April 8, 2010 12:00 am

Will the IRS Oversee Your Health Care?

The Patient Protection and Affordable Care Act, which was signed into law on March 23, 2010, mandates that every American, with few exceptions, have health coverage starting in 2014. Failure to obtain required coverage will result in a penalty. For those whose household income is below set limits, there are federal tax credits to help make coverage affordable.

It is not clear how involved the Internal Revenue Service will be in enforcing the mandate. IRS Commissioner Shulman has indicated that the definition of “adequate health coverage” as required by the new law will be determined by the Department of Health and Human Services (not by the IRS). However, the IRS will create 1099 forms that insurance companies will use to inform the IRS of those with adequate coverage.

If the IRS learns that an individual does not have adequate coverage (presumably because no 1099 was received for that person), a letter will be sent about the penalty. The penalty could be withheld from any tax refunds owed to an individual without adequate health coverage. There are no criminal sanctions for failure to obtain coverage or to pay the penalty for lack of coverage.

The IRS will also do outreach to inform eligible taxpayers about tax credits available to help pay for health coverage.

Source: IR-2010-41, 4/5/10 and remarks at the National Press Club luncheon
Tax Glossary

Net operating loss

A business loss that exceeds current income may be carried back against income of prior years and carried forward as a deduction from future income until eliminated.

More terms