The Internal Revenue Service is urging taxpayers to choose their tax preparer carefully, warning that some unscrupulous preparers are pocketing their individual health coverage payments under the Affordable Care Act.
“In some cases, these preparers were instructing their clients to make individual shared responsibility payments directly to that preparer,” said the IRS in an email alert Tuesday. “In some cases, this was happening even though the taxpayer had Medicaid or other health coverage. Under this circumstance, the taxpayer didn’t need to make the shared responsibility payment at all. In some parts of the country, unscrupulous return preparers were targeting taxpayers with limited English proficiency and, in particular, those who primarily speak Spanish.”
The IRS pointed out that most taxpayers don’t owe the payment at all because they have health coverage or qualify for a coverage exemption. However, if they owe a payment, they should remember that it should be made only with your tax return or in response to a letter from the IRS. The payment should never be made directly to an individual or a tax return preparer.
The IRS said tax preparers who inappropriately ask for direct payment use a variety of invalid reasons, such as telling individuals that they must make an individual shared responsibility payment directly to the preparer because of their immigration status, promising to lower the payment amount if the client pays it directly to the preparer, and demanding money from individuals who are exempt from the individual shared responsibility payment.
Taxpayers who are not U.S. citizens or nationals, and are not lawfully present in the United States, are exempt from the individual shared responsibility provision, also known as the individual mandate, and do not need to make a payment, according to the IRS. For this purpose, an immigrant with Deferred Action for Childhood Arrivals (DACA) status is considered not lawfully present and therefore is exempt. They may qualify for this exemption even if they have a Social Security Number.
The IRS has a special form in which taxpayers can complain about their tax preparer, Form 14157, Complaint: Tax Return Preparer. Taxpayers can also use the IRS’s Interactive Tax Assistant tool Am I required to make an Individual Shared Responsibility Payment? to help determine if they qualify for an exemption from the payment or if they owe the payment.