According to the Treasury Inspector General for Tax Administration (TIGTA), Obamacare will result in the most expansive set of tax law changes this nation has seen in 20 years. But from a collections standpoint, is it anything more than a bunch of new words?
Obama’s health care reform law charges the IRS with enforcement, but makes them do so with their “bare hands.” The IRS normally has a vast array of collection tools, or “weapons” at their disposal to enforce this nation’s tax laws. If we don’t pay, the IRS begins with threatening letters, then imposes penalties and interest on unpaid balances. Next, the IRS moves on to levies, liens, and wage garnishment. And if this doesn’t result in full payment of what is owed, the IRS will pull out the heavy artillery such as the civil suit or seizure of personal and real property. It is the threat of these weapons that convinces many taxpayers to seek professional help from a tax relief attorney or, if circumstances warrant, to just to find a way to pay it.
But the new health care law does not endow the IRS with the same collection tools they have always relied on. In fact, the only way the IRS is permitted to collect the individual mandate “tax” is by capturing a taxpayer’s refund, and even that will lose its effect once people figure out how to adjust their withholdings and avoid a big refund. I guess the pen will have to be the IRS’ new weapon — after all, they can always send those threatening letters.