Group Seeks Expansion of TIN Matching Program

The Health Plans Industry Tax Group ("HPITG") is submitting this letter to request that the Internal Revenue Service ("IRS" or "the Service") reconsider its position on expansion of the TIN Matching Program ("TM" or "the program"). Specifically, we are requesting that the IRS expand the scope of the program to include information returns required under Sections 6055 and 6056 of the Internal Revenue Code ("IRC" or "the code"). HPITG is an organization of tax professionals from some of the nation's largest accident and health insurers and is writing on behalf of its member companies. Our member companies collectively file millions of information reporting returns each year, and the implementation of health care reform legislation will impact, direct or indirectly, our member companies for years to come.

Background

The Affordable Care Act ("ACA") was enacted on March 23, 2010. Code sections 6055 and 6056 were added to the code in order to enforce compliance of the law, both by individuals and employers. With the information reported on the new Form 1095 series, the IRS will be able to identify individuals subject to penalties for failure to maintain qualifying coverage. When reporting the coverage information on the Form 1095-B, health insurers, including self-insured employers, are required to include the name and taxpayer identification number ("TIN") of all covered individuals. Failure to report, or the inclusion of incorrect information in that reporting, will subject both the issuer and the recipient of the 1095 forms to potential penalties.

TIN Matching Program

The TIN Matching Program was introduced by the IRS in 2003 as a tool for the information reporting community to proactively verify a taxpayer's name and TIN. From its inception, the program has only been applicable to names and TINs being reported on Forms 1099 that are subject to backup withholding, most commonly the Form 1099-MISC. The program has been very successful, with large filers utilizing the program to reduce reporting errors for invalid name and TIN combinations. The increase in the accuracy of the information reported on these 1099 forms benefits everyone involved, including issuers, recipients, and the IRS. The program has assisted taxpayers in filing accurate information returns, thus reducing notices and penalty assessments.

Since the beginning of the program, the Information Reporting Program Advisory Committee ("IRPAC") has long advocated for the expansion of TM to include all information reporting tax forms. However, to date the IRS has rejected all requests to expand the program. With the addition of the aforementioned code sections related to ACA, and the tens of millions of new returns that will be required as a result of it, the health care industry believes the expansion of the program is warranted to proactively ensure better accuracy of payee name and TIN combinations.

The impact to individuals is of particular concern to the industry. Individuals in these cases will potentially receive penalty notices from the IRS for failure to meet the qualifying coverage mandate under code section 5000A. In many cases, the individual will in fact possess coverage, with the actual failure being the reporting of an incorrect name and TIN combination. To further exacerbate this issue, this failure is often not theirs, and could be the result of something as simple as a data-entry mistake, such as a typographical error or transposition at the time of enrollment. Insurers are concerned about the adverse consequences that these individuals may experience when they receive a penalty notice from the IRS. The expectation is that these notices will cause confusion, prompting individuals to contact their insurer, the IRS, or both.

Expanding the program

The adverse impacts of erroneous 1095 reporting include increased demand on customer service personnel (both at the insurers and even more so at the IRS), tax refunds for individuals being put at risk, and increased administrative tasks for all related to the assessment of penalties as well as the inevitable attempts of having those penalties abated. Expansion of the program to include information returns required under code sections 6055 and 6056 would significantly reduce erroneous filings. Insurers want to get it right; the IRS needs insurers to get it right; and individuals expect us to get it right.

Allowing insurers to proactively validate the name/TIN combinations for their insured population would greatly impact the quality of the information insurers report on Form 1095. The health care industry has demonstrated its willingness to utilize the program, resulting in dramatic reductions in error rates for the 1099 forms currently filed by health insurers that are supported by the program. Many of the payers in the industry have witnessed their error rates plummet over the years since the program was introduced in 2003, often to levels below the .5% threshold the IRS has set for payers being subject to penalties. Prior to the implementation of the program, the industry error rates for name/TINs would often run 5% to 10%, or even higher in some instances. This has resulted not only in a decreased administrative burden on the health care industry, but also ensured more accurate taxpayer reporting of income, which ultimately is the goal of all information reporting.

As mentioned previously, tens of millions of new 1095 forms will be issued. The importance of filing accurate returns when dealing with volumes of this size is significant. Even a small incremental reduction in the error rate results in potentially millions of returns being filed correctly. Expanding the program to Form 1095 will allow insurers to proactively validate the names/TINs for millions of individuals, allowing for the solicitation of corrected information where necessary.

IRPAC's attempts to get the IRS to expand the program was previously resisted based on an IRS position that the program discloses information under Section 6103, which protects taxpayer identity and return information from unauthorized disclosure. However, the information provided under the program is limited to whether the data submitted by the filer agrees to IRS records. We believe strongly that the program does not disclose any information protected under code section 6103 and concur with IRPAC that the IRS may have the legal authority to expand the TIN matching program under the same authority used to create the program.

We believe that the broad grant of statutory authority provided to the IRS under section 7805 is sufficient to support expansion of the TIN matching program to provide an essential source for verification of the accuracy of Social Security numbers required for completing the new Form 1095-B.

The TIN matching program will benefit all parties, including the IRS, impacted by information reporting mandated by code section 6055 and 6056 and significantly improve the accuracy and efficiency of information provided under section 6055. The long-term benefits of expanding the program will more than justify any additional immediate resource commitment. Accurate information reporting eases administrative burdens that ultimately cost the IRS, filers, and taxpayers a lot of time and money. The program is a proven tool that can greatly impact the accuracy of taxpayer information. Limiting its application only restricts the overall effectiveness of information reporting. As such, we respectfully ask the IRS to reconsider its position on TIN matching and allow for the expansion of the program to include information returns required under code sections 6055 and 6056.

Thank you for your consideration of our views on this important matter. We would be happy to meet with you in person to discuss the importance of this issue and find ways to see the Program expanded to include the Form 1095 series. Should additional information be needed, please contact Susan Celmer at 860-226-4056.