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Tighter fraud filter needed for Obamacare tax credits: IRS watchdog

A busy screen is shown on the laptop of a Certified Application Counselor as he attempted to enroll an interested person for Affordable Care
A busy screen is shown on the laptop of a Certified Application Counselor as he attempted to enroll an interested person for Affordable Care

WASHINGTON (Reuters) - The Internal Revenue Service needs to be better prepared to stop possibly fraudulent claims for tax subsidies that some Americans will soon be able to get under the Affordable Care Act, the tax agency's inspector general said on Tuesday.

Beginning in 2014, a tax credit will be available to low- and middle-income individuals to help them pay for health insurance, based on a percentage of income.

The credit is meant to help people get coverage in insurance marketplaces being set up by the states and federal government as part of President Barack Obama's healthcare law, known as "Obamacare."

In an audit, the Treasury Inspector General for Tax Administration (TIGTA), said two new IRS systems to catch tax refund fraud are under development.

"Until these new systems are successfully developed and tested, TIGTA remains concerned that the IRS's existing fraud detection system may not be capable of identifying ACA refund fraud," the watchdog said.

Additionally, TIGTA said some IRS cybersecurity controls were inadequate and need "corrective actions."

In response to the TIGTA findings, White House spokesman Jay Carney said on Tuesday: "The IRS aggressively safeguards our information systems and combats tax fraud. Our efforts to protect the integrity of our Affordable Care Act programs are no exception."

IRS acting commissioner Danny Werfel said in a statement: "The IRS has a strong, effective system in place for administering the premium tax credit."

Republicans in Congress seized on the TIGTA report as another sign of Obamacare's problems.

"The Obamacare premium subsidies are a fraudster's dream come true," Republican Senator Orrin Hatch said in a statement. "The problems with these tax credits are deeply rooted in the law itself."

(Reporting by Patrick Temple-West; Editing by Kevin Drawbaugh and Gunna Dickson)

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