Audit: O-Care subsidies susceptible to fraud

The new tax credits that the IRS will handle under ObamaCare are susceptible to fraud, according to a new federal audit released Tuesday.

Treasury’s inspector general for tax administration said the IRS has yet to complete its strategy for battling fraud concerns like wrongly issued tax credits. The IRS’s systems for protecting private information also have software flaws, the audit found.

“With the healthcare exchanges open for business, it is imperative that the IRS ensure the accuracy and completeness of Premium Tax Credit and Advanced Premium Tax Credit calculations and ensure the security of information provided by taxpayers to the IRS and subsequently transmitted to other government entities,” Russell George, the tax administration inspector general, said in a statement.

Starting in January, some low- and middle-income taxpayers who purchase health insurance through exchanges are eligible for a refundable tax credit to help cover the costs.

Those credits, available to people whose income is less than four times the poverty line and don't receive insurance through their jobs, can also be sent directly to a taxpayer’s insurer.

The inspector general audit found that the IRS had successfully developed computer programs to calculate how much of a credit taxpayers should receive, and to verify how accurate those calculations are.

Still, the suggestion that the healthcare subsidies might be vulnerable fraud is just the latest concern for the faulty rollout of ObamaCare.

Danny Werfel, the interim IRS chief, and Jay Carney, the White House press secretary, both defended the IRS's efforts to implement ObamaCare.

"The IRS has a strong, effective system in place for administering the Premium Tax Credit," Werfel said in a statement. "We have a proven track record of safely and securely transmitting federal tax information, and we have a robust and secure process in place to deliver this important credit for taxpayers."

The inspector general’s recommendations to the IRS include developing a plan to correct the failed privacy security tests, and moving to finish off its anti-fraud plan.

The IRS agreed with most of the inspector general’s suggestions, but said it didn’t need a new plan to deal with the security issues.

This post was last updated at 1:39 p.m.