson calls the "crying need" for tax reform, and the challenges in being able to provide service to the taxpayer, listen to the interview at the top of this page.