Approximately 710,000 taxpayers who received the Advanced Premium Tax Credit for buying health insurance last year have not filed their tax returns or filed for an extension.
In a letter to Senate Finance Committee chairman Orrin Hatch, R-Utah, IRS commissioner John Koskinen said the IRS is contacting the taxpayers to remind them of their obligation.
“Approximately 710,000 of the taxpayers with APTC have not yet filed a tax return and have not filed an extension, as required,” he wrote last Friday. “As one part of our post-compliance strategy, we are sending letters to taxpayers who had APTC paid on their behalf who have not yet reconciled and who did not file an extension to remind them of their obligation to file a tax return. Under regulations issued by the Department of Health and Human Services, taxpayers must meet this obligation in order to maintain their eligibility for APTC to help pay for Marketplace coverage in 2016. We are urging these taxpayers to file an electronic tax return to reconcile their APTC within 30 days. We will follow up with these taxpayers as appropriate.”
In response to the letter, Hatch called on the Treasury Inspector General for Tax Administration, J. Russell George, to examine the use of the tax credits, noting that the 710,000 people had probably received more than $2.4 billion in Advanced Premium Tax Credit payments.
In a letter to Inspector General George, Hatch reiterated his ongoing concern regarding the integrity of APTC payments and outlined his request for an examination of a large sample of individuals who received a government subsidy and failed to submit a tax return.
“A critical element in safeguarding the integrity of insurance subsidies is the reconciliation process that occurs when taxpayers file their tax returns and reconcile subsidies received versus the amount they were in fact due,” Hatch wrote Monday in a letter to George. “While it is likely that not all of these are fraudulent, because of the Marketplace’s lax integrity controls there is reason to believe that a significant portion could be.”
Hatch’s letter comes on the heels of a Senate Finance Committee hearing that included testimony from an official with the Government Accountability Office who found as part of an undercover investigation that the federal exchange approved 11 out of 12 telephone and online applications for fictitious applicants (see Fake Applicants Received Tax Credits for Health Insurance). As a result, the federal government paid $2,500 per month, or $30,000 per year, in credits for insurance policies for these fictitious individuals.