The Treasury Inspector General for Tax Administration (TIGTA) was tasked with assessing the IRS’ ability to ensure compliance with the employer mandate under the Affordable Care Act. The TIGTA audited the IRS and found that some processes did not function as intended and the IRS did not have accurate and complete data to identify non-compliant employers.
The TIGTA’s report exposed several weaknesses with the IRS’ review and enforcement of ACA compliance and reporting. Specifically,
- Due to system errors, the IRS was not able to process paper 1094/1095 information returns timely and accurately. As of October 28, 2016, approximately 16,000 paper 2015 form 1094-C and 1.4 million paper 2015 1095-C forms had not been processed.
- The criteria used to identify validation errors for electronic submissions did not work properly. Some error codes were generated when there was no error and some error codes did not generate when an error existed. The audit found that the IRS did not sufficiently test its error code programming.
- The development and implementation of systems to identify employers that did not satisfy the employer mandate and should be subject to an employer shared responsibility payment assessment have been delayed, not initiated or canceled. The IRS was supposed to have a validation system in place by January 2017, but the system has not yet been finalized. Therefore, the IRS has not penalized any employers for failing to satisfy the employer mandate.
The TIGTA’s report provided seven recommendations to the IRS to improve the processing of 1094/1095 forms. The IRS has said that it has, and is, implementing significant changes to its systems and is working on corrective actions to implement most of TIGTA’s suggestions.
A copy of the audit report, along with the IRS’ response can be found here.
