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BEGINNING JANUARY 1, 2013 THE IRS BECOMES THE HEALTH CARE “POLICE”

Unless you’ve been living in a cave, you know that the term, “Obamacare” is a generic reference to the new health care law that recently went into effect and requires health insurance for all Americans.

Without getting into the specifics of the law or the politics of it, I think all sides would agree that it is complicated and it’s going to cause a lot of questions for businesses as well as individuals. In essence, the law makes the IRS the “police” with respect to the new health care law. However, it is not given power to punish individual taxpayers who do not comply with the law. It can, however, threaten to withhold tax refunds from those that it deems non compliant. Another aspect of the IRS’ policing powers is that if it determines that if you are not meeting the required amount of coverage, the IRS can pose a fine against you.

As I said, there are lots and lots of questions which will probably take years to hash out. For example, if you owe the IRS income tax and they also fine you for not complying with the health care law, you really have two separate liabilities. If you make a payment that is less than the total, they can apply that payment however they deem fit. There are apparently no rules to specify otherwise.

The IRS’ most impressive weapon is their ability to withhold your tax refund. Most taxpayers do receive some kind of a tax refund. However, this new law gives the IRS the ability to keep that refund if you do not comply with the health care law. If the IRS does determine that you do not have sufficient health insurance and you are subject to a penalty, there is a three-month grace period. (The penalty is based according to the number of months that you do not have adequate coverage).

The IRS has over 100,000 employees, and one question in many people’s minds is how many of those people will now be tasked to enforce the new health care law. No one knows. There have been studies and papers and speeches, etc., but the bottom line right now is that this is all evolving.