Sometimes rules are only meaningful to the extent that they are enforced.
In the case of the “shared responsibility” penalty of the American Care Act (ACA), a growing number of taxpayers are simply ignoring the penalty.
In 2016, the ACA provided for a penalty of $695 or 2.5 percent if income for individuals who did not have insurance coverage for the full year.
However, the ACA also limits the IRS’s ability to collect the tax to only withholding the penalty from refunds.
The IRS processes returns which fail to comply with the ACA provisions, and GOP lawmakers are still signally their desire to scrap the law entirely (however unlikely.) IRS officials say that the tax is still owed, even if it is not collected — but it is unclear what collection enforcement mechanism exists for taxpayers who aren’t expecting refunds.
Failing to comply with the current ACA provisions is risky however, and could come back to haunt taxpayers in future years — particularly if democrats grab power in 2018.
“What’s Happened to the ACA Penalty Tax?,” Roberton C. Williams, Tax Policy Center
“The ‘Silent’ But Risky Way to Protest Obamacare This Tax Season,” Ben Steverman, Bloomberg
“4 ways states can prevent the Affordable Care Act from “exploding”,” Tom Baker and Daniel Hemel, Vox