More on the Individual Mandate

With the individual mandate element of ObamaCare going into effect in 2014, some people who are currently without health insurance may be wondering if they should begin looking into joining the ranks of the insured. We now know what the penalty will be for failure to secure insurance, so there will certainly be those who do a little cost/benefit analysis. As the deadline creeps up on us, perhaps some are also wondering why. Why is there a penalty at all?

I found a succinct and informative article on the PBS website that answers many of the common questions that pop up in relation to the individual mandate:

If you aren’t already aware, Americans will be required to obtain health insurance beginning in 2014 or else pay a tax penalty of up to $95 per adult and half that for each child, or 1 percent of the household income, whichever is greater. And if you still don’t have coverage by 2016, you’ll pay as much as $695 per adult and $347 per child pursuant to the individual mandate.

What I really like about the PBS article is the plain-language explanation of the “why.”  For the health care overhaul to work, there has to be a broad base of participants. If everybody participates, including the young and the healthy, then the rates will (ideally) remain low. If coverage were not mandatory, then there would be an inordinate number of sick, high-cost participants which would drive the price of insurance through the roof.

However, opponents of the individual mandate believe that the penalty isn’t severe enough to ensure anything near 100% participation. Some people will certainly weigh their options and risk a penalty that will be lower than a health insurance premium, especially if the IRS is not going to do too much to enforce the individual mandate.

Is IRS Ready for Obamacare Amid Turmoil?

The IRS was selected as one of the main agencies to implement President Obama’s new health care law.  Many of the provisions will go into effect next year.  But it is difficult to see how the IRS will be able to get all its ducks in a row amid the tax exempt applications scandal, congressional scrutiny of overspending, and various leadership changes.  All this turmoil seems to have come at a time when the IRS will be needed most.

There were more than 40 tax code changes associated with the Affordable Care Act, many of which are still being hammered out.  Here are some of the tasks that the IRS faces in the coming months:

  • collect tax penalties from individuals who fail to obtain insurance and employers who fail to provide it
  • define key terms in the law such as “minimum value,” and “minimum essential coverage”
  • issue guidance on new forms

Will the IRS be ready, or will they try to request an extension?

Help the IRS Reduce America's Tax Burden

You’ve probably never heard of the Taxpayer Burden Reduction (TBR) division of the IRS; few people have. TBR is led by senior advisor, Laurie Tuzynski, who recently explained her role in an official IRS video. Taxpayer Burden is defined as the time and money taxpayers spend to comply with their federal tax obligations. Here’s a perfect example: the Treasury Inspector General for Tax Administration (TIGTA) recently stated that individuals and businesses spend an estimated 6.1 billion hours per year complying with tax filing requirements.

And that’s just prepping and filing taxes!  What about the time spent by taxpayers, tax attorneys, and other practitioners in resolving tax problems?

You can help TBR identify forms, procedures, and rules that are wasteful and overly-burdensome so they can go to work trying to simplify. And the procedure for doing so is fairly simple: you just need to fill out a Form 13285-A “Reducing Tax Burden on America’s Taxpayers.” This form asks you to explain the problem, identify the stakeholders (who it is that the problem affects), and propose your solution. However, if you feel that the “Reducing Tax Burden” form itself is overly-burdensome, there is a procedure for that too! And I quote:

If you have suggestions for making this form simpler, we would be happy to hear from you. You can e-mail us at *  Please put “Forms Comment” on the subject line.  Or you can write to [Tax Products Coordinating Committee].


IRS to Hire 4,000 New Employees

“[I]t’s a power grab. So even if the ObamaCare gets thrown out those agents will be there to harass us. What we need as a nation is fewer tax collectors and more entrepreneurs. We need tax simplification and these IRS agents should be able to contribute to the economy instead of sucking the blood out of it.

~ Steve Forbes

World Series of Tax Reform

On October 22, 1986, President Ronald Reagan signed into law the most sweeping tax reform in United States history.  At the conclusion of his speech he said:

I feel like we’ve just played the World Series of tax reform, and the American people won.

Its been 25 years, so maybe we’re due for another win.  The consensus these days is that the tax code is a mess and we need to start over again.  But there are nearly as many opinions as there are pages to the code.  Here are just a few.