The recent triumph of President Obama's Affordable Care Act in the Supreme Court has the Internal Revenue Service in a tizzy. Since the "penalty" for not having health insurance has been labeled a tax, the IRS has been charged with making sure people either get health insurance or pay a tax for not getting insurance. In response, the IRS is bringing in new employees to help with writing new regulations, forms, and publications, designing new computer programs to implement and enforce the tax, and create an outreach program that will explain the new tax to both taxpayers and tax professionals. Most importantly, however, are the thousands of workers that will be needed to actually administer the tax credits - which will result in about $4,000 in tax cuts for millions of middle-class taxpayers and their families. Notably, the IRS will have only limited authority to collect the health care taxes and cannot impose any civil or criminal penalties in connection with the tax.
Starting in 2014, a tax will be charged to taxpayers who do not have qualified health insurance and are not otherwise exempt because of low income, religious beliefs, or because they are members of American Indian Tribes. By 2016, when the tax is to be fully implemented, each uninsured adult within a family will pay the greater of $695 or 2.5% of family income, up to a maximum of $12,500.
As various government agencies struggle to adjust to this massive change in both policy and substantive law, it will be interesting to observe how the IRS chooses to focus its efforts. With all these new employees on the books, someone is going to need to pay attention to collecting the tax dollars to pay them.