From the The Ohio Society of CPAs:
The Supreme Court said June 28 that the key provisions of the health care overhaul can stand, but tax professionals say many questions still remain about how and whether the IRS will be able to enforce the law.
A top concern is that, when the statutory tax penalty for individuals not carrying health insurance goes into effect in 2015, IRS may have few options for collecting the penalties because Congress restricted the agency’s collection authority.
Unlike most other types of tax debts, IRS cannot file a tax lien against individuals who do not comply with the health insurance mandate and can only collect the money by withholding it from tax refunds or Social Security checks.
IRS Commissioner Douglas Shulman’s testimony on the topic to Congress has “almost said we’re just going to write [nonpaying individuals] a letter,” according to a panel of attorneys speaking about the law.
There is also an issue for the IRS and Congress because the law exempts individuals with incomes below the filing threshold from the tax and the tax itself is relatively modest—the greater of a maximum flat fee of up to $2,085 for a family or 2.5% of modified adjusted gross income—so some households may decide it is cheaper for them to pay the penalty rather than buy insurance.
The Congressional Budget Office estimated that 4 million will choose to pay the penalty rather than buy health insurance, but practitioners say they suspect more than 4 million people will choose not to pay it.
Attorneys also said a number of important details of the tax-related provisions still need to be hashed out by IRS in its rulemaking process, including how the agency thinks the law’s 40% excise tax on high-cost health insurance plans should be calculated, as well as implementing new taxes on pharmaceuticals and medical devices and issuing tax credits and premium assistance for individuals participating in state health care exchanges.
Regulators can have a non-enforcement period during which they do not implement the law, which is a step they can take without needing congressional approval or an executive order from President Obama.
Sen. Charles Grassley (R-Iowa) said the enormity of the job facing the IRS in writing the rules and trying to enforce them leaves him skeptical that the agency is up to the task.
