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Enforcing The Health Law Mandate: What The IRS Can & Can't Do

The Affordable Care Act's (ACA) individual mandate is perhaps the most controversial piece of the health reform legislation. The law requires nearly all Americans maintain "minimal essential" health insurance coverage beginning January 1, 2014.

Several states filed suit against the U.S. Department of Health and Human Services claiming the mandate is unconstitutional. The states were unsuccessful in their suit, and the Supreme Court's June 2012 decision upheld the law that required those who fail to comply make a "shared responsibility payment." This penalty will be collected by the Internal Revenue Service (IRS) in the same manner as other tax penalties.

Attorney Neal Graham with the firm Harris Shelton Hanover Walsh in Memphis explains how the Supreme Court rationalized the constitutionality of the mandate:

"Historically, a 'tax' is a payment made by an individual as a result of the receipt of a privilege or benefit from the government." While uninsured individuals are not directly receiving benefits, they "… are subjecting the public to economic risk because other individuals who have health insurance will be forced to pay higher premiums for their coverage to offset the potential costs being absorbed by healthcare providers for uninsured individuals."

Are there any exceptions to the mandate?

The law does allow exemptions for those with religious objects and those suffering severe financial hardship; the incarcerated, undocumented immigrants and members of an Indian tribe may apply for an exemption, but all others are subject to a penalty for failing to obtain health insurance coverage.

How much is the penalty?

The annual penalty for 2014 is $95 per adult and $47.50 per child (maximum $285 per family) or one percent of household income, whichever is greater. The penalty increases in 2015 to $325 for adults and $162.50 for children (maximum $975 per family) or two percent of household income. In 2016, the penalty rises to $695 for adults, $347.50 for children (maximum $2,085 per family) or 2.5 percent of household income. In 2017 and the years following, the 2016 amount will be increased by the cost of living.

There is no penalty for gaps in coverage of three months or less, and the penalty is pro-rated by the number of months in a year the taxpayer is without coverage.

What enforcement power does the IRS have to collect "shared responsibility payments?"

According to tax attorney Kenneth Burns with the business law firm Kolesar & Leatham of Las Vegas, "The penalty will be imposed if you fail to provide sufficient information with your tax return that you have acceptable coverage, or you are exempt."

The IRS is limited in its ability to collect the penalty. "Once the IRS has assessed a penalty," says Burns, "there is no enforcement mechanism for collecting the penalty other than reducing a taxpayer's refund."

The ACA does not allow the IRS to file a Notice of Tax Lien for failure to pay the penalty. This means the IRS cannot attach a lien to your wages, bank accounts or personal assets. "Further," says Burns, "no criminal prosecution or penalty may be imposed on anyone for refusal to pay the individual mandate penalty." While tax evasion is a serious crime, failure to pay the ACA penalty will not land a taxpayer in jail.

The only way the IRS can collect the penalty from those that do not voluntarily pay is by offsetting any refund, current or future, due the taxpayer. For those that are not entitled to a refund, the penalty does not go away; it will be carried to future years.

Gillian Burdett is a freelance writer covering all things home and living. Her work can be found on

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