Affordable Care Act and Tax Collection


The Affordable Care Act 2010 makes it mandatory for all US citizens to purchase health insurance. The US Supreme Court has recently upheld most of the Affordable Care Act 2010 as a tax issue rather than an issue of interstate commerce. This decision means the responsibility of making sure people abide by the Affordable Care Act rests basically with the IRS. The IRS will grant tax breaks so that taxpayers can afford health insurance while those who do not buy insurance and on some businesses that do not have an insurance plan for employees get slapped with tax penalties except for those who are exempted such as the lower income group or members of the Native American community.

But ironically, the ability of the IRS to collect the penalties is limited by law. The IRS cannot initiate civil or criminal penalties, seize bank accounts or garnish wages to penalties. Also, no interest accumulates for unpaid penalties. The only practical way for the IRS to collect on penalties is to withhold tax refunds.

But some lawmakers in Washington are questioning if the IRS has the ability to cope with being the country’s tax collector as well as enforcer of the healthcare insurance requirement under the Affordable Care Act at the same time. The enforcement of the Act will entail hiring thousands of workers Some Republicans suspect the IRS is taking away resources used to collect taxes to prepare for enforcing the Act that goes into effect in tax year 2014.

The Act also brings with it “ the largest set of tax law changes in more than 20 years,’’ according to the Treasury Inspector General for Tax Administration (TIGTA). A spokeswoman for the Treasury, Sabrina Siddiqui said, ‘‘The overwhelming majority of funds used by the agency to implement the Affordable Care Act go to administer the premium tax credits, which will be a tax cut averaging about $4,000 for more than 20 million middle-class people and families.’’

‘‘Knowing the complexity of the health law, there’s no question that the IRS is going to struggle with this,’’ said Rep Charles Boustany Jr. (R-La.), chairman of the House Ways and Means oversight subcommittee. ‘‘The IRS wants more resources. Well, we need to start digging down into what are they doing with the resources and personnel.’’ The House Ways and Means Committee have accused the IRS of concealing the true cost of enforcing the Affordable Care Act by absorbing it into other parts of the agency’s budgeted expenses.

Some Republicans on the Ways and Means Committee wrote in a recent letter to IRS commissioner, Doug Shulman, ‘‘The agency’s repeated lack of transparency to Congress and its failure to provide accountability to the American taxpayers raises fundamental concerns about implementation authorities vested to the IRS’’.


DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Darrin Mish, Tampa Tax Attorney, The Law Offices of Darrin Mish, P.A. | Attorney Advertising

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