July 21, 2018

IRS enforcement

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.

Accounting News Roundup: Joint Taxation Committee Explains IRS Penalties Under Health Care Bill; Madoff Owes New York $1 Mil in Taxes; ACORN Shutting Down | 03.23.10

What Happens If You Don’t Buy Health Insurance under Health Care Reform Bill? [Tax Policy Blog]
Believe it or not, there is misinformation out there about the health care reform bill. No, it’s true!

One big fear is the IRS getting all up in your shit for not buying health insurance. According to some, heavily armed IRS agents will kick down your door if you haven’t made the necessary arrangements for coverage, take your children away and kick your dog as they exit your house with your money and your freedom. Fortunately, Tax Policy blog has presented the Joint Taxation Committee’s explanation of what would really happen if you decided to skip on the coverage.

The penalty applies to any period the individual does not maintain minimum essential coverage and is determined monthly. 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.

NY is newest Madoff victim [NYP]
Apparently Berns didn’t sort out all of his affairs before taking his permanent vacation to the Carolinas. He owes nearly $1 million taxes to New York State according to the Department of Tax and Finance’s list of largest delinquents.

Acorn to Shut All Its Offices by April 1 [NYT]
After getting dropped from the VITA list by the IRS and getting snubbed by the Census Bureau, Glenn Beck’s favorite NPO is closing up shop on April Fool’s Day. Beck will certainly be on hand to see the headquarters burned to the ground to assure that the American people aren’t being duped again.

The IRS, Not Too Hung Up on Priorities, Demands Delinquent Taxes of Four Cents

In this morning’s roundup we gave a couple of examples of why you should consider giving the IRS a break and remember that they’re civil servants just doing their jobs. All the violence, jokes and resentment are a little self-serving so maybe we should all just back off.

And then we heard about a couple of jackbooted agents (armed to the teeth, presumably) heading over to Herv’s Metro Car Wash in Sacramento to demand some delinquent taxes from the owner Aaron Zeff.

“They were deadly serious, very aggressive, very condescending,” says Harv’s owner, Aaron Zeff…

“It’s hilarious,” he says, “that two people hopped in a car and came down here for just 4 cents. I think (the IRS) may have a problem with priorities.”

How on Earth could two agents be ‘deadly serious, very aggressive, very condescending’ over four f—ing cents? How serious are they required to take their jobs? In the job description does it explain “the collection of delinquent taxes are to be vigorously pursued, regardless of the sum”?

Plus, the letter states $202.31 of penalties and interest are supposedly due on the delinquent portion. Has the IRS gotten so desperate for funds that it has delved into loan sharking? What’s more, Zeff has a letter from October 2009 stating that he ‘has filed all required returns and addressed any balances due,’ which now makes us think that the Service is pulling names out of hat and saying “who is our delinquent taxpayer of the day?”

It’s hard to believe that with just a few days prior to the first corporate filing deadline of 2010, that these two agents didn’t have anything better to do. Someone could have sent them to a sorting facility or, God forbid, have them review some returns. Jesus, put them on loan to the Utah branch if nothing else. They need all the help they can get over there.

IRS visits Sacramento carwash in pursuit of 4 cents [Sacramento Bee via TaxProf]