I don’t have health insurance, what will the IRS do to me?

Not much! 

If you don’t have insurance you are supposed to pay the penalty as part of your income tax filing. But if you don’t do that the IRS has limited power to collect making the penalty for a smart taxpayer meaningless. 

The penalty will be treated like income tax due. While the IRS can garnish wages and file liens and levies to collect unpaid income taxes, the Affordable Care Act specifically prohibits those activities if people don’t pay the penalty. All the IRS can do is subtract the penalty from a tax refund … if you have a refund … hunt, hint. 🤑 

Between the numerous exemptions and the limited collection procedures, the penalty is hardly the incentive to carry insurance that was claimed to be necessary to minimize adverse selection in the insurance policies.  

Are you surprised that another element of the law isn’t what it claimed to be? 


1 reply »

  1. It’s worse than that. There are so many exemptions and exceptions – and such complexity that even the IRS doesn’t know who was to pay the penalty and who was exempt. For 2014, the first year of the penalty, initial reports (in July 2015) after the tax filing season were over, showed 7.5MM paid a penalty, averaging about $200, generating $1.5 Billion – where 85% of those who paid the penalty still had a net, net refund.

    Of those who paid the penalty, about 300,000 were too stupid to know that they probably qualified for an exemption. On the other hand, over 12 million have claimed an exemption. Another 5.1MM indicated they did not have coverage, but did not claim an exemption or pay the fine. The IRS is “investigating”

    Remember, there are still 25 – 30MM Americans without coverage. So, chances are many of them have no earnings or earnings so low that no tax return need be filed, and no penalty is due.

    As the penalty maximum dollar penalty increases from $325 in 2015 (2% of household income if greater), to $695 in 2015 (2.5% of household income), expect to see this shake out and be clarified – or perhaps the IRS will do what they always do, throw up their hands and admit it is too complex (such as EITC fraud, etc.)


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