Increased Chances of ObamaCare Tax Audit

ObamaCare_EnforcementA report produced by the Foundation for Government Accountability has a wealth of detail about the tax credits available through ObamaCare. The report discusses some issues you might want to consider in applying for premium tax credits, among them, the increased chances of an ObamaCare tax audit.

The new law creates 18 new taxes and adds 47 separate new provisions to the IRS that will enable the Service to collect over $1 trillion over 10 years.

Most of the IRS’ new responsibilities will be concerned with the hundreds of billions of dollars worth of “premium assistance” tax credits built into the law.

Collecting taxes is one thing, but where the government is also handing out money in the form of “tax credits” experience has shown that the Service will devote a lot of resources toward “anti-fraud” efforts. For example, the adoption tax credit, while apparently commendable, comes with a price for those who have taken advantage of it. Over 70% of recipients of the adoption tax credit were audited by the IRS after applying for it.

Mr. Obama has requested an additional $440 million and over 2000 new agents to help implement ObamaCare. That’s 2000 more people whose job it will be to pry into every detail of the lives of those looking for “tax credits” to help pay for the insurance premiums they can no longer afford because of ObamaCare.

There are a number of questions you might like to ponder before applying for ObamaCare credits.

How safe will your personal data be from fraud and theft while in the hands of the newly empowered IRS?

The application alone can run to over 20 pages of information. The IRS isn’t the only outfit that will have access to your data. The Service will share it with at least this short list: the Department of Justice, the Social Security Administration, the Department of Homeland Security, the Department of Health and Human Services, and the Treasury Department. State agencies will also share your information. Not to mention the host of “navigators” hired to help you with the maze of regulations and rules.

The government’s track record isn’t good where protecting privacy is concerned. A recent “mistake” by the Minnesota ObamaCare exchange sent 2,400 names and social security numbers to an insurance broker. Last July the Service posted as many as 100,000 social security numbers online. The Inspector General for Tax Administration has reported serious breaches in the security of IRS records.

Will Congress will keep changing the rules and standards?

Congress changes the tax laws on an annual basis. If the past is any indication on this issue, I’d say we can count on it.

Will enrolling in an exchange and taking a tax credit leave even more vulnerable to a long, expensive audit than you are now?

If the Service’s track record with the adoption tax credit is any indication, yes it most definitely will increase your chances of an audit.   In the words of Taxpayer Advocate Nina Olson, “the IRS’s implementation of the expanded adoption credit does not bode well for its implementation of the premium tax credit…”

If you are considering applying for premium credits, you will want to read the whole report. You can find it here: ObamaCare Tax Credits and the IRS.

You might also be interested in: Too Risky to Exchange?

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Lysander Venible is the author of "On Your Own in Tax Court," a book about how to save your shirt in U.S. tax court. He has been engaged with the Service for over 10 years both administratively and in tax court.

If you have questions, topics or a situation you'd like to discuss, comment below or click the "About/Contact" tab above.

Lysander is not an attorney and it is not his intent to offer legal advice.

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