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The IRS and the Affordable Care Act: taxes as policy tool

The core mission of the IRS is to collect tax revenue for the U.S. government and help enforce compliance with tax law. To be sure, the IRS, along with all federal agencies, is now facing its share of across-the-board budget cuts. But its fundamental mission has not changed.

Increasingly, however, the agency is also taking on an additional role: implementing the federal healthcare reform law. Whether you live in Texas or elsewhere, income taxes play an important part in the nuts-and-bolts application of the Affordable Care Act (ACA).

This first became apparent when lawmakers were negotiating the structure of the provision known as the "individual mandate." This is the provision that requires people to buy insurance if they do not already have it through an employer or spouse - or face a penalty. The penalty they face is essentially a tax penalty, as it is paid to the IRS.

Nor is this the only way in which the IRS is involved in the implementation of the ACA. For those who may need financial assistance to buy the required health insurance, this year's federal tax returns will be used to determine eligibility for that assistance. And the assistance will in the form of tax credits.

Next year, when the ACA becomes fully operational, health insurance can be purchased through new insurance exchanges that will be opening in Texas and across the country. Each state will have one. In some states, including Texas, they will be operated by the federal government. In others, the state itself will operate the exchange.

Source: "The link between your tax return and health insurance," Dallas News, Pamela Yip, 3-3-13


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