The Treasury Department's Inspector General (IG) for Tax Administration warns that the Internal Revenue Service (IRS) needs to act quickly to put controls in place to prevent fraud by taxpayers seeking refundable tax credits under the Affordable Care Act (ACA).
"Without adequate fraud mitigation controls, the IRS may be unable to identify ACA refund fraud or schemes prior to the issuance of erroneous refunds," the IG's report states.
Admittedly an Obamacare foe, the ranking member of the Senate Finance Committee, Sen. Orrin Hatch (R-Utah), said after reading the report that the system is "a fraudster's dream come true."
The audit report concludes: "It is important for the IRS to thoroughly consider fraud threats and risks that could impact new ACA systems. Robust fraud mitigation controls and new systems are required to reduce improper and erroneous payments and fraud risk."
The IRS counters that there is no fraud risk with its advanced premium tax credit calculator or the income and family size verification process in version 3.0 of its ACA system.
"The very nature of these credits — pay first, verify a person's income later — will lead to potentially hundreds of billions of dollars of improper payments and could put millions of Americans' personal information at risk," Sen. Hatch responds.