The U.S. Treasury Inspector General for Tax Administration says the IRS needs to do a better job collecting the medical device excise tax created under Obamacare. The inspector general looked at 5,107 Forms 720 from the first half of 2013 and found lower-than-expected numbers in 276 tax returns.
The difference between the excise tax amount captured by the IRS from the Forms 720 to the excise tax amount calculated by TIGTA totaled almost $117.8 million, according to the inspector general report. Medical device tax payments from medtech companies had been estimated at $1.4 billion in 2013.
Another major concern that arose is the IRS cannot identify which medical device manufacturers registered with the FDA are required to file a Form 720 and pay the excise tax. Additionally, the report found that the IRS also erroneously assessed 219 failure-to-deposit penalties during a penalty relief period totaling $706,753. It reversed most, but TIGTA alerted the IRS of the rest (86), IRS management reversed the penalties and issued apology letters.
The 2.3% of retail price tax on medical devices went into effect January 1, 2013. Manufacturers, producers, and importers must collect the excise tax and file a Form 720, Quarterly Federal Excise Tax Return. Revenues had been expected to reach $20 billion for Fiscal Years 2013 to 2019, according to the Joint Committee on Taxation.
TIGTA seeks to weed out taxpayer noncompliance by issuing this review on IRS’s processing of tax returns reporting the medical device excise tax and its efforts to identify taxpayer noncompliance.
TIGTA recommends the IRS:
Redefine its compliance strategy to include actions to identify noncompliant manufacturers; Conduct a review of the 276 tax returns TIGTA found and determine the proper excise tax owed; Establish a process to verify accuracy of medical device excise tax amounts for paper-filed Forms 720; Initiate a process to correspond with taxpayers to get missing taxable sales or tax amounts. Refresh your medical device industry knowledge at MEDevice San Diego,
