USA Today, IRS Lacks Clout to Enforce Mandatory Health Insurance, by Sandra Block:

The IRS processed more than 230 million tax returns last year, paid 127 million refunds and received about 68 million phone calls. The agency is responsible for enforcing a tax code that, at 71,000 pages, makes Anna Karenina look like a comic book.

Starting in 2014, the agency will have another task: making sure all Americans have health insurance. Under the law, Americans who can afford health insurance but refuse to buy it will face a fine of up to $695 or 2.5% of their income, whichever is higher. More than 4 million Americans could be subject to penalties of up to $1,000 by 2016 if they fail to obtain health insurance, the Congressional Budget Office said last week.

The IRS will be the enforcer — sort of.

While the IRS can impose liens or levies, seize property or seek jail time against people who don't pay taxes, it's barred from taking such actions against taxpayers who ignore the insurance mandate. In the arsenal instead: the ability to withhold refunds from taxpayers who decline to pay the penalty, IRS Commissioner Doug Shulman said this month.

Still, compliance with the health reform law will be largely voluntary, says Timothy Jost, a law professor at Washington and Lee University. "By taking criminal sanctions and liens and levies off the table, the IRS' hands are tied, to a considerable extent."

The IRS is "being put in a position where it will be sending notices that will annoy people" and not much else, says James Maule, professor of law at Villanova University and author of the tax blog MauledAgain. "It's basically designed for failure."

Shulman said he believes most Americans will comply with the law. The experience of Massachusetts, which has required residents to have health insurance since 2006, would appear to support that view. In 2008, 98% of state tax filers who were required to provide health insurance information with their state tax returns met that filing requirement, and 96% had coverage, according to a preliminary report issued in December by the Massachusetts Department of Revenue.

But Massachusetts' health care law gives the Department of Revenue the authority to use its regular tax-collection powers to enforce the insurance mandate, says spokesman Robert Bliss. Through September 2009, the state had collected $12.9 million of the $16.4 million in penalties assessed in 2008.

In this political environment, even a defanged IRS stirs up powerful emotions. Among the concerns about the IRS' role in the health care reform law:

• The law will lead to a dramatic expansion of the IRS.
• The law will make it more difficult for the IRS to carry out its primary job of collecting taxes.
• The IRS does a poor job of managing social programs.