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July 9, 2012


Implementation of Healthcare Law Expected to Have Big Impact on IRS

On June 28, the U.S. Supreme Court upheld the individual mandate portion of the federal healthcare law. When the law takes full effect, filing a tax return will include providing proof of health insurance.

Those without insurance will be subject to penalties that must be paid to the IRS.

What effect is this new role as health insurance enforcer likely to have on the Internal Revenue Agency? After all, the agency already has a lot on its plate in collecting taxes and enforcing compliance with tax laws through tax audits and other means.

Several key legislators have already expressed concern about the costs that will be incurred by the IRS in administering the tax penalties in the new law.

“Knowing the complexity of the health law, there’s no question that the IRS is going to struggle with this,” said Rep. Charles Boustany Jr. of Louisiana. Rep. Boustany is the chairman of the House Ways and Means oversight subcommittee.

A Congressional hearing on the tax impact of the Supreme Court’s healthcare decision is scheduled for tomorrow.

The tax impact of the healthcare law doesn’t only involve penalties to be paid to the IRS for failure to comply with the individual mandate to buy health insurance. Businesses that meet certain criteria but do not offer health insurance to their employees may also be subject to penalties.

Besides the penalties, the role of the IRS will also include overseeing various tax incentives to help businesses and individuals pay for insurance coverage.

Overall, the healthcare law is expected to result in the biggest changes in tax law in over 20 years, according to the inspector general from the Treasury Department whose job is to oversee the IRS.

Source: “Can IRS manage to police both taxes and health care law?” USA Today, Stephen Ohlemacher, 7-9-12