IRS Indicates No Plans to Audit Returns for Adherence to ObamaCare

The Patient Protection and Affordable Care Act (PPACA) is a law issued by President Obama’s administration that requires all Americans to have health insurance.  With a ruling by the Supreme Court in June 2012 that the law known informally as “ObamaCare” is constitutional, PPACA can now go into effect as planned.

The Obama administration signed ObamaCare into law in 2010, and the law will impose a penalty on many Americans starting in 2014 if they do not have health insurance.  But the Internal Revenue Service (IRS) has now commented that they for one have no plans to help enforce ObamaCare.

The IRS could use its audit power to review filed tax returns to confirm the individual indicates they are paying for health insurance.  But a representative of the IRS has released a statement indicating they will not dedicate agents to this purpose.

“We will not use levies, liens, or criminal prosecutions if taxpayers have unpaid amounts related to the individual-coverage provision,” indicated Steven Miller, who is a deputy commissioner for the IRS.  Miller made his remarks before a House Ways and Means subcommittee meeting last week.  “There will not be revenue agents involved in this.  These will not be audits.”

The IRS will review tax returns to confirm the amounts reported as being paid for insurance premiums match premiums received and reported to the IRS by insurance companies.  If it appears that a taxpayer’s reported insurance premiums are too high, too low, or otherwise ineligible as a deduction, the IRS will notify the taxpayer via a letter.

Members of the United States House of Representatives have expressed their views that the IRS will increase the number of agents it maintains purely to give the IRS the manpower to audit tax returns specifically for adherence to ObamaCare.

Although the IRS has the power to garnish a person’s wages in cases where they have an unpaid tax liability, the IRS has also indicated they will not use their wage garnishment power against those who do not pay the appropriate insurance premiums once ObamaCare goes into effect.  However, the IRS may adjust a person’s tax return if the premiums are not appropriate.

PPACA requires that each American is required to have health insurance.  In 2014, those who do not maintain health insurance must pay the United States government $95 or 1% of their annual household taxable income.

Many believe the law will not have the desired effect, because the penalty of $95 for not complying does not appear to be sufficient enough to drive compliance with the law.  However, the penalty for non-compliance increases annually.  By 2016, the penalty will have increased to $695 per person with a maximum threshold of $2,085 for an entire household or 2.5% of their annual household taxable income.

Estimates say that approximately 1.5% of the population of the United States will be affected by the penalty in 2016, which equates to almost 4 million Americans who are not carrying health insurance.

Presidential candidate Mitt Romney has indicated that if elected he will seek to repeal most of ObamaCare, likely maintaining the portion of the law that requires insurance companies to offer equivalent premiums to those with pre-existing conditions as it does to everyone else.

by Mark Johnston

Mark has been a contributor to legal web sites related to bankruptcy, tax, and criminal law since 2011. He has an Accounting degree from Texas A&M University.