UPDATE: Actual individual mandate tax revenue: $1.5 Billion+ from 7.5M tax *returns*

Just 4 days ago (Friday), you'll recall that both Investor's Business Daily (and myself in my response to them) made a big deal out of a report from the Taxpayer Advocate dept. of the IRS which gave the initial estimates of how many households/people ended up paying the Individual Shared Responsibility Payment (aka the "individual mandate tax"), and just how much that ended up generating in tax revenue.

According to that report, about 6.6 million tax returns (this distinction is vitally important) ended up paying a total of roughly $1.254 billion, or $190 per return.

However, according to this letter sent to Congress from IRS Commissioner John Koskinen on the same day (July 17th), all three of these numbers are somewhat higher (thanks to Phil Galewitz for the heads up):

Preliminary Data on the Individual Shared Responsibility Provision

Under the individual shared responsibility provision, individuals are required to have qualifying health insurance coverage for each month of the year, have an exemption from the requirement to have minimal essential coverage, or make an individual shared responsibility payment. The vast majority of taxpayers have coverage from one source or another, such as through the individual’s workplace, Medicare or Medicaid. These taxpayers needed to do nothing more than check a box on their 2014 tax return. As expected, we are seeing that about 76 percent of taxpayers (currently approximately 102 million tax returns) just checked the box to indicate they had qualifying coverage all year. Another approximately 7 million dependents, who do not have to report on their coverage, filed a return and did not have to do anything new this year, for a total of 81 percent of returns.

Approximately 7.5 million taxpayers reported a total of $1.5 billion in individual shared responsibility payments. By contrast, about 12 million taxpayers claimed a health care coverage exemption.8 Payments were generally relatively small, with the average payment around $200. About 40 percent of these payments were $100 or less and about 95 percent of these payments were $500 or less. The vast majority – 85 percent– of taxpayers reporting a shared responsibility payment still reported a refund.

Of the taxpayers who reported an individual shared responsibility payment, an estimated 300,000 low-income taxpayers reported a payment when they should have claimed a health care coverage exemption. Although we have not yet completed our post-filing analysis, we are committed to conducting additional outreach to taxpayers, including letters to these specific taxpayers who did not have to report or make a payment. These letters will inform them about available exemptions and note that they may benefit from amending their return. Generally, taxpayers have three years to file amended returns. We are also working with tax software companies to build on lessons we learned from this first filing season as they develop their products for the next tax season, which could also help address this issue going forward.

8 Currently approximately 5.1 million non-dependent taxpayers did not check the box, claim a health care coverage exemption, or report an individual shared responsibility payment. We are analyzing these cases to determine their status.

Hmmmm...ok, on the one hand, assuming 7.5 million "taxpayers" refers to "filing head of household" not "total individuals" is quite a bit higher than either the 6 million households (not individuals) originally spitballed by the government back in January or the 6.6 million referred to in last week's Taxpayer Advocate report...a good 25% higher, in fact. So, assuming I have these definitions correct, it sounds like IBD was correct that the actual number being required to pay was noticably higher than original expectations. If that's the case, then I suppose they deserve some recognition for that...although the "household" vs. "taxpayers" vs. "tax returns filed" definition can get messy, as noted below.

HOWEVER, their larger claim--that revenue generated from the penalty was "40% lower" than expected--turns out to be way off. They claimed that only $1.2 billion was actually brought in, when it looks like it was more like $1.5 billion. This is still 25% less than the $2 billion projected by the CBO back in March, but given that the CBO rounds their projections off to the nearest whole billion in that report, this is splitting hairs (and yes, the U.S. Federal Budget is the only place where you can call "rounding off" $500 million "splitting hairs" and not be laughed at for doing so).

The 300,000 paying who didn't need to part lines up pretty closely with the other report (although that one claimed 250K paying who didn't need to at all, plus another 50K who did have to pay the tax but overpaid when doing so). the dollar amount from these folks isn't included in this letter, so I'll have to assume it's the $35 million referred to in the other report.

It's also noteworthy that while the other report stated that the IRS hasn't decided whether to actively return that $35M or not, the wording of the letter above suggests that they're gonna leave it up to the taxpayers--they (the IRS) will inform those people that they overpaid, but it'll be up to the taxpayer to make the decision.

The most confusing aspect here is the one I was so certain about on Friday--the "households vs. total people" issue. At the time I did a simple calculation: 6.6 million households x an average of around 2.58 people per household = around 17 million people total who had to pay up (whether themselves or their parent/etc).

However, the letter above (along with a few comments in the thread last Friday) points out that it's a bit more complicated than that: You can have adult children who are still on their parents' plan/living with them who file separately, or couples filing separately but living together, or other types of situations which can gum up the calculations.

However, the letter addresses this point earlier by noting that:

The 2015 tax filing season opened on January 20, 2014. Since that time, the IRS has processed approximately 135 million of the around 150 million individual tax returns we expect. 1 Every year, millions of taxpayers request an extension beyond April 15th to file their return. This year was no different in that the IRS received nearly 12 million requests for extensions which gives taxpayers until October 15th to file their return.2

They note that "some" of those 12 million extension requests have since been filed and are included in the 135 million figure. The larger point, however, is that this gives a pretty good estimate of the real "people per tax return" ratio (which is a more accurate description than "people per household"): 321 million people in the country / 150 million tax returns = about 2.14 people per return.

Based on that, a more accurate estimate of the total number of people who had to pay the mandate tax ends up being: 7.5 million returns x 2.14 = 16.05 million.

OK, so about 1 million fewer than I had figured last week...but still pretty close. When you throw in a small percentage of the extensions as well as some percentage of the 5.1 million "non-dependent taxpayers" who neither checked the box nor claimed an exemption nor reported a mandate payment, it sounds to me like the final revenue tally should end up being much closer to the $2 billion projected by the CBO after all.