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IRS budget cuts hamper Affordable Care Act implementation

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Budget constraints are challenging the Internal Revenue Service's ability to implement the Affordable Care Act, a report from the Treasury Inspector General for Tax Administration says.

The agency's budget decreased about 3 percent from fiscal 2010 to fiscal 2012 as it has phased in what the report (.pdf), released Sept. 17, says is the largest set of tax law changes in decades. The IRS requested an extra $473 million to administer tax provisions from the Affordable Care Act in fiscal 2012, but Congress did not provide it.

The IRS did receive a total of nearly $500 million from the Health and Human Services Department's health reform implementation fund in fiscals 2011 and 2012.

To implement the law, the IRS has to revise forms or issue new ones, create new computer programs, issue regulations, train its employees, and reach out to tax professionals and the public.

The new provisions, about 50 in total, consist of tax breaks for healthcare expenses as well as penalties for individuals and businesses who do not obtain health insurance. Some have already gone into effect, with about 10 more set for fiscal 2014 or fiscal 2018.

The TIGTA report also raises concerns about a recent drop in tax revenue from enforcement, which has fallen 13 percent since fiscal 2010. That correlates with a 14 percent decline in the number of enforcement personnel at the IRS in that time.

In fiscal 2012, the IRS brought in $50 billion in enforcement revenue. Meanwhile, the most recent estimate of the tax gap--the difference between taxes owed and taxes voluntarily paid on time--was $450 billion.

The number of IRS employees overall was nearly 98,000 at the end of fiscal 2012, down from more than 107,000 at the end of fiscal 2010.

For more:
- download the report, 2013-30-078 (.pdf)

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