Health-Care Law May Pose Challenges For IRS, Taxpayers

Linda O’Keefe – 

The IRS is going to be overwhelmed by Obamacare.

I guess this will be efficient, because the IRS agent can tell you how much you owe in taxes. When that triggers a heart attack, the same agent can let you know that you are being denied treatment due to rationing.

All of the things that Obama said wouldn’t happen are going to happen.


Health-Care Law May Pose Challenges For IRS, Taxpayers

By David S. Hilzenrath
Washington Post

The new federal health-care law may pose compliance challenges for taxpayers and the Internal Revenue Service, an IRS ombudsman reported Wednesday.

The agency, which will be responsible for administering major aspects of health insurance finance, is neither structured nor funded to effectively oversee social programs, the National Taxpayer Advocate Service said in a news release.

In addition, a tax reporting requirement in the health-care law “may impose significant burdens on businesses, charities, and government agencies,” the advocate service reported.

Those burdens “may turn out to be disproportionate as compared with any resulting improvement in tax compliance,” the head of the advocate service, Nina E. Olson, said in the release.

The advocate service is an independent organization within the IRS that helps taxpayers solve problems with the agency and recommends reforms.

Beginning in 2012, the health-care legislation enacted in March will require all businesses and tax-exempt organizations to issue an IRS form called a 1099 to vendors from whom they buy goods totaling $600 or more annually — and to file a copy to the IRS. The requirement is intended to reduce the under-reporting of business income, but it will demand thorough record-keeping on the part of buyers.

“For example, if a self-employed individual makes numerous small purchases from an office supply store during a calendar year that total at least $600, the individual must issue a Form 1099 to the vendor and the IRS showing the exact amount of total purchases,” the IRS release said.

Previously, such disclosures were required for the purchase of services but not goods.

The Taxpayer Advocate Service estimated the new requirement will affect 40 million businesses and other entities. Those include about 26 million sole proprietorships, not counting farms.

The IRS “will face challenges making productive use of this new volume of information,” the mid-year report said. “In our view, it is highly likely that the IRS will improperly assess penalties that it must abate later, after great expenditure of taxpayer and IRS time and effort.”

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