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Health Insurance Reform Mythbuster: Myths About IRS Harassment

Posted on by Karina

Following the President signing of comprehensive health insurance reform legislation into law this week, opponents of reform continue to spread myths about the bill, including claiming that Americans who don't buy health insurance could face jail time or harassment from the IRS.

MYTH: “The IRS will hound taxpayers, confiscate property, or put you in jail if you do not have health insurance.”

FACT: The bill specifically prohibits the IRS from confiscating taxpayer assets, from using liens or levies, or imposing criminal penalties of any kind — including jail time — because of a lack of health care coverage.

MYTH: “The IRS may need to hire as many as 16,500 additional employees to investigate and collect billions in new taxes.”

FACT: This number is a fabrication — and the fact is that any new IRS employees would be hired to help deliver the more than $500 billion in tax relief provided under this bill: ensuring that individuals and businesses are aware of the tax incentives and how to claim them, answering taxpayer calls, building online self-help tools, and performing other outreach services.

Health insurance reform provides the largest middle-class tax cut for health care in American history — and the IRS makes it easy for Americans who qualify for help by paying a significant portion of their premiums up front — so they never have to pay the full bill.

The claim that IRS agents would be dispatched to quiz Americans citizens on the intricacies of their health plan is FALSE. Insurance companies will automatically report health care coverage that they provide to both taxpayers and the IRS.

In addition, today IRS Commissioner Douglas Shulman testified before the Ways and Means Oversight Subcommittee and helped set the record straight:

Transcript:

Representative Kind:
Dr. Boustany raised the issue of the health reform bill and I think there is a lot of misinformation, a lot of misperception, about the role that IRS will play in the implementation of the recently passed health care bill.

So let me ask you a series of questions and as much as you can just answer them yes or no to clarify some questions that I have about the exact role that the IRS will play.

Representative Kind:
The health care bill that was just signed by the President will not fundamentally alter the relationship between the IRS with the American taxpayer, will it?

IRS Commissioner Shulman:
No.

Representative Kind:
You said that right now you are moving forward doing calculations of costs and staffing needs that the IRS has but you haven't made any of those final determinations yet have you?

IRS Commissioner Shulman:
That is correct.

Representative Kind:
And IRS agents are not going to go out and auditing taxpayers to verify if they have obtained acceptable health insurance, will they?

IRS Commissioner Shulman:
No.

Representative Kind:
In fact it's going to be the insurance companies that will merely be certifying whether or not an individual has obtained health care coverage and they will be certifying that to the IRS?

IRS Commissioner Shulman:
Yes, it's probably worth me being very clear because I think there have been some misconceptions out there. The way we envision this working is that HHS, the Department of Health and Human Services and the exchanges will be working with the insurance companies to determine what is acceptable coverage.

All that will happen with the IRS is similar to a current 1099 where a bank sends IRS a statement that says ‘here's the interest’ someone owes and they send it to the taxpayer. We expect to get a simple form that we won't look behind that says this person has acceptable health coverage. There are not going to be any discussions about health coverage with an IRS employee.

Representative Kind:
In fact I envision that the major role the IRS will play is trying to get information into the individuals' hands and businesses about the various tax incentives that the health reform bill has and how they can best access those incentives and utilize them, is that correct?

IRS Commissioner Shulman:
Yes, I mean, the role of the IRS is going to be again, the tax portions of this, not the health portions of this, and what we are going to try to do is make sure that people are educated, that there is information, we process payments quickly. We also will make sure there is no fraud and abuse in the system as we always do.

Representative Kind:
So the IRS is still going to pick up the phone and answer questions in regards to the tax incentives in the health care bill?

IRS Commissioner Shulman:
Yes

Representative Kind:
And I assume that the IRS will try to build some type of online education service too for people to access as far as what they are eligible for?

IRS Commissioner Shulman:
Absolutely.

Representative Kind:
And that you will probably be performing some additional outreach services with businesses and taxpayers about the health care bill?

IRS Commissioner Shulman:
Absolutely.

Representative Kind:
And as you indicated earlier to Mr. Etheridge, you are already moving forward on a 35% tax credit that small businesses are going to be getting this year already with enactment of the health care bill?

IRS Commissioner Shulman:
That is our first move.

Representative Kind:
And no taxpayer is going to be subject to any IRS liens or levies, or jail time, for failing to disclose insurance requirements to the IRS?

IRS Commissioner Shulman:
That is what the legislation calls for, yes.

Representative Kind:
And as soon as your internal review is done, I assume you will come back and report to Congress what type of resources you'll need for staffing or for additional funds in order to implement the health care bill?

IRS Commissioner Shulman:
Yes, I do want to be clear as I was with Mr. Boustany, we will need resources to implement the tax provisions of this legislation and we will look forward to working with Committee to make sure we have the proper resources to serve the American people.

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