The medical device tax, a key source of funding for the Affordable Care Act (ACA), fell 25 percent short of revenue expectations, says the Treasury Inspector General for Tax Administration (TIGTA) in a report released this week.

The ACA requires manufacturers, producers and importers to collect an excise tax of 2.3 percent of the sales price of medical devices, a measure that the Joint Committee on Taxation projected would result in $20 billion over seven years to help fund healthcare reform. Manufacturers are required to report the new tax on their returns using Form 720.

According to a report in The Hill, the IRS expected 9,000 to 15,600 forms to be filed and $1.2 billion to be raised in Q2 and Q3 2013. Instead, just 5,100 forms and $913.4 million dollars were received.

TIGTA discovered that the IRS not only had no way to identify which medical device manufacturers were required to pay the tax, but also had no way to ensure the accuracy of the tax revenue reported. Earlier this year, TIGTA raised concerns about the IRS’s ability to enforce more than 40 new ACA provisions.

The IRS watchdog organization is sifting through forms and attempting to determine whether vendors are misfiling or not filing. Thus far, the TIGTA discovered 276 errors resulting in a discrepancy of $117.8 million, The Hill reported.

TIGTA also reported that the IRS had been overzealous in assessing failure-to-deposit penalties. The agency had assessed 219 penalties totaling $706,753 against businesses filing a Form 720 for the two quarters of 2013 under review, which was designated a penalty relief period. The IRS had already reversed 133 of the penalties, but TIGTA alerted the agency to the remaining 86 penalties.

The IRS reversed those penalties and issued apology letters to the vendors affected.