Don't Mess With Taxes

If you didn't get acceptable Affordable Care Act, aka Obamacare, medical coverage last year and owe the health care law's shared responsibility payment, make sure it's being handled properly.

The Internal Revenue Service is getting reports that unscrupulous tax preparers nationwide are instructing clients to make these penalty payments directly to the preparer.

Wrong.

If you owe this penalty, it should be made only as part of your tax return, not as a separate payment to the person who helped you complete that return. 

Correct payment processes: In most cases, the shared responsibility payment comes out of a taxpayer's expected refund. Where there is no refund, then a payment is necessary.

But it is a part of the regular tax payment process, which means writing a check or setting up direct payment to the U.S. Treasury.

Some individuals also might be notified they owe a shared responsibility payment via a letter from the IRS. In this case, follow the letter's payment instructions, which, again, will say to make the payment to the Treasury.

In no instance should an Obamacare penalty payment be made directly to an individual or a return preparer.

Wrong reasons for bad payments: Most people, fortunately, don't owe the payment at all because they have health coverage or qualify for a coverage exemption.

Still, says the IRS, bad tax preparers are telling clients they need to make the payments and make them to the tax pros.

Other taxpayers have been promised lower penalties if they pay the preparer.

And some unscrupulous return preparers are targeting taxpayers who don't speak much English, specifically those whose native language is Spanish. In many of these cases, reports the IRS, taxpayers have been told that the Obamacare payment needs to be made to the preparer to avoid possible immigration status problems.

Reporting improper penalty payments: The bottom line is if your tax preparer asks you to make an Obamacare shared responsibility payment to him or her, don't.

If you believe you have been targeted by an unscrupulous preparer or you have been financially affected by a tax return preparer's misconduct or improper tax preparation practices, report it to the IRS. Use Form 14157, Complaint: Tax Return Preparer.

And if you're unsure about your shared responsibility status, use the IRS interactive tool to help determine if you qualify for an exemption or owe the payment.

Tax pro oversight: Tax professionals also were a discussion subject last week at my other tax blog.

Two major consumer advocacy groups have, once again, called for oversight of tax professionals. The National Consumer Law Center and the Consumer Federation of America found in their 2015 tax-time report that the lack of overall national minimum standards puts taxpayers at risk from incompetent or criminal preparers.

This Obamacare tax penalty ruse seems to bear out that report's findings.

Also over at Bankrate last week, I looked at the generally fiscally sound plans folks have this year for their tax refunds.

My additional thoughts at Bankrate Taxes Blog generally are posted every Tuesday and Thursday. If you don't see them those days, check in here over the weekend where you'll usually find highlights and links.

You also might find these items of interest:

• More forgiving IRS to waive some bad 1095-A tax penalties
• 5 things to check when hiring a tax preparer
• Which is better, a big refund or more money throughout the year?