IRS Geared Up for the Obamacare Individual Mandate Tax

by JIM KOURI, CPP July 9, 2012

When the U.S. Supreme Court ruled in favor of Obamacare's individual mandate on Thursday -- and in fact dubbed it a tax in spite of the Obama administration's denials -- no one was more jubilant this past weekend than the recently hired agents at the Internal Revenue Service who get to keep their jobs, according to a law enforcement official in Washington, D.C. Their jobs are now safe and secure.  

The Internal Revenue Service (IRS) executives are witnessing the largest manpower expansion -- at least since withholding taxes were first introduced by President Franklin D. Roosevelt during World War II -- to enforce the new tax mandates and penalties included in the health care law, according to Rep. Kevin Brady (R-TX). 

According to Brady, a new analysis by the Joint Economic Committee and the House Ways & Means Committee staff estimates up to 6,500 new IRS personnel will be necessary to collect, examine and audit new tax information mandated on families and small businesses as a result of the Affordable Care Act. 

"When most people think of health care reform they think of more doctors exams, not more IRS exams," said Congressman Brady, a top House Republican on the Joint Economic Committee.  "Isn't the federal government already intruding enough into our lives?  We need thousands of new doctors and nurses in America, not thousands more IRS agents." 

Included within the expanded staff is an increase in the number of criminal investigators whose job will be to "make cases" whenever possible in order to increase financial penalties, according to tax lawyer John Kubisty.

Scores of new federal mandates and about 21 different tax increases  totaling $400 billion are imposed under Obamacare, many of the increases hidden from voters, according to finance experts such as Fox Business Channel's Stuart Varney.

In addition to more complicated tax returns, families and small businesses will be forced to reveal further tax information to the IRS, provide proof of government approved health care and submit detailed sales information to comply with new excise taxes.

Unfortunately, according to the Center for American Progress, the structure of the IRS' use of private agencies to collect "debts" encourages abuse. Under the current program, collectors are awarded as much as 25 cents of every dollar they collect, in addition to a $100 bonus for every account they close.

The Internal Revenue Service strategy of paying private debt collectors a 25 percent commission to collect unpaid tax debt originally met with bipartisan resistance from Congress. Members of Congress claimed that the proposal jeopardized the rights and privacy of American taxpayers. 

Several organizations voiced their objections to the IRS proposal and have expressed their strong support for the consumer protection legislation Rep. Chris Van Hollen introduced: Citizens for Tax Justice, Consumer Federation of America, Consumers Union, National Consumer Law Center, National Consumers League.

According to political consultant Mike Baker. the very nature of the program provides incentives for collectors to push the limits of legality to extract a little more revenue from their targets. As part of the IRS Restructuring and Reform Act of 1998, Congress, fearing overly aggressive collection practices, explicitly prohibited the IRS from compensating its own collectors based on the amount of money they collect.

"If Congress believes that incentive-based pay will cause official IRS collectors to cross the line, why would they think private collectors would behave any differently?" asked Baker. 

Although IRS officials indicated that the purpose of the limited implementation phase was to assure readiness for full implementation using up to 12 private collection agencies, the IRS has not documented how it will identify and use the lessons learned to ensure that each critical success factor is addressed before expanding the program even further during the current atmosphere of extraordinary government spending.

IRS officials indicated that they are considering criteria that could trigger a go/no go decision, such as the amount of penalties collected from Americans unwilling or unable to purchase health care insurance and there are some indications of private collection agencies abusing taxpayers or misusing taxpayer data.

"It's a sad situation when the President and Commander in Chief is drastically cutting defense spending including reducing the size of the military while at the same time hiring more tax collectors to squeeze every dime -- the dime Obama said would never be levied against Americans -- out of taxpayers," said Baker.