Monday, October 9, 2017

IS SILENCE GOLDEN?


The final topic covered by the “Panel Discussion” at the August NATP National Conference in Washington DC – the last session on the last day – was that of “remaining silent” with respect to the question of full-year health insurance coverage on the Form 1040, or 1040A. 
 
As you know, in the past the IRS rejected returns during processing when the taxpayer didn’t provide information related to health coverage – i.e. they were “silent” and did not check the box to indicate that they had “full-year coverage”, did not identify an exemption, and did not calculate and include the penalty. However, during the tax filing season the IRS announced it would accept both electronically filed and paper filed 2016 returns that were silent with regard to health care coverage.  If you submitted a return that was silent regarding coverage and requested a refund the return was timely processed and the refund issued.
 
I have a problem with the “self-assessment” of IRS penalties. I especially oppose requiring a taxpayer to pay a preparer to assess them a penalty.  The client is getting no value or benefit for the fee paid to a tax professional to calculate a penalty.  If the IRS chooses to calculate and assess a penalty that is their right, but forcing