The Affordable Care Act requires the Internal Revenue Service to enforce taxpayer compliance without resort to the power of liens, levies and jail. Find out where the teeth of the Act are and how they can bite you.

I have fielded alot of questions on the Affordable Care Act (the "ACA") lately, and I have held off on my answers to see what the full ramifications of IRS enforcement will be.  The answers are not coming quickly from the IRS or Congress, but here is what we know.

The ACA requires all U.S. citizens to purchase insurance beginning in 2014.  The United States Supreme Court has ruled that the ACA is constitutional as a tax, not as a matter of insterstate commerce.  So, the lion's share of policing compliance with the ACA will be up to the IRS.

However, the ACA prohibits many of the traditional methods the IRS uses in tax enforcement.  The IRS cannot initiate civil or criminal penalties, file liens or levy (garnish) a taxpayer's bank accounts or wages or otherwise seize property to satisfy any unpaid ACA tax.  Also, no interest can accrue on these tax penalties.  The only practical way for the IRS to collect on penalties is to capture or withhold tax refunds from year to year until satisfied.  So, in summary, you can't go to jail for failure to comply, but you could lose your refund.

The IRS will also oversee many tax breaks and incentives to allow taxpayers to afford health insurance and penalize those not in compliance.  Future employment of thousands more IRS agents and more changes to the already complex tax code are anticipated.

Travis Watkins
Senior Tax Attorney