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SOI Tax Stats – Corporation Source Book: U.S. Total and Sectors Listing

April 16, 2014 Comments off

SOI Tax Stats – Corporation Source Book: U.S. Total and Sectors Listing
Source: Internal Revenue Service

The 2011 Corporation Source Book is now available on the IRS Tax Stats Webpages. This publication presents balance sheet, income statement, tax, and other selected items, by size of total assets for all returns with and without net income, and returns with net income only. Data tables are available by industrial groupings based upon the North American Industry Classification System (NAICS). Separate data tables are available for S corporations at the highest level of industry groupings. The Source Book contains over 700 Excel tables in separately grouped zip files.

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Millions of Dollars in Potentially Improper Claims for the Qualified Retirement Savings Contributions Credit Are Not Pursued

April 10, 2014 Comments off

Millions of Dollars in Potentially Improper Claims for the Qualified Retirement Savings Contributions Credit Are Not Pursued (PDF)
Source: Treasury Inspector General for Tax Administration

For Tax Year 2011, TIGTA determined that taxpayers potentially made approximately $53 million in improper claims for contributions made to a qualifying retirement account. Based on a comparison with third party data, these claims appear to be potentially either false or overstated. In the future, if the IRS identifies and addresses taxpayers who are potentially ineligible to receive the saver’s credit, it could recover approximately $264 million over five years.

TIGTA — Millions of Dollars in Potentially Improper Self-Employed Retirement Plan Deductions Are Allowed

March 31, 2014 Comments off

Millions of Dollars in Potentially Improper Self-Employed Retirement Plan Deductions Are Allowed (PDF)
Source: Treasury Inspector General for Tax Administration

IMPACT ON TAXPAYERS
Self-employed taxpayers may deduct contributions that are made to their own Simplified Employee Pension (SEP) or other qualified retirement plan account on line 28 of their individual tax return under certain circumstances.

WHY TIGTA DID THE AUDIT
The overall objective was to determine whether the IRS’s controls and third‑party data are adequate to identify improper deductions for contributions made by self‑employed taxpayers to their own SEP plan retirement account.

WHAT TIGTA FOUND
This could be verified using information provided by taxpayers when individual tax returns are filed. If the IRS improves controls, it could prevent improper deductions and potentially protect $71 million in revenue over five years. In addition, TIGTA found that the IRS could better use third‑party data to detect potentially improper SEP deductions. For example, to be able to claim a SEP deduction on line 28 of Form 1040, self‑employed taxpayers must show net earnings on a self-employed business. If the IRS improves controls, it could detect improper deductions and potentially realize $29 million in revenue over five years.

WHAT TIGTA RECOMMENDED
TIGTA recommended that the IRS enhance controls to prevent and detect improper claims on line 28 and assess the need for additional third‑party data to verify line 28 deductions. In their response, IRS management disagreed with TIGTA’s conclusion…but they agreed that certain actions can be taken to improve existing processes. TIGTA does not believe that the IRS’s corrective actions are sufficient. This audit identified millions of dollars in potentially improper or fraudulent claims… TIGTA continues to believe that the IRS should consider additional controls to prevent or detect potentially improper retirement plan deductions.

IRS — Improvement Is Needed to Better Enable Frontline Employee Identification of Potentially Dangerous and Caution Upon Contact Designations

March 28, 2014 Comments off

Improvement Is Needed to Better Enable Frontline Employee Identification of Potentially Dangerous and Caution Upon Contact Designations
Source: Treasury Inspector General for Tax Administration

IMPACT ON TAXPAYERS
The IRS has approximately 25,000 employees who have direct contact with taxpayers and their representatives (hereafter referred to as frontline employees). The safety of its employees is a top priority for the IRS. As such, the IRS has programs to help protect employees when interacting with individuals who are known to be violent, abusive, or pose some other type of danger. Examples include the Potentially Dangerous Taxpayer (PDT) and Caution Upon Contact (CAU) programs.

WHY TIGTA DID THE AUDIT
This audit was initiated in response to a Treasury Inspector General for Tax Administration Office of Investigations referral that identified paid tax return preparers who may pose a threat to IRS employees conducting official business. Frontline IRS employees can be exposed to many difficult, threatening, and dangerous situations. The overall objective of this review was to determine the adequacy of processes and procedures for employees who have direct contact with taxpayer representatives to identify those representatives who are designated as potentially dangerous or who need to be approached with caution upon contact.

