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Health Care Reform and Tax Nasties

An op-ed in the Wall Street Journal last week by James Peaslee, a partner in a New York law firm points our that “taxpayers will be fined for honest mistakes." He begins his op-ed by writing:

“Two tax provisions in the health-care bill voted on by the House Ways and Means Committee earlier this summer have gained significant attention. One would impose a surtax on high-income earners. The other would force individuals (or their employers) who do not have approved health-insurance plans to pay a tax penalty. But there are other "revenue provisions" in the bill that also deserve a close look.

“One would change the law to mandate that the Internal Revenue Service slap penalties on honest but errant taxpayers.

“Under current law, taxpayers who lose an argument with the IRS can generally avoid penalties by showing they tried in good faith to comply with the tax law. In a broad range of circumstances, the health-care bill would change the law to impose strict liability penalties for income-tax underpayments, meaning that taxpayers will no longer have the luxury of making an honest mistake. The ability of even the IRS to waive penalties in sympathetic cases would be sharply curtailed.”

Peaslee points out “(t)he proposed changes in penalty rules have largely escaped notice because they are buried in a part of the bill that purports to deal with abusive tax shelters.” Rather, he says, it “underscores the need to read (the bill) closely.” He cites other examples of "tax nasties" tucked away in what is supposedly a health care reform bill.

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