There has been considerable debate about the Individual Mandate in the Patient Protection and Affordable Care Act (Aka the ACA or Obamacare). Over the 3 years since its passage there have been at least 6 lawsuits about the constitutionality of Obamacare including the Supreme Court case National Federation of Independent Business v. Sebelius which found that one of the more controversial parts of the law, the individual mandate, to be constitutional. The Supreme Court found in a 5-4 decision that the law was constitutional under the taxing authority of congress.
The individual mandate was particularly contentious part of the law because it required that individuals either 1) Purchase a qualifying health insurance plan, 2) Fall into one of the exemptions. If an individual did not purchase insurance or have an exemption they would be assessed a penalty (construed as a tax by the Supreme Court).But how is the penalty enforced? Well, the Individual Mandate (or the “individual shared responsibility provision” as the law calls it) is assessed as a penalty against your tax return. In short either you demonstrate that you have an exemption or qualifying coverage, or you are assessed penalty. But if you don’t have a tax return, how does the IRS enforce the provision? This is from the IRS’ own Q&A about the Individual Mandate:
The law prohibits the IRS from using liens or levies to collect any payment you owe related to the individual responsibility provision, if you, your spouse or a dependent included on your tax return does not have minimum essential coverage. However, if you owe a shared responsibility payment, the IRS may offset that liability against any tax refund you may be due.
So the IRS seems to saying that it will only collect the ‘tax’ against individuals who are receiving a return on their taxes. The law does not permit the IRS to use normal methods of liens or levies to actually collect the tax, so it seems that the IRS can only collect against a tax return. The individual might only affect a small subset of the people that would fall into its provisions. However, if you are wondering about how this or any tax may affect you, you should consult an attorney and your tax adviser. But it appears for many people, the individual mandate may not be…mandatory.
THIS IS NOT LEGAL OR TAX ADVICE. Information on this page is solely intended as opinion and information. If is not advice on the applicability of tax law to you individually. Always consult an attorney and your tax advisory about the applicability of any tax.
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