WHAT TIGTA FOUND
The IRS has not developed sufficient procedures to enable frontline employees to readily identify whether a taxpayer representative has been designated as PDT or CAU. While a frontline employee can research an individual’s tax account for the PDT or CAU designation using the individual’s Social Security Number (SSN), the employee typically does not have a taxpayer representative’s SSN. The employee generally must search for the representative’s tax account using the representative’s name. Without the SSN, the employee is unable to definitively identify and examine the representative’s tax account for a PDT or CAU indicator.

As of August 29, 2013, the IRS designated 84 taxpayer representatives with a PDT or CAU indicator. Although this number is a small percentage of the 2.3 million representatives in the Centralized Authorization File, the safety of frontline employees, others working in the same facilities, and taxpayers is at risk when these employees unknowingly meet with potentially dangerous taxpayer representatives. IRS employees reported four incidents of physical assault by taxpayer representatives in Calendar Years 2010 through 2012. The IRS agreed that even one assault is one too many.

WHAT TIGTA RECOMMENDED
TIGTA recommended that the Deputy Commissioner for Services and Enforcement: 1) develop a process to enable frontline employees to readily access information that identifies whether a taxpayer representative has been designated as a PDT or CAU; and 2) ensure that internal guidance is updated with procedures to research taxpayer representative designations and that outreach and training is performed to ensure that frontline employees are knowledgeable of the revised process.

IRS management’s response to the report states that they believe their current procedures are appropriate to ensure the safety of employees. However, TIGTA remains concerned that frontline employees do not have a process to readily identify whether a taxpayer representative has been designated as PDT or CAU.

IRS Releases FY 2013 Data Book

March 27, 2014 Comments off

IRS Releases FY 2013 Data Book
Source: Internal Revenue Service

The Internal Revenue Service today released the 2013 IRS Data Book, a snapshot of agency activities for the fiscal year.
The report describes activities conducted by the IRS from Oct. 1, 2012, to Sept. 30, 2013, and includes information about returns filed, taxes collected, enforcement, taxpayer assistance and the IRS budget and workforce, among others.

During fiscal year 2013, the IRS collected almost $2.9 trillion in federal revenue and processed 240 million returns, of which 151 million were filed electronically. Out of the 146 million individual income tax returns filed, almost 83 percent were e-filed. More than 118 million individual income tax return filers received a tax refund, which totaled almost $312.8 billion. On average, the IRS spent 41 cents to collect $100 in tax revenue during the fiscal year, matching low-cost results for 2008 and 2001.

The IRS examined just under one percent of all tax returns filed and about one percent of all individual income tax returns during fiscal year 2013. Of the 1.4 million individual tax returns examined, over 39,000 resulted in additional refunds. The IRS provided taxpayer assistance through 456 million visits to IRS.gov and assisted almost 91 million taxpayers through its toll-free telephone helpline or at walk-in sites.

IRS Notice 2014-21 (FAQ on tax treatment of virtual currency)

March 25, 2014 Comments off

IRS Notice 2014-21 (PDF)
Source: Internal Revenue Service

For federal tax purposes, virtual currency is treated as property. General tax principles applicable to property transactions apply to transactions using virtual currency.

Changes in ACA Implementation Will Create Challenges for IRS Customer Service

March 24, 2014 Comments off

Changes in ACA Implementation Will Create Challenges for IRS Customer Service
Source: Treasury Inspector General for Tax Administration

The Internal Revenue Service (IRS) has developed a customer service strategy that includes sufficient plans to assist individuals in understanding the tax implications of the Affordable Care Act (ACA), however changes in the law’s implementation will create challenges that could affect this strategy.

That is the primary finding of a report publicly released today by the Treasury Inspector General for Tax Administration (TIGTA). TIGTA conducted its audit to evaluate the IRS’s efforts to provide individuals assistance related to the ACA provisions on obtaining the minimum essential coverage and the tax credit to offset health care expenses.

Signed into law in March 2010, the ACA includes tax provisions that require individuals to maintain minimum essential health care coverage. It also provides a tax credit (Premium Tax Credit) to offset the health care expenses of qualified individuals. The IRS will impose a penalty on any taxpayer who, after Calendar Year 2013, fails to maintain the minimum essential coverage, for three months or more and does not qualify for an exemption.

