Consumers seem to have fewer problems with Affordable CareAct tax rules these days, but consumers who do have ACA tax problems may end up driftingthrough procedural fog.

Nina Olson, the country's national taxpayer advocate, talksabout what she sees as Internal Revenue Service abuse of “unrealaudits,” or audit-like examinations conducted outside of theformal IRS audit framework, in a new annual report she prepared forCongress.

The “distinction between 'real' and 'unreal' audits hasreal-world consequences that impact taxpayer rights, including theright to challenge the IRS's position and be heard, the right toappeal an IRS decision in an independent forum, the right tofinality, and the right to a fair and just tax system,” Olsonwrites in the report.

The IRS strategic plan calls for increased use of unreal audits,Olson writes.

“It is therefore crucial for the IRS to reevaluate and reviseits current guidance about what constitutes an audit, through thelens of the Taxpayer Bill of Rights,” Olson argues.Olson says thatone area in which the IRS has made heavy use of unreal audits is inasking taxpayers about conflicts between the information on theirForm 8962 premium tax credit filings and information in ACA publicexchange programs' Form 1095-A reports on taxpayers' use ofadvance premium tax credit subsidies.

When the IRS looks into the discrepancies, “there are situationswhere the IRS is essentially conducting a 'real' audit under theguise of an 'unreal' audit, thereby circumventing statutoryprotections against repeat examinations,” Olson writes.

Congress created the taxpayer advocate position, and the Officeof the Taxpayer Advocate, through a provision in the Taxpayer Billof Rights 2 bill. Former President Bill Clinton signed that billinto law in 1996.

The taxpayer advocate's office has hundreds of case advocateshelping consumers with IRS problems. The advocate is supposed togive Congress annual reports on what the case advocates are seeingout in the field.

In the new annual report, Olson discusses many topics, includingproblems with IRS use of private debt collection agencies,reductions in IRS employee training, and cuts in IRS walk-in centerassistance.

A copy of the report section that refers to unreal audits, andto ACA-related case advocate activities, is available here.

Here are five ACA and unreal audit highlights, forinsurance agents and brokers, from Olson's report.

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1. The number of ACA-related tax filing problems appearsto be falling.

In a table listing the case advocates' top 10 issues, Olsonshows that the number of new cases involving ACA premium tax creditproblems fell to 4,643 in federal fiscal year 2017, which endedSept. 30, 2017, from 10,910 the previous year.

CMS can check the accuracy of payments to issuers, and that'sabout it, officials say.

2. Most of the ACA-related tax filing problems that cometo the case advocates' attention involve the ACA premium taxcredit.

The number of cases involving the “individual sharedresponsibility” penalties — penalties that the ACA imposes on manypeople who lack what the government classifies as adequate healthcoverage for enough of the year — fell to 367 in fiscal year 2017,from 390 in fiscal year 2016.

The number of cases involving other types of ACA issues fell to98, from 136.

The case advocates are now learning how to help employers withACA employer health coverage reporting and penalty issues, Olsonsays.

3. Unreal audits are much more common than realaudits.

IRS reports on formal audits understate how often the IRScontacts taxpayers for compliance reasons, Olson says.

The IRS formally audited just 0.7% of individual tax returnfilers in fiscal year 2016, but imposed real and unreal auditprocedures of all kinds on 6.2% of the individual return filers,according to Olson's analysis of IRS data.

4. Most unreal audits involve four major types ofsituations.

Olson says the IRS can use unreal audits in situations thatinvolve:

• Apparent math or clerical errors.

• Conflicts between the information on an individual's own taxreturns and information in reports filed by other parties, such asemployers or banks.

• Signs of possible identity theft or refund fraud.

• The automated substitute for return (ASFR) program. Under theASFR program, the IRS uses information from outside parties toestimate the tax liability for some people who have failed to fileindividual returns and appear to have incurred a significanttax liability.

5. Olson distinguishes between efforts to correct simpleerrors and efforts to package audits as corrections.

The IRS should be able to use a process other than a formalaudit for a situation involves an obvious error, such as anaddition error, or a failure to include a necessary form, Olsonsays.

When, however, the IRS responds to conflicts betweeninformation on an individual's Form 8962 ACA premium taxcredit filing and an ACA public exchange Form 1095-A coveragefiling, the main difference between a formal audit process and the“automated questionable credit” process is that the IRS states inthe notice letter that the process is not an audit, Olson says.

“There are 'unreal' audit situations that clearly look likean audit, walk like an audit, quack like an audit, and should beconsidered a 'real' audit,” Olson argues.