Top IRS officials have been working with Democrats on Capitol Hill to determine how the agency will enforce President Obama's new health care law. Republican lawmakers estimate the legislation will require the hiring of many thousands of new tax enforcement agents.
While it's still not known exactly how many will be hired, here's what's clear: Under the new law, the IRS is required to fine taxpayers thousands of dollars if they do not purchase health insurance. In order for the government to enforce compliance, tax authorities will need information, for the first time, about people's health care. Collecting that data will require more IRS personnel.
Consider what has happened in Massachusetts, which passed a similar health care bill in 2006. To enforce the individual mandate, the state's Department of Revenue asks filers what kind of insurance they have, as well as details like whether their "sincerely held religious beliefs" are moving them to petition for an exemption from the requirement.
The form also asks workers whether their employer gives them "affordable" coverage, forcing some employees to decide between tattling on their workplace and submitting false information to tax agents.
Critics have slammed the new federal mandate for its harsh consequences (failing to buy health insurance could land you in jail) and have raised constitutional questions about its legality. And they point to the Obama administration's recent efforts to ramp up IRS audits, especially of small businesses, as evidence that the mandate is likely to prove more onerous than previously thought.
The Obama administration's plan to increase audits is in line with a long-term agency goal of ending the "tax gap," bureaucratese for the amount of uncollected taxes each year. In 2001, the IRS estimated the gap at around $300 billion.
Critics call the agency's estimates dubious and fear the tax agency will overreach in its efforts under Obama, who launched a tax task force last year in part with the goal of collecting more revenue.
A July 2009 report from the agency says the IRS is going to "increase audit coverage and better target returns for examination" including focusing on Schedule C audits that often target small businesses and the self-employed.
The document also says tax agents will share details with state enforcement agencies to increase enforcement efficiency.
To examine more Americans' tax filings, Obama is proposing more money for the agency. His latest budget proposes "over $8 billion in the Internal Revenue Service's enforcement and modernization programs" to support "significant new revenue-generating initiatives that will target critical areas of non-compliance."
The administration's plans are exacerbating concerns of some critics with the health care bill's mandate, in part because it will require a veritable new army of enforcement agents.
A March 18 report from House Ways & Means Committee Republicans estimates the IRS will need to hire between 11,800 and 16,500 new agents to enforce the bill.
The report slams the bill's "plans to grant massive new powers to the IRS, backed up by billions of dollars in additional taxpayer fund for the hiring of thousands of new IRS agents, examiners, and other personnel."
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