Health Insurance – What the IRS Can and Cannot Do
To Buy or Not to Buy
To help you decide whether you should buy health insurance, you should know the following:
IRS is limited in its collection activities if YOU choose NOT to buy health insurance. You will be financially penalized (taxed), but the IRS Can NOT lien or levy against your assets. Nor can it charge interest on that balance. But the IRS CAN withhold your refund for that year and the following years until fully paid.
Useful Hint: If you choose not to buy health insurance and you pay for your medical bills yourself, make sure you don’t have refunds coming to you at tax time!
Healthcare Premium Credits
IRS offers a tax credit to help pay for healthcare premium costs bought through a state-managed exchange. The credit is calculated based on taxpayer’s annual income reported during the sign-up process and the IRS pays the credit upfront upon purchase of the health insurance. At tax time, the taxpayer reports actual income on the 1040 and if that amount is higher than the amount reported earlier upon receiving healthcare, then the taxpayer will owe the IRS for the excess health premium credits. The IRS HAS FULL COLLECTION POWERS for this amount owed. The IRS can lien/levy and charge interest on that balance.
Useful Hint: Be honest about ALL of your income when you choose to buy health insurance. The IRS will eventually find out about all of your income sources. All the agencies are now connected and communicate with regard to your health insurance and your associated costs.