Americans are wondering how the new "tax" on the Affordable Care Act ("ACA") will work and what challenges they face with the IRS for being uninsured.
Well, here is the answer for now. In 2014, insurance companies will begin sending a 1099 on all insureds by January 31 of the year following coverage. Taxpayers will attach this form to their 1040 individual returns, essentially showing the IRS that they are indeed covered as the ACA mandates.
If a taxpayer is uninsured for that tax year, the taxpayer is in charge of calculating the penalty for noncompliance. The uninsured must pay the larger of $95 or 1% of income above the minimum amount required to file a tax return, not to exceed $285. That figure will increase in coming years.
Remember, the IRS can't charge interest on this tax, levy, seize or do anything else to collect the tax. They can, however, hold on to your tax refund, if any, to satisfy the debt.