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United Parcel Service, Inc. (UPS), General Motors Company (GM): What This IRS Move Means for You

What type of fines am I looking at if I choose not to purchase health insurance?
There aren’t too many surprises here other than you may have not known that the top-line fine by 2016 of $695 per adult or 2.5% of family household income – whichever is greater — will adjust higher in line with inflation each year thereafter. The next year, though, will be particularly easy from a fining aspect with penalties of just $95 per adult or 1% of total household income, whichever is greater.

Can the IRS come after me or garnish my wages to collect my mandate penalty?
In what I consider to be an incredibly odd twist, the answer is “no”! The IRS will have no authority to file criminal penalties against you or to seize your property or wages if you fail to pay to your mandate penalties for not carrying health insurance for yourself or your family.

What the IRS can do is withhold your tax refund should you be due one. This could be a defining factor that causes (at least in the first year when the penalties are considerably lower) quite a few people to opt to go without insurance. Keep in mind, though, that many of our nation’s largest retailers rely on consumers spending their tax refunds to fuel their bottom line. Wal-Mart Stores, Inc. (NYSE:WMT), the United States’ largest employer, missed on earnings earlier this year and blamed, among other things, delayed tax refunds for its weaker results. Just imagine what could happen to its bottom line if the IRS took mandate penalties out of some of these consumers’ returns!

The bottom line
There aren’t a ton of surprises here save for the fact that the IRS is not planning to actively pursue those individuals who choose to accept the mandate penalty but not pay it.

The biggest implication here could be for individual health insurers like WellPoint, Inc. (NYSE:WLP) and CIGNA Corporation (NYSE:CI), which both recently made hefty purchases — $4.5 billion for Amerigroup in WellPoint, Inc. (NYSE:WLP)’s case and $3.8 billion for HealthSpring in 2011 for CIGNA Corporation (NYSE:CI). Although the primary goal of these purchases is to pick up a big chunk of the 16 million soon-to-be-accepted Medicaid participants under the Medicaid expansion, these companies could really struggle to lock in new participants if it’s just easier for some individuals to take a nominal fine, and especially if the IRS has little means at its disposal other than withholding an individual’s tax refund. Only time will tell if this proves true, but if I were a betting man, I’d definitely say the lack of IRS follow-through will result in millions more opting for the penalty in the first year than many estimates had planned for.

The article IRS Issues Final Guidelines on Obamacare’s Individual Mandate: What It Means for You originally appeared on and is written by Sean Williams.

Fool contributor Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLongThe Motley Fool owns shares of, and recommends WellPoint. It also recommends General Motors and United Parcel Service.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

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