written by Patti Stoner

Patti Stoner head shot

Continuing our focus on the health care act (Patient Protection and Affordable Care Act or PPACA – see links below), we’ll look at the enforcement hurdles that the government faces despite the 2012 U.S. Supreme Court’s decision to uphold the majority of it.

Although the law is known as a health care law, it carries many tax provisions, which requires the IRS to implement and enforce. The IRS has already been trying to keep up with the numerous tax code amendments, extensions and changes in general. But this law reflects the largest set of tax law changes in over 20 years. The heart of this law is the individual mandates and large employer mandates to provide health insurance. Beginning in 2014, there are penalties for failure by either the individual or the employer to comply with this law.

Individual* penalties:

  • $95 or up to 1% of income, whichever is greater for 2014
  • Will rise to a cap of $695 or 2.5% of income by 2016
  • After 2016, will increase with annual cost of living adjustments

Large employer** penalties:

  • $2,000 annual penalty per full-time employee
  • Additional $3,000 annual penalty per full-time employee if this is a low-income employee who is certified as having received a tax credit or cost-sharing reduction from a state health exchange

The penalty for failing to carry health insurance will not allow the IRS to:

  • File a notice of lien on any taxpayer’s property
  • Levy on any taxpayer’s property

They will, however, be allowed to offset refunds or credits to collect for these penalties. These limitations on collections raise doubts about IRS’ ability to truly enforce these tax provisions. Will some taxpayers decide to forego health insurance and pay the penalty because it’s cheaper than the insurance premiums? Or will they even forego paying the penalties since the IRS’ has limited collections means to enforce?

*Individual penalties will generally not apply to individuals having household income below the filing requirement thresholds for federal income tax.

**Large employer is defined as a business employing an average of at least 50 full-time employees during the preceding calendar year. If fewer than 50, they are exempt from this mandate.

Contact us if you have any questions about enforcement of the provisions of the health care act 417-881-0145.

written by Patti Stoner, CPA, Partner

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