If the IRS doesn’t owe me a refund, how does it enforce the individual mandate penalty?

Q. If the IRS doesn’t owe me a refund, how will it enforce the penalty? Will IRS agents be coming to our homes to collect it? I have read that they have hired 14,600 new employees just to handle the penalties.

A. These rumors represent yet another example of flagrant fear-mongering.

As factcheck.org points out: “This wildly inaccurate claim started as an inflated, partisan assertion that 16,500 new IRS employees might be required to administer the new law.”

Republican Rep. Ron Paul of Texas then took the rumor over the top, “claiming in a televised interview that all 16,500 would be carrying guns.”

Factcheck.org is clear: “None of those claims is true. The IRS’ main job under the new law isn’t to enforce penalties. Its first task is to administer subsides to help millions of low- and middle-income individuals buy health insurance.”

And there is also a long list of exemptions from the penalty. For the 2014 tax year – the first time that the penalty applied – the IRS reported in July 2015 that 7.5 million tax filers had reported about $1.5 billion in penalties on their returns. But another 12 million filers had claimed exemptions from the penalty. For 2015, the IRS reported that 6.5 million people reported about $3 billion in penalties on their returns, but 12.7 million other filers claimed exemptions from the penalty.

If you were uninsured, don’t qualify for an exemption, and owe the penalty, here’s how it works:

  • If you’re owed a refund, the IRS will deduct the penalty from your refund. This is how it works for the majority of tax filers, since most filers do get a refund.
  • But if you’re not owed a refund, the IRS cannot use its normal enforcement avenues to collect the money. They cannot use liens, levies, wage garnishment, or criminal prosecution.
  • If you don’t pay the penalty, it gets carried over to the following year, which continues to be the case if you continue to not pay it. If you pay your regular income tax but not the penalty, you’ll need to make sure you clarify which one you’re paying, or else the IRS might apply your payment to a previous year’s penalty instead of a current year’s tax bill.

But the normal methods that the IRS uses to collect other outstanding tax debts don’t apply to the ACA penalty. Any statements to the contrary are fear-mongering.

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Related terms

individual mandate

  • You can’t be prosecuted for ignoring the individual mandate, but you can be prosecuted for lying to the government.
  • More FAQs about the individual mandate.