October 14, 2019

The IRS Will Enforce Mandatory Healthcare Using the Honor System

How much tax would you pay on April 15 if the IRS couldn’t levy on your bank account, slap you with a lien, charge you penalties and interest, or send you to jail? Not much, eh? Then ponder the rules forcing individuals to buy “minimum essential coverage” under Obamacare.

The forced purchase of insurance is key to Obamacare. The “personal responsibility requirement” – a funny name for a requirement imposed by the state – is needed to make sure that low-risk individuals buy insurance to help keep it affordable for high-risk buyers (or, less politely, healthy young men are forced to subsidize everybody else). The penalty is considered vital to any semblance of fiscal soundness for the program. The rule is backed up by penalties and will be collected on tax returns.


The reaction of healthy young men in 2014 when this penalty kicks in will be “Dude. You’re not serious.”

And they will be right.

Caleb noted this yesterday from the Joint Committee of Taxation explanation of the penalties (my emphasis):

The penalty is assessed through the Code and accounted for as an additional amount of Federal tax owed. However, it is not subject to the enforcement provisions of subtitle F of the Code. The use of liens and seizures otherwise authorized for collection of taxes does not apply to the collection of this penalty. Non-compliance with the personal responsibility requirement to have health coverage is not subject to criminal or civil penalties under the Code and interest does not accrue for failure to pay such assessments in a timely manner.

If we take them at their word – and new Code Sec.5000A(g)(2) seems to say just this – why would any sensible taxpayer ever pay the penalty?

• They can’t threaten you with jail.
• They can’t hit you with a lien.
• They can’t levy your accounts.
• There’s no interest charge, so even if you do pay it late somehow, you’ve had the interest in the meantime.

We tax preparers probably won’t be allowed to recommend non-payments to our clients, or we will be silenced by our new IRS preparer enforcement overlords, but people will figure it out in a hurry. And if you think that people will pay taxes anyway without the threat of collection, penalties or interest, then why are we wasting any money funding the IRS?

This provision means one of two things: either this penalty is a joke, and they are just kidding about the cost estimates of the bill — they will be much, much higher — or the toothless penalties are just a PR stunt that they plan to correct as soon as they can get away with it.

How much tax would you pay on April 15 if the IRS couldn’t levy on your bank account, slap you with a lien, charge you penalties and interest, or send you to jail? Not much, eh? Then ponder the rules forcing individuals to buy “minimum essential coverage” under Obamacare.

The forced purchase of insurance is key to Obamacare. The “personal responsibility requirement” – a funny name for a requirement imposed by the state – is needed to make sure that low-risk individuals buy insurance to help keep it affordable for high-risk buyers (or, less politely, healthy young men are forced to subsidize everybody else). The penalty is considered vital to any semblance of fiscal soundness for the program. The rule is backed up by penalties and will be collected on tax returns.


The reaction of healthy young men in 2014 when this penalty kicks in will be “Dude. You’re not serious.”

And they will be right.

Caleb noted this yesterday from the Joint Committee of Taxation explanation of the penalties (my emphasis):

The penalty is assessed through the Code and accounted for as an additional amount of Federal tax owed. However, it is not subject to the enforcement provisions of subtitle F of the Code. The use of liens and seizures otherwise authorized for collection of taxes does not apply to the collection of this penalty. Non-compliance with the personal responsibility requirement to have health coverage is not subject to criminal or civil penalties under the Code and interest does not accrue for failure to pay such assessments in a timely manner.

If we take them at their word – and new Code Sec.5000A(g)(2) seems to say just this – why would any sensible taxpayer ever pay the penalty?

• They can’t threaten you with jail.
• They can’t hit you with a lien.
• They can’t levy your accounts.
• There’s no interest charge, so even if you do pay it late somehow, you’ve had the interest in the meantime.

We tax preparers probably won’t be allowed to recommend non-payments to our clients, or we will be silenced by our new IRS preparer enforcement overlords, but people will figure it out in a hurry. And if you think that people will pay taxes anyway without the threat of collection, penalties or interest, then why are we wasting any money funding the IRS?

This provision means one of two things: either this penalty is a joke, and they are just kidding about the cost estimates of the bill — they will be much, much higher — or the toothless penalties are just a PR stunt that they plan to correct as soon as they can get away with it.

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