IRS Could Take Refunds for Health Insurance Penalties

The IRS could potentially take personal tax refunds to collect fines from those who do not purchase health insurance in accordance with recent healthcare legislation.

Under the new law, most people are required to buy health insurance. If they don’t, they will face harsh penalties. By 2016, those who do not purchase coverage could be hit with fines of as much as two percent of their income.

Anybody who does not comply would be subject to a penalty. If they don’t pay, the penalties could then be taken out of their tax refunds.

The new law does not allow the IRS to levy fines or seize assets. So, it makes most sense to target refunds as a collection option.

Last month, President Obama signed the legislation that is meant to help more than 32 million Americans secure health insurance.

Of course, not everybody likes the direction that this law is headed. For instance, Representative Dave Camp said, “The individual mandate would create millions of captive customers for health insurance companies, with the IRS acting as the enforcement agency for those companies.”

IRS Commissioner Douglas Shulman has been busy shooting down the idea that the government will have to hire as many as 16,500 agents to enforce the new laws and regulations. He said, “That is a made up number. The only official numbers come from the IRS, which I have to sign off on. We don’t have a number yet.”

Republicans claim that the number is based on an estimate that $10 billion would be needed to implement the new law over the course of the next 10 years – less $1 billion for related administration costs.

While this is a major concern, it is not one that will come to the forefront just yet. None of the provisions will be active in 2010, with the majority of them coming in 2013 and beyond.