HEALTH CARE Thoughts: IRS resources

HEALTH CARE thoughts: The Taxpayer Advocate and others are unhappy

National Taxpayer Advocate Nina Olson is reported to be unhappy about the major IRS role in the new health care regime. Olsen believes the IRS is already overworked (she used “overtaxed” in her annual report issued this month, a great pun) and needs more money and time in order to do the job.

“Obamacare” (PPACA) requires the IRS to create an entirely new enforcement and penalty system, while the Service struggles to deal with such programs as the new home buyers credit, not to mention the regular work burying the agency.

Estimates of resource needs vary, and nothing is very concrete yet, but certainly a substantial increase in manpower and infrastructure will be necessary, very soon (and the IRS never moves very fast).

Then it gets worse.

Obamacare includes various add-ons, one of which will require additional Forms 1099 for supplies purchased to be filed by millions of businesses and entities and then sent to hundreds of thousands of businesses and entities and copied to the IRS so everything can be matched. This is supposed to minimize the “tax gap” and cut down tax evasion.

(For example, I will have to send a 1099 every year to Staples.)

Problem is, Congress clearly does not understand how tax evasion really occurs and this will distract the IRS from more important work, and clog the processing capabilities for an eternity.

(I am quite certain Staples is already reporting my purchases.)

In a strange twist, credit card purchases are apparently exempt. This could be because credit cards will be traced via another route (worrisome) but more likely because some bank lobbyists got inside the sausage factory (so I could eliminate the 1099 to Staples by using my credit card).

The story of the health care reform bill is just getting started, and lots of problems are ahead.

Tom aka Rusty Rustbelt

Rdan here…Linda Beale adds a comment I lifted from an e-mail:

Its no secret that the IRS Is overtaxed—its becoming the primary agency for all kinds of jobs—tax collection, sure, but also health, social security, environmental, aging generally…..

and as for the 1099s, yes, that is another paperwork mountain that will go to the IRS. Fine if it is all computerized and matched, but that may be a big if.

The problem with most enforcement, these days, is that it takes quite an effort to do anything to catch up with all the effort that is being put into nonenforcement.

Linda M. Beale