WASHINGTON – Today Congresswoman Lynn Jenkins (KS-02) questioned the Internal Revenue Service (IRS) Commissioner John Koskinen on whether the IRS has systems in place to prevent tax fraud and improper payments made to individuals enrolling in the healthcare exchanges who are eligible for refundable tax credits.

During a Ways and Means Subcommittee on Oversight hearing with the IRS Commissioner, Congresswoman Jenkins highlighted the following:

• The IRS’s new mission of distributing a new refundable tax credit could make it a target for abuse, particularly because of the high fraud rates with other refundable tax credits administered by the IRS. 
• In the years before the Affordable Care Act took effect, the IRS’ mismanagement of refundable tax credits cost American taxpayers an estimated $140 billion in improper payments.
• One in every four IRS refund payments made under the Earned Income Tax Credit refund is actually made in error.
• The IRS openly admits that the agency makes a number of mistakes when it comes to issuing refundable tax credits, and has even greater difficulty recouping those improper payments after they have been made to individuals.

After the hearing, Congresswoman Jenkins stated: “As you know, the President’s healthcare law tasks the IRS with a yet another refundable tax credit to manage with $900 billion in taxpayer dollars at stake. Today, I was not reassured that the IRS is prepared to handle the potential brazen tax refund fraud that will accompany this new refundable tax credit program, as with existing refundable tax credits, they do not have the proper mechanisms in place to verify peoples’ incomes (or eligibility) before the money goes out the Treasury door.”

CLICK HERE to Watch the Full Exchange

Full Remarks from Congresswoman Lynn Jenkins (KS-02):

“The President’s healthcare law resulted in the largest expansion of the IRS’ role in history, burdening the agency with enforcement of 47 new provisions totaling about a trillion in new taxes. One of the IRS’ new duties under the law will be verifying income information to determine how much an individual will receive in the premium tax credit subsidies and back last fall, the Treasury Inspector General for Tax Administration released a report detailing improvements needed in order to ensure the IRS could adequately strengthen the Premium Tax Credit Project that is a part of the law.

“As you all know, these premiums are taxpayer subsidies that are available to enrollees in the form of refundable tax credits. The CBO’s Annual Budget and Economic Outlook, which was released just yesterday, estimates that 80 percent of folks enrolling over the healthcare exchange will qualify for, and use, one of these premium tax credits. The CBO estimates that the Treasury will be giving out over $900 billion over the next ten years in healthcare premium tax credits.

“Now then, even the most honest of taxpayers can expect to face difficulties with the IRS over this subsidy. Any number of normal life events as you just talked about with the EITC, such as marriage or a job promotion, could inadvertently lead to an individual being paid too large a premium tax credit and it will be up to the IRS to recover that money.

“However, it doesn’t even begin to touch on the difficulty the IRS will face when confronting folks who might commit outright tax fraud. As I noted, these are refundable tax credits which are particularly attractive to those who are wishing to commit fraud. We’re talking about millions of individual tax returns and a pot of nearly $900 billion.”

“That brings me to my primary concern. Beginning on page 14 of their report, the Inspector General raises several concerns over the IRS’s lack of fraud mitigation strategy to guide the systems development as it relates to the premium tax credits. It notes that there is no overarching fraud  mitigation strategy and concludes by saying this: ‘The IRS’ existing fraud detection system may not be capable of identifying ACA refund fraud or schemes prior to the issuance of tax refund returns.’

“Now, I see that the IRS agreed with the Inspector General’s recommendations to develop fraud mitigation systems. So, can you just give our Committee an update of what exactly the IRS is doing in it’s effort and how successful we can expect that to be?”

# # #