With the new Healthcare Bill, Congress expanded the responsibilities of the Internal Revenue Service and essentially changed the relationship between taxpayers and the IRS. With the new health care legislation, the IRS is the chief enforcer for the new government-operated health insurance system.
The IRS will have the authority to collect additional taxes from Americans whose health insurance covered is assessed as insufficient for meeting the definition of minimum coverage required to be purchases, as have been defined by the federal bureaucrats. The IRS would now have the task of verifying that each American taxpayer has obtained and maintained acceptable health coverage for all 12 months of a year. Should the IRS find that a taxpayer lacks the acceptable insurance for even one month, they would impose a new tax. The IRS will even go so far as to audits the taxpayer and assess interest and penalty fees in addition to the tax.
Other examples of the IRS’s new power in the health care system include:
- Confiscation of your tax refund in regard to unacceptable health insurance coverage
- Authority to assess fines up to $2,250, or 2% of your income, (whichever figure is greater) for failure to prove you have purchased the minimum essential coverage.
- The likely increase of IRS audits on American taxpayers
- The additional hiring of as many as 16,500 auditors, agents, and employees to conduct investigations, collect new taxes, and conduct audits
- The necessity of up to $10 billion dollars to make administrative changes to the health care program
In addition to all the changes of new IRS power, it is estimated that nearly half of the new mandate taxes will be paid by individuals who are earning less than 300% of poverty ($66,150 for a family of four).
Individual Mandate Tax
The bill added a new section to the Internal Revenue Code. This section, 5000A, would require that practically every American obtain the minimum essential health care coverage. The subsection defines this as one of the following types of health insurance:
- TRICARE for Life
- Veterans health care
- Eligible employer-sponsored plans
- Individual market plans offered through sTate Exchanges
- Grandfathered health plans
- Health program for Peace Corps volunteers
- Other types of eligible insurance as accepted by the Secretary of Health and Human Services and the Secretary of the Treasury.
Any taxpayer that fails to prove to the Internal Revenue Service they have obtained minimum essential coverage during any month of the year will be required to pay a new Individual Mandate Tax (IMT) when they file their federal income tax returns. The IMT will go into full effect in 2016 and gradually be phased in up to that point over the preceding several years.
The IRS will be responsible for enforcing the IMT and will be the entity that assesses interest and penalties as well as auditing taxpayers when it is determined taxpayers do not have adequate coverage during a 12 month period. In 2016, the Individual Mandate Tax would be the greater of $750 per person with a maximum of $2.250 per household or 2% of household income. These amounts would be indexed for inflation after 2016. There will be certain applicable exceptions such as hardship exemptions would be provided to a taxpayer who would not have to pay if the health insurance premium exceeded 8% of their income. There would also be exceptions for religious conscience, those below the poverty line, members of a health care sharing ministry, Indian tribe members, incarcerated individuals, and illegal aliens.