The Affordable Care Act, with its broad and diverse set of new regulations, has been a challenge for individuals and business leaders. It has also been a challenge for the IRS, the agency tasked with enforcing the law. This has led to confusion and delays in IRS enforcement of the law. However, that is now changing.
Recently, the IRS announc-ed two changes to its enforcement efforts related to the Affordable Care Act. One, the IRS will be sending notices to taxpayers who filed tax returns last year and paid a penalty for not having health insurance. The letter will encourage those taxpayers to sign up for insurance through an exchange during the upcoming open enrollment period. The IRS will specifically target young taxpayers who were an important part of the shared risk objective of the law, which relies on young and healthy participants to pay into the system to offset the higher costs generated by older and less healthy participants.
Second, the IRS will be reminding people who received health care subsidies and did not file a tax return that they are required to file a return or must pay back the amount of the subsidy. Under the Affordable Care Act, the IRS uses tax returns to reconcile the amount of a subsidy received versus the amount that the taxpayer was qualified to receive under the law. Therefore, taxpayers who were previously not required to file an income tax return may now be required to file a return to report their subsidy even if no tax will be due.
While the IRS enforcement action is an expected byproduct of the law, some are concerned that fear of the IRS will cause some people to pay more than they are required due to a lack of representation.