Health insurance mandate penalty may be vastly misunderstood

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Federal law places a penalty on those without health insurance coverage

The health insurance mandate of the U.S. Affordable Care Act has become one of the more controversial aspects of the federal law. According to the law, all U.S. citizens must have active health insurance coverage beginning on January 1, 2014. Failure to comply with the mandate could mean facing a tax penalty issued by the Internal Revenue Service (IRS). These penalties will not actually be issued until March 31, 2014, when the open enrollment period for health insurance exchanges throughout the country comes to a close.

The IRS is responsible for enforcing compliance with federal insurance mandate

The IRS is often considered to be one of the most powerful federal agencies in the country due to the fact that it has access to the financial information of millions of people and can legally affect this information in often dramatic ways. The agency is responsible for enforcing compliance with the health insurance mandate and will penalize those without health insurance coverage as much as 1% of their annual income, which will be taken from their income tax return. The agency may not be able to follow through with this responsibility, however, due to a step taken by legislators in 2010.

health insurance confusionFederal lawmakers ensure IRS cannot penalize those without insurance

When the Affordable Care Act was passed in 2010, federal lawmakers forbade the IRS from using its traditional powers to force people to pay penalties for not having health insurance coverage. This means that the agency cannot put a tax lien on those that do not comply with the insurance mandate, nor can the agency seize any assets that such people may have.

Penalties may be a widely misunderstood issue

There are many issues surrounding the Affordable Care Act that have generated controversy, but the penalty associated with the health insurance mandate may be one issue that is vastly misunderstood. Those that do not comply with the mandate could face fines, but the IRS does not actually have the capability to enforce these fines on those that do not purchase or maintain health insurance coverage beginning in 2014.

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