Taxes and the ACA, part 2: penalties for not having health insurance

Let’s conclude our two-part post on taxes and the Affordable Care Act (ACA or Obamacare).

In the first part of this post, we outlined the ways in which you can show the IRS that you are in compliance with the new requirement to have at least “minimal essential” health insurance coverage under the ACA.

But if you aren’t in compliance, what penalties do you face? And what collection tactics can the IRS use against you?

Let’s start with the collection question. When it passed the ACA a few years ago, Congress decided that the IRS will not be allowed to use the full array of collection methods that it normally has in its toolkit.

This means that the IRS is not permitted to impose tax liens or levies on you if you don’t have health insurance that meets ACA standards. And there are certainly no criminal penalties. But the IRS can take the ACA fee out of future tax refunds that you may be eligible for.

How much is the fee itself? The fee for not having coverage went up again this year. For not having coverage in 2015, it is the higher of two numbers: 2 percent of household income, up to a certain maximum amount, or a certain dollar amount per adult or child, again up to a certain maximum amount.

For the fee based on household income, the maximum is the “total yearly premium for the national average price of a Bronze plan” that is sold through the government’s online marketplace.

For the fee per person, the amount is $325 per adult and $162.50 per minor child, up to a maximum of $975.

If all of this sounds complicated and cumbersome, it is. But after two different Supreme Court decisions in recent years upholding the ACA, it is the law of the land.