WASHINGTON - The Internal Revenue Service (IRS) implemented an interim manual process in Calendar Year 2016 to help certain displaced workers and retirees pay for health insurance. The interim process issued Health Coverage Tax Credit (HCTC) advance monthly payments to Health Plan Administrators on behalf of the displaced workers and retirees. The IRS also initiated a comprehensive outreach effort to inform the public about the HCTC advance monthly payment program.
The Treasury Inspector General for Tax Administration (TIGTA) issued an audit report today, after completing a review with the overall objective of assessing the effectiveness of the IRS's implementation of its advance monthly payment system for the HCTC, which covers 72.5 percent of the cost of qualified health insurance premiums for eligible individuals and qualified family members.
The IRS was required by law to start providing HCTC advance monthly payments on behalf of eligible applicants starting June 29, 2016. IRS management realized that they would not be able to establish the necessary systems, processes, and procedures to meet this deadline, and implemented an interim manual process to issue HCTC advance monthly payments on behalf of eligible applicants until a systemic process could be established in January 2017. The IRS stated it issued a total of $5.8 million in HCTC advance monthly payments on behalf of 1,220 individuals covering the months July 2016 through December 2016.
TIGTA also found that the IRS completed actions to establish a permanent HCTC enrollment and systemic advance monthly payment system. This system includes sending letters to inform individuals that the IRS received their system enrollment packages and to inform them of the IRS's progress in reviewing and processing the packages.
Finally, TIGTA found that many individuals identified by the Pension Benefit Guaranty Corporation (PBGC) as potentially eligible to claim the HCTC did not meet the requirements to claim the credit. Of the 896,213 individuals the PBGC Pension Benefit Guaranty Corporation identified as potentially eligible to claim the Credit HCTC on their Tax Year 2015 return, as of December 2015, TIGTA identified that 506,396 (57 percent) of those individuals had a characteristic that disqualified them from claiming the HCTC.
TIGTA recommended that the IRS Commissioner, Wage and Investment Division, develop processes and procedures to ensure that individuals meet HCTC eligibility qualifications before adding eligibility indicators to their tax accounts. The IRS agreed with and plans to implement TIGTA's recommendation.