US IRS won't audit individuals amid health reform

* No need for individuals, IRS to discuss healthcare

* Taxpayers to get form documenting coverage

WASHINGTON, March 25 (Reuters) - The U.S. Internal Revenue Service will not audit individuals to make sure they have health insurance as part of the sweeping system overhaul just signed by President Barack Obama, the U.S. tax commissioner said on Thursday.

Taxpayers are likely to receive a form similar to the 1099 form they now get for reporting dividends or interest income, IRS Commissioner Douglas Shulman told a subcommittee of the U.S. House of Representatives Ways and Means Committee.

"There will be no discussions about health coverage with an IRS employee," Shulman said.

Under the new law, individuals are required to get health insurance or face penalties that phase in. By 2016, those without coverage could see fines of 2 percent of their income.

Subsidies would help some poorer people buy coverage, and states must also set up exchanges to allow individuals and small groups to shop for and compare policies.

The U.S. tax chief, appointed by former U.S. President George W. Bush and retained by Obama, told lawmakers he envisioned the U.S. health department and the insurance exchanges working with insurers to determine if individuals have purchased acceptable levels of coverage.

The commissioner, testifying about the proposed IRS 2011 budget and the 2010 tax reporting season, was asked the question by Representative Ron Kind, a Democrat who voted for the health care bill. (Reporting by Kim Dixon; additional reporting by Susan Heavey; editing by Lisa Von Ahn)