The Punishment for Ignoring Obamacare Penalty Might Surprise You

Joshua Krause   Now that April 15th is on the horizon, many taxpayers are bracing themselves for the inevitable penalty that will hit them if they don’t sign up for Obamacare. It’s estimated that at least 3 million households may have to pony up 1% of their income, or $95 per adult, if they don’t have insurance; a number which is poised to expand to 2.5% for the 2016 tax year.

However, for all its bluster and intimidating language, the Affordable Care Act might not have any teeth. Recently, a tax expert writing for Forbes noticed that Obamacare, while far-reaching and burdensome in terms of what it demands from the American people, offers little to no repercussion for anyone who would be tempted to avoid it.

It seems that when the bill was first being drafted and it came time to outline the penalties for failing to comply, somebody got cold feet.

Nobody has a clue what’s really going to happen. You see, when the Act became news in 2010, rumors were flying about what would happen if you didn’t pay the penalty. It was politically tricky. The consequences needed to be enough to make you want to conform with the Act but not so onerous that Congress would be loathe to vote for it.

The final language in the Act declared that the penalty “shall be paid upon notice and demand” which sounds really intimidating. The language went on to note that the penalty would be “collected in the same manner as an assessable penalty under subchapter B of chapter 68″ which also sounds pretty serious – especially since subchapter B references some pretty nasty penalties for otherwise not complying with other sections of the Tax Code.

So what would the penalty for noncompliance be? Jail time? Nope. The language in the Act specifically rules out jail time, saying at Section 500A(g)(2)(A):

“In the case of any failure by a taxpayer to timely pay any penalty imposed by this section, such taxpayer shall not be subject to any criminal prosecution or penalty with respect to such failure.”

Well that’s good news for anyone who wants to take a principled stand against Obamacare. At least you won’t be thrown in jail, though I’m sure there will still be some horrendous consequences for noncompliance, right?

Nope. That’s not allowed under the Act. At 500A(g)(2)(B)(i), the Treasury cannot “file notice of lien with respect to any property of a taxpayer by reason of any failure to pay the penalty imposed by this section.”

So, no liens.

Then, clearly there will be levies or seizures on your wages and account, right?

Nope. Not that either. Under 500A(g)(2)(B)(ii), the Treasury cannot “levy on any such property with respect to such failure.”

To recap then, by law, you have to pay the penalty. But if you don’t, you won’t go to jail, you won’t be liened and you won’t be levied for collection.

Well that’s interesting to say the least. The author found that the only thing that the IRS can do to you, is seize part of your tax refund, should you refuse to comply. And even then, it’s hard to say what they’re planning to do. The IRS has only said that they have the ability to garnish your refund. They’ve yet to say whether or not they’ll go through with it (garnishing a refund is easy enough though, so I assume they will).

Now I’m no tax expert, so I’m reluctant to offer this article up as “advice.” For this year, it may be wise to pay up, just to be safe. But obviously there will be plenty of people who won’t pay. If they don’t face repercussions, they may be unwittingly paving the way for a massive noncompliance movement.

The Daily Sheeple

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