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IRS releases statements on 'shared responsibility payment' for individuals

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On Tuesday, the IRS released a series of statements for taxpayers, reminding them that as of January 2014, individuals are required by law to obtain healthcare, if they do not qualify for an exemption or already have coverage from a qualified plan or pay a penalty to the IRS at tax time: Four Tax Facts about the Health Care Law for Individuals, IRS Reminds Individuals of Health Care Choices for 2014, The Individual Shared Responsibility Payment - An Overview, and Affordable Care Act Tax Provisions. By now, most people know that the individual mandate of the Affordable Care Act, or Obamacare, has taken effect. Notable from these announcements, is the wording of the penalty, being dubbed, a “shared responsibility payment.” This verbiage, while in the original legislation, is not a term that we have heard much before.

“Beginning in 2014, those who do not comply with the mandate must make a “[s]hared responsibility payment” to the Federal Government. §5000A(b)(1). The Act provides that this “penalty” will be paid to the Internal Revenue Service with an individual’s taxes, and “shall be assessed and collected in the same manner” as tax penalties. §§5000A(c), (g)(1).”

It is also pointed out that the penalty, or “shared responsibility payment,” is:

  • 1 percent of your household income that is above the tax return threshold for your filing status, such as Married Filing Jointly or single, or
  • Your family’s flat dollar amount, which is $95 per adult and $47.50 per child, limited to a maximum of $285.

The penalty goes up to 2.5 percent in 2015, a substantial increase in this tax, or “shared responsibility payment.”

You probably remember that the administration argued to the Supreme Court that it was a tax, in order to justify its constitutionality, while relaying to the public over and over again that it was not a "tax." Call it what you will, penalty, tax, or shared responsibility payment, the result is the same, more money being paid to the government at tax time, hurting the middle class the most.

Following is an excerpt from the opinion of the Supreme Court supporting the implementation of the individual mandate as a tax:

“Construing the Commerce Clause to permit Congress to regulate individuals precisely because they are doing nothing would open a new and potentially vast domain to congressional authority. Congress already possesses expansive power to regulate what people do. Upholding the Affordable Care Act under the Commerce Clause would give Congress the same license to regulate what people do not do. The Framers knew the difference between doing something and doing nothing. They gave Congress the power to regulate commerce, not to compel it. Ignoring that distinction would undermine the prin- ciple that the Federal Government is a government of limited and enumerated powers. The individual mandate thus cannot be sustained under Congress’s power to “regulate Commerce.” Pp. 16–27. (b) Nor can the individual mandate be sustained under the Necessary and Proper Clause as an integral part of the Affordable Care Act’s other reforms. Each of this Court’s prior cases upholding laws under that Clause involved exercises of authority derivative of, and in service to, a granted power. E.g., United States v. Comstock, 560 U. S. The individual mandate, by contrast, vests Congress with the extraordinary ability to create the necessary predicate to the exercise of an enumerated power and draw within its regulatory scope those who would otherwise be outside of it. Even if the individual mandate is “necessary” to the Affordable Care Act’s other reforms, such an expansion of federal power is not a “proper” means for making those reforms effective. Pp. 27–30. 3. CHIEF JUSTICE ROBERTS concluded in Part III–B that the individual mandate must be construed as imposing a tax on those who do not have health insurance, if such a construction is reasonable.”

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