Taxation & Estate Planning

The IRS and your Health Care

By Darrin Mish

What does the IRS have to do with your Health Care, you might ask. Plenty, if the current Democratic Health Restructuring bills have anything to say about it. The bills are presently being proposed to both the House of Representatives and the Senate through their respective Health, Education, Labor and Pension (HELP) committees.

The Senate bill will make it mandatory for all who provide health care insurance (like employers) to disclose the names, addresses, Social Security numbers and period of coverage for each person being covered to the IRS. The bill also gives the right to the Secretary of Health and Human Services to request for any additional information deemed necessary, like the terms of the coverage, names of immediate family members etc and disclose them to the IRS.

On the other hand, the House of Representatives' bill calls for the disclosure of the names, addresses and TIN of the primary insured and the name of each other person also covered under the same policy and the period of coverage for such persons. It also gives the right to the Secretary of Health and Human Services to request for additional information. The reason this information is to be declared to the IRS is to facilitate the tax of people who do not have such coverage. The tax rate will be 2.5% of the excess of the taxpayer's modified adjusted gross income for the year after deducting the amount of gross income declared under Section 6012(a)(1).

The Senate bill also calls for a tax but it calls it a 'shared responsibility amount' instead. The difference is that this tax is levied only after a taxpayer is not covered for at least a month and is not calculated according to a percentage but is based on the discretion of the Secretary. The Secretary is to impose a tax amount that would be sufficient to encourage taxpayers to take part in qualifying coverage.

So to know who to tax, the IRS needs to know who are already part of such health care coverage. With the information received, the IRS will proceed to cross check against its list of taxpayers to determine who does not have adequate health care insurance coverage. Such individuals will be taxed unless they show proof of having health care coverage from some other acceptable sources.

Such disclosure of personal health data would not likely go down well with the people who are concerned of personal privacy. For the first time the IRS will not only possess income data but sensitive health information of taxpayers as well.

Full post as published by IRS Problem Solver Blog on August 28, 2009 (boomark / email).