IRS will have big issues collecting ACA-related penalties

The Internal Revenue Service will likely have little recourse to obtain tax penalties from those Americans who violate the Affordable Care Act's individual mandate by not getting health insurance next year, USA Today reported.

Congress banned the IRS from using its usual techniques to get people to pay penalties as part of passing the ACA in 2010, according to the newspaper. The agency can deduct any penalties from tax refunds owed individuals, but it does not have the ability to apply liens on property or garnish wages or bank accounts as it would if income taxes were due.

"They might send you a sternly worded letter," Andy Grewal, a University of Iowa law professor, told USA Today. If an individual ignores the letter, the agency could send another letter in response. "I think they thought, 'We're not going to throw people in jail or put a lien on their house for not having coverage,'" Grewal added.

The lack of an IRS enforcement mechanism could be an ill omen for hospitals. If millions of Americans ignore the individual mandate, it could deprive hospitals of revenue if these individuals are admitted as inpatients. Political pressure has also been mounting to delay its implementation, FierceHealthPayer previously reported.

However, the ACA is modeled after the 2006 Massachusetts health insurance requirement. That state levied similar non-binding tax penalties on those who didn't purchase insurance and the compliance rate was extremely high, according to USA Today.

Meanwhile, the individual mandate is just one of 46 different areas of ACA enforcement that falls under the IRS, the Fiscal Times reported. And agency officials say they are already under enormous operational stress even without the additional tasks.

"In all candor, unless the IRS receives additional resources in order to implement the's a zero-sum game," J. Russell George, the treasury inspector general for tax administration, recently told a House Appropriations subcommittee. "They're going to have to make very difficult choices in terms of customer service, in terms of enforcement, in order to take on this huge responsibility that they have been presented with."

To learn more:
- read the USA Today article
- here's the Fiscal Times article

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