Obamacare: what happens if I don’t pay the penalty?

I have not had health insurance all year.  I figure that the penalty is less costly than buying health insurance.  Then it occurred to me — maybe I don’t have to pay the penalty either.  What happens if I don’t pay it?

Happy Go Lucky

Dear Happy Go Lucky,

First, it is possible that you do not owe the penalty.  See the IRS’s list of circumstances that shield people from the penalty.

If you do not qualify for any of the exceptions, then you would owe the penalty or tax.  Indeed, the penalty might be a lower cost than your health insurance would have been.  Here is how the tax is calculated.

Let’s imagine you do owe the tax penalty.  The Affordable Care Act tax penalty is unique in that the IRS cannot enforce collecting it.  The IRS cannot put a lien on your house or garnish your wages.  Nevertheless, it is an IRS debt.

The IRS can deduct the tax from any refund that you are owed.  It’s not clear whether it will be reported to the credit rating agencies and affect your credit score.  Lots of employers check your credit score when you apply for a job.  The unpaid penalty might also affect you if you apply for certain government jobs or contracts.

In short, you will be better off in the long run to pay the penalty if you owe it.  But first, make sure that you truly owe it.  You might not!

Linda Riddell

About Linda Riddell

A published author and health policy analyst with 25 years’ experience, Linda Riddell's goal is to alleviate the widespread ailment of not knowing what your health plan can do for you.