Wednesday, October 02, 2013

Gordon's Obamacare Penalty Fix

Gordon Durand has a great post on how to avoid the Obamacare penalty: just make sure your W-4 doesn't leave you with a refund. He quotes the legislation which clearly says:
  1. WAIVER OF CRIMINAL PENALTIES. In the case of any failure by a taxpayer to timely pay any penalty imposedby this section, such taxpayer shall not be subject to any criminal prosecution or penalty with respect to such failure.
  2. LIMITATIONS ON LIENS AND LEVIES. The Secretary shall not
    1. file notice of lien with respect to any property of a taxpayer by reason of any failure to pay the penalty imposed by this section, or
    2. levy on any such property with respect to such failure.
Brilliant! And, it's the law of the land.


MAX Redline said...

Amusing. Yet, most people tend to look forward to getting a tax refund; they've been conditioned to do so.

Apparently, this means that the only way that they can collect their penalty is through deduction from the refund. However, I remain wary.

In my case, I have since the early 1980's adjusted thing such that I receive no refund (or a very small one, depending on how well I anticipated earnings); my view has always been that there is no reason for me to give them what amounts to an interest-free loan. And I've always itemized - prior to Packwood's "tax reform" legislation, there were many available deductions, and so I saved every receipt.

Interest paid on credit cards and other loans were deductible, as were fuel taxes, among many others. I viewed it as a game: "They want my money; how much can I legally keep from them?"

The annual deduction exercise informed my W-4 construction for the coming year. Good times.

I remain wary because of the fact that, despite the wording, they've been quite clear that failure to pay for insurance in 2014 elicits a penalty of less than $100 or 1% of gross pay, whichever is higher. And in succeeding years, the penalties escalate. Somehow, I suspect that they have every intention of exacting those penalties.

Given the contempt for law that this administration has repeatedly demonstrated, I've no confidence in their willingness to adhere to a new law.

T. D. said...

Given the Obama administration contempt for laws against the political use of the IRS and a ton of other "oh, I changed my mind on enforcing" this or that law, you definitely bring a word to the wise, Max.

If I remember right there was a big to do about people being jailed for not signing up (or not having sufficient funds to sign up) so they wanted something in the bill to derail that possibility.

MAX Redline said...

If I remember right there was a big to do about people being jailed for not signing up

Good recall there, TD - they were going to criminalize failure to comply, then realized that part alone might derail things, so they went with a levy instead.

T. D. said...

Yes, wouldn't want any bad PR up front now, would we?