Bankruptcy Procedures Designed to Protect Taxpayer Rights and the Government’s Interest Were Not Always Followed

March 13, 2014 Comments off

Bankruptcy Procedures Designed to Protect Taxpayer Rights and the Government’s Interest Were Not Always Followed
Source: Treasury Inspector General for Tax Administration

IMPACT ON TAXPAYERS
The bankruptcy automatic stay provision prohibits the IRS from taking certain collection actions against a debtor (taxpayer) as soon as it learns, or is notified by a U.S. bankruptcy court, that a bankruptcy petition has been filed. Similarly, the debtor may be granted a discharge, which remains after the case is closed and is a permanent injunction order prohibiting the IRS from taking any form of collection action against the debtor personally with respect to discharged debts. If the IRS does not observe the automatic stay or the discharge injunction, taxpayers’ rights could potentially be violated and the IRS could be sued for damages.

WHY TIGTA DID THE AUDIT
In Fiscal Year 2012, IRS data showed that the Field Insolvency function received 306,920 bankruptcy cases on taxpayers owing approximately $2.5 billion in taxes, penalties, and interest. This audit was initiated to determine whether the function has effective controls and procedures in place to take appropriate and timely actions to protect the Government’s interest and taxpayers’ rights during bankruptcy proceedings.

WHAT TIGTA FOUND
Field Insolvency function specialists frequently did not follow required procedures when working bankruptcy cases. Although TIGTA did not identify any violations of taxpayers’ rights and/or failure to protect the Government’s interest during this review, there is a higher risk that this could occur when procedures are not followed.

TIGTA’s review of three random samples of closed bankruptcy cases showed that specialists did not always follow established procedures in 17 (57 percent) of 30 Chapter 7 cases, 15 (50 percent) of 30 Chapter 11 cases, and 13 (43 percent) of 30 Chapter 13 cases reviewed. Specifically, specialists did not always timely or properly conduct the initial case analysis, follow up on scheduled case actions within a reasonable time, or timely or properly close cases.

TIGTA also reviewed a random sample of 30 bankruptcy cases with Automated Proof of Claim flag conditions (errors that need to be resolved by a specialist). Specialists did not timely or properly resolve the flag conditions in 12 (40 percent) of 30 cases.

WHAT TIGTA RECOMMENDED
TIGTA recommended that the Director, Field Collection, Small Business/Self-Employed Division: 1) enhance casework priorities and efficiencies; 2) ensure that specialists are properly conducting the initial analysis and closing actions; 3) ensure that the Automated Insolvency System follow-up tool is the preferred method for creating follow-ups; 4) ensure that case actions are properly documented for Automated Proof of Claim flag conditions; and 5) ensure that the Flagged Cases Report is the preferred method for monitoring cases.

In their response to the report, IRS officials agreed with all of our recommendations and plan to take corrective actions.

Treasury Budget Supports Obama Administration’s Efforts To Create Opportunity For All Americans

March 5, 2014 Comments off

Treasury Budget Supports Obama Administration’s Efforts To Create Opportunity For All Americans
Source: U.S. Department of the Treasury

The Treasury Budget request makes key investments that will help spur economic growth and job creation, while boosting confidence in the safety and soundness of the U.S. financial system.

To continue our support for state economic development agencies’ work to boost lending to small businesses, the Budget proposes a new investment of $1.5 billion for the State Small Business Credit Initiative (SSBCI).

The FY 2015 Budget also provides $225 million for the Community Development Financial Institutions (CDFI) Fund, which promotes economic development investments in low-income communities. The Budget proposes a one-year extension of the CDFI Bond Guarantee program, which provides a source of long-term capital to financial institutions that support lending in underserved communities. Of the total request, $35 million for the Healthy Food Financing Initiative will support the growth of businesses that improve the availability of affordable, healthy food options in low-income communities.

The Budget proposes an increase of $11 million for investments in enhancing Treasury’s cyber-preparedness and the security of Treasury’s financial and intelligence data, as Treasury seeks to improve the protection and resilience of the financial sector from cyber and physical attacks.

The Budget also proposes to extend the Terrorism Risk Insurance Program and to implement cost-effective programmatic reforms to limit taxpayer exposure. The extension will preserve the long-term availability and affordability of property and casualty insurance for terrorism risk.

The President’s Budget includes a separate Opportunity, Growth, and Security Initiative, with pro-growth investments which are fully paid for with a balanced package of spending cuts and tax loophole closers. The proposal demonstrates that additional pro-growth investments are easily affordable without increasing the deficit, if Congress enacts common-sense spending and tax reforms.

See: Budget in Brief (PDF)

Internal Revenue Service’s Executive Long-Term Taxable Travel

February 24, 2014 Comments off

Internal Revenue Service’s Executive Long-Term Taxable Travel (PDF)
Source: Treasury Inspector General for Tax Administration

We reviewed the travel records for 31 executives, less than 10 percent of the IRS executives employed, to determine whether their travel appeared to be properly classified as taxable or nontaxable. We found that the tax classification of travel for nine executives appeared to be incorrect based on their travel patterns and the IRS’s validation, and for three executives, the classification was not made in a timely manner as required by Internal Revenue Manual 1.32.11.9, Taxable Travel Reimbursement. 9 Consequently, not all executives who were in a LTTT status were correctly and/or timely classified as such; therefore, the IRS did not withhold the appropriate amount of taxes on the travel reimbursements paid to some executives.

Without an effective periodic assessment and management review of the executives’ travel activities, the IRS cannot verify that its executives’ travel expenses are properly classified as LTTT when they should be. The inaccurate reporting of the LTTT resulted in the executives’ potentially underreporting income, Federal, State, Medicare, and Federal Insurance Contributions Act taxes.

Revised Interim Policy on Gluten Content Statements in the Labeling and Advertising of Wine, Distilled Spirits, and Malt Beverages

February 17, 2014 Comments off

Revised Interim Policy on Gluten Content Statements in the Labeling and Advertising of Wine, Distilled Spirits, and Malt Beverages (PDF)
Source: U.S. Department of the Treasury (Alcohol and Tobacco Tax and Trade Bureau)

Truthful , accurate, and non – misleading gluten content statements, in accordance with this ruling, are permitted on labels and in advertisements for alcohol beverage products regulated by the Alcohol and Tobacco Tax and Trade Bureau (TTB). TTB may modify the interim guidance provided in this ruling w hen the Food and Drug Administration (FDA) issues fu rther guidance or final regulations on use of the term “gluten – free” on labels of fermented foods.

FinCEN Issues Guidance to Financial Institutions on Marijuana Businesses

February 14, 2014 Comments off

FinCEN Issues Guidance to Financial Institutions on Marijuana Businesses
Source: Financial Crimes Enforcement Network

The Financial Crimes Enforcement Network (FinCEN), in coordination with the U.S. Department of Justice (DOJ), today issued guidance that clarifies customer due diligence expectations and reporting requirements for financial institutions seeking to provide services to marijuana businesses. The guidance provides that financial institutions can provide services to marijuana-related businesses in a manner consistent with their obligations to know their customers and to report possible criminal activity.

Providing clarity in this context should enhance the availability of financial services for marijuana businesses. This would promote greater financial transparency in the marijuana industry and mitigate the dangers associated with conducting an all-cash business. The guidance also helps financial institutions file reports that contain information important to law enforcement. Law enforcement will now have greater insight into marijuana business activity generally, and will be able to focus on activity that presents high-priority concerns.

Filling the Small Business Lending Gap: Lessons from the U.S. Treasury’s State Small Business Credit Initiative Loan Programs

February 14, 2014 Comments off

Filling the Small Business Lending Gap: Lessons from the U.S. Treasury’s State Small Business Credit Initiative Loan Programs (PDF)
Source: U.S. Department of the Treasury (Center for Regional Economic Competitiveness)

On September 27, 2010, President Obama signed into law the Small Business Jobs Act of 2010 (the Act), which created the State Small Business Credit Initiative (SSBCI). The Act provided almost $1.5 billion for state programs that support acces s to credit for small businesses and small manufacturers. SSBCI is expected to spur up to $15 billion in new private capital by requiring states to demonstrate a reasonable expectation that they will leverage $10 in private lending for every $1 in SSBCI funds.

The Act also called on Treasury “to provide technical assistance to States for starting such programs and generally disseminate best practices.” Treasury requested the enclosed report — Filling the Small Business Lending Gap: Lessons from the U.S. Treasury’s State Small Business Credit Initiative Loan Programs — from outside experts for their perspective on the lessons learned from the loan programs. The report is addressed to state policymakers and state program managers . The report covers three areas:

+ The context for SSBCI, including the existing federal programs to support small business lending;
+ The distribution of SSBCI loan programs by the type of program, the type of implementing agency, and the type of lender;
+ The consultants’ perspective on the lessons learned and recommendations that could further improve the program’s performance.

IRS — Quarterly Publication of Individuals Who Have Chosen To Expatriate

February 12, 2014 Comments off

Quarterly Publication of Individuals Who Have Chosen To Expatriate (PDF)
Source: Internal Revenue Service (via Federal Register)

This notice is provided in accordance with IRC section 6039G of the Health Insurance Portability and Accountability Act (HIPPA) of 1996, as amended. This listing contains the name of each individual losing United States citizenship (within the meaning of section 877(a) or 877A) with respect to whom the Secretary received information during the quarter ending December 31, 2013. For purposes of this listing, long-term residents, as defined in section 877(e)(2), are treated as if they were citizens of the United States who lost citizenship.

National Taxpayer Advocate’s (NTA) Annual Report to Congress 2013

January 13, 2014 Comments off

National Taxpayer Advocate’s (NTA) Annual Report to Congress 2013
Source: Taxpayer Advocate Service (IRS)

National Taxpayer Advocate Nina E. Olson today released her 2013 annual report to Congress, urging the Internal Revenue Service to adopt a comprehensive Taxpayer Bill of Rights – a step she said would increase trust in the agency and, more generally, strengthen its ability to serve taxpayers and collect tax. The Advocate also expressed deep concern that the IRS is not adequately funded to serve taxpayers, pointing out that the IRS annually receives more than 100 million telephone calls from taxpayers and that, in fiscal year 2013, the IRS could only answer 61 percent of calls from taxpayers seeking to speak with an IRS customer service representative.

IRS Vendors Owe Hundreds Of Millions Of Dollars In Federal Tax Debt

December 24, 2013 Comments off

IRS Vendors Owe Hundreds Of Millions Of Dollars In Federal Tax Debt
Source: Treasury Inspector General for Tax Administration

More than 1,100 vendors doing business with the Internal Revenue Service (IRS) owe a combined $589 million in Federal tax debt, according to a new report publicly released today by the Treasury Inspector General for Tax Administration (TIGTA).

Federal law generally prohibits agencies from contracting with businesses that have unpaid Federal tax liabilities.

TIGTA reviewed the IRS’s controls over the integrity and validity of vendors receiving payments from the IRS, including the vendor’s tax compliance and suspension and debarment status. TIGTA also reviewed controls over the IRS’s Vendor Master File (VMF), which contains information about vendors that enables them to do business with the IRS.

The vast majority of vendors that conduct business with the IRS meet their Federal tax obligations. However, TIGTA found that 1,168 IRS vendors (7 percent) had a combined $589 million of Federal tax debt as of July 2012, the most recent data for which information was available at the time TIGTA conducted the review. Few of the vendors had a current tax payment plan.

TIGTA: IRS Must Do More To Reduce Fraud Involving Employer Identification Numbers

December 10, 2013 Comments off

TIGTA: IRS Must Do More To Reduce Fraud Involving Employer Identification Numbers
Source: Treasury Inspector General for Tax Administration

While the Internal Revenue Service (IRS) has developed processes to authenticate individuals applying for an Employer Identification Number (EIN), it needs to do more to prevent fraud committed using stolen EINs, according to a new report publicly released today by the Treasury Inspector General for Tax Administration (TIGTA).

The IRS issues EINs to identify taxpayers’ business accounts. Individuals attempting to commit tax refund fraud steal or falsely obtain an EIN to file tax returns that report false income and withholding. TIGTA’s report found that such fraud could top $11.4 billion in potentially fraudulent refunds over a five-year period.

The overall objective of TIGTA’s review was to assess the IRS’s processes for issuing EINs and identifying stolen or falsely obtained EINs used to report income and withholding.

TIGTA found that the IRS has developed processes to both authenticate individuals applying for an EIN and ensure that there is a valid business reason to obtain an EIN. However, TIGTA identified 767,071 Tax Year 2011 electronically filed individual tax returns with refunds based on falsely reported income and withholding. Of the 285,670 EINs used on these tax returns:

+ 277,624 were stolen EINs used to report false income and withholding on 752,656 tax returns with potentially fraudulent refunds issued totaling more than $2.2 billion.
+ 8,046 were falsely obtained EINs used to report false income and withholding on 14,415 tax returns with potentially fraudulent refunds issued totaling more than $50 million.

The IRS has developed a number of processes to prevent fraudulent refunds claimed using stolen and falsely obtained EINs. However, the IRS does not have the third-party Form W-2 information needed to make significant improvements in its detection efforts. Nonetheless, the IRS does maintain data that could increase its ability to detect tax returns with false income and withholding associated with stolen or falsely obtained EINs.

More than 122 million Returns e-Filed in 2013

December 5, 2013 Comments off

More than 122 million Returns e-Filed in 2013
Source: Internal Revenue Service

The Internal Revenue Service today announced a milestone for IRS e-file – more than 122 million returns were e-filed during 2013. The statistics provided today contain complete e-file totals for 2013.

This year, the IRS received more than 45.2 million returns from those who prepared and e-filed their own returns on home computers, up from 43.2 million a year earlier, an increase of 4.6 percent. E-filed returns from tax professionals increased slightly, totaling more than 77 million returns. Whether they are self prepared or prepared by a tax return preparer, 91 percent of all tax returns filed by individuals are prepared on computers using tax preparation software, which improves the accuracy of those returns.

The IRS Needs to Improve Its Procedures to Ensure That Taxpayers Can Successfully Access Their Tax Account Information Online in a Secure Manner

December 5, 2013 Comments off

The IRS Needs to Improve Its Procedures to Ensure That Taxpayers Can Successfully Access Their Tax Account Information Online in a Secure Manner
Source: Treasury Inspector General for Tax Administration

The IRS should develop better procedures to provide taxpayers with secure online access to their tax account information. This is the finding of a new audit report issued today by the Treasury Inspector General for Tax Administration (TIGTA).

The IRS Restructuring and Reform Act of 1998 (RRA 98) requires the IRS to develop procedures to allow taxpayers filing returns electronically to review their accounts online. Since the enactment of this legislation, the IRS initiated the My IRS Account project to provide taxpayers with an online system to view, access, update, and manage their tax account. After 32 months of development and approximately $10 million in expenditures, the project was cancelled due to an ineffective enterprise-wide eAuthentication solution. eAuthentication is the process of establishing and verifying user identities electronically to a system.

TIGTA conducted this audit at the request of the IRS Oversight Board and found that none of the current applications that the IRS has developed and implemented met the intent of RRA 98. These applications only allow taxpayers to view a limited portion of their tax account information or to request tax transcripts be sent to certain lending institutions electronically. The IRS is planning to deploy the Get Transcript application in January 2014 and will enable taxpayers to access their tax account to obtain transcript information via the Internet.

TIGTA also determined that the IRS successfully deployed an eAuthentication solution for applications already deployed. However, the IRS has not completed required capacity testing to ensure the online applications can support the expected number of users. TIGTA also noted that cost information for the project was not readily obtainable for project management.

Improvements Needed to ACA Health Care Premium Tax Credit Project

December 5, 2013 Comments off

Improvements Needed to ACA Health Care Premium Tax Credit Project
Source: Treasury Inspector General for Tax Administration

The Internal Revenue Service (IRS) needs to strengthen systems development controls for the Premium Tax Credit (PTC) Project, the Treasury Inspector General for Tax Administration (TIGTA) concludes in a new report publicly released today.

The PTC is part of the Affordable Care Act (ACA). Beginning January 2014, eligible taxpayers who purchase health insurance through the Health Insurance Marketplace (an Exchange) may qualify for and request a refundable tax credit (the PTC) to assist with paying their health insurance premium. The credit is claimed on the taxpayer’s Federal tax return at the end of each coverage year. Because it is a refundable credit, taxpayers who have little or no income tax liability can still benefit. The PTC can also be paid in advance to a taxpayer’s health insurance provider to help cover the cost of premiums. This credit is referred to as the Advanced Premium Tax Credit (APTC).

The IRS’s implementation plan for ACA Exchange provisions includes providing information that will support the Department of Health and Human Services and the Exchanges in three main areas: eligibility and enrollment; developing calculations for the maximum APTC; and reconciling PTCs with reported taxable income.

TIGTA reviewed whether the IRS is adequately managing systems development risks for the PTC Project. TIGTA evaluated the IRS’s key management controls and processes for risk management, requirements and change management, testing, security, and fraud detection for the PTC Project.

TIGTA found that the IRS has completed development and testing of the software used to calculate the Advanced Premium Tax Credit and the Remainder Benchmark Household Contribution (RBHC) which is the household’s contribution towards the monthly insurance premium.

In addition, the IRS developed a process to verify the accuracy of the PTC calculations. Based on an analysis of IRS test cases for the software, TIGTA was able to replicate the IRS’s results showing that the software accurately calculated the maximum APTC and RBHC amounts for eight specific test cases within the IRS test environment. While the IRS was able to accurately calculate the maximum APTC amounts within the software testing environment, TIGTA was unable to assess the software’s full operational capabilities based on the test cases.

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