IRS Commissioner on Enforcement of Health Insurance Mandate

IRS Commissioner on Enforcement of Health Insurance Mandate

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moms mableyMoms Mabley had more teeth than the health insurance mandate.

But Timothy Noah of Slate says IRS Commissioner Doug Shulman has a plan to enforce the health insurance mandate included in the recently passed healthcare bill:

Internal Revenue Service Commissioner Doug Shulman seemed to indicate that if you didn’t purchase health insurance and then refused to pay the fine, the IRS could seize any current or future tax refund headed your way. This leaves me feeling a bit confused.

The individual mandate will be phased in between 2014 and 2016. The new law says that if you don’t buy health insurance, you’ll have to pay a fine of either $695 or 2.5 percent of your income, whichever is higher. People who don’t earn enough to pay income tax or who, if forced to purchase health insurance, would end up spending more than 8 percent of their annual income, are exempt.

What if your failure to obtain health insurance means you owe the penalty but you nonetheless refuse to pay it? That’s where things get tricky. The IRS can’t throw you in jail, because the health reform law explicitly states (on Page 336): “In the case of any failure by a taxpayer to timely pay any penalty imposed by this section, such taxpayer shall not be subject to any criminal prosecution or penalty with respect to such failure.”

Nor can the IRS seize your property, because the law states (also on Page 336) that the health and human services secretary may not “file notice of lien with respect to any property of a taxpayer by reason of any failure to pay the penalty … or levy on any such property with respect to such failure.”

The Commish was then asked this question:

“If you can’t use sanctions to collect health care fees, what will keep people from getting away with not signing up for insurance coverage?”

Here’s what he said (emphasis is Noah’s):

My belief is while some people may play with the kind of question that was asked, the vast majority of American people have a healthy respect for the law and want to be compliant with their tax obligations and whatever else the law holds. People will get letters from us. We can actually do collection if need be. People can get offsets of their tax returns in future years, so there’s a variety of ways for us to focus on things like fraud, things like abuse, and we’re gonna run a balanced program.

Apparently Mr. Shulman doesn’t realize that the seizure of a taxpayer’s refund is, in fact, a seizure of his property and, therefore, prohibited under the clear language of the healthcare bill.

My guess is that President Obama and the Democrats intended the healthcare mandate to be unenforceable and included it in the bill only to frighten folks into purchasing health insurance.

And they accuse Republicans of fear mongering?

About Peter Pappas

Peter is a tax attorney and certified public acccountant with over 20 years experience helping taxpayers resolve their IRS and state tax problems.

He has represented thousands of taxpayers who have been experiencing difficulty dealing with the Internal Revenue Service or State tax officials.

He is a member of the American Association of Attorney-Certified Public Accountants, the Florida Bar Association and The Florida Institute of Certified Public Accountants and is admitted to practice before the United States Tax Court, the United States Supreme Court, U.S. District Courts - Middle District of Florida


  1. HappyTaxDude says:

    Peter, you are absolutely correct that this provision has had any enforcement teeth purposely extracted by the language of the legislation. Unless the uninsured taxpayer had a previous tax liability, the government as absolutely no lien rights in the taxpayer’s overpayment. So, with schedules and processes to determine if they are required to have insurance and then determining an amount of a penalty, the only option remaining for enforcement is to issue a bill and ask for the payment and hope that the taxpayer voluntarily surrenders. Beyond that, there is nothing legally that can be done. So where is the need for the additional 16,500 IRS employees to enforce this provision? This legislation is a very expensive joke.

  2. Happy,

    Where did you read the the IRS is hiring an additional 16,500 employees to enforce healthcare reform?

    I think it comes from Republican Senator Jim DeMint and, from what I can tell, is false.

    Do you have a link?

  3. HappyTaxDude says:

    No, it was the Republican spin on the after-effects.

  4. I thought the spin/or coverage was that the IRS requested 10Billion to enforce the provisions of the Health Care Bill

  5. Tony,

    There is much spin on both sides. It’s hard to tell what the truth is.

  6. Offsetting against an overpayment of tax in the form of a refund reduction is not a levy. I think Obama and the Democrats absolutely intended this to be a backdoor means for collecting the penalty. Unless Congress amends the law or later judicial interpretations apply a broad definition to “levy,” people owing the penalty better be careful not to overpay their income taxes during the year – at not until the issue is finally settled because it’s clear the IRS thinks it is allowed to offset and it will do so until told otherwise.

  7. After what has occurred with illegal immigration, does anyone think President Obama cares what the healthcare law says about penalties? All he has to do is direct E. Holder to sue you. Who’s going to stop him? The Supreme Court? Don’t depend on the clause that says you can’t be sent to jail. You need to have a president who actually cares about the law for that to matter. To bad we don’t have one. Are there actually people out there who believe that the IRS will not be able to find a way to punish or intimidate you if you do what they want.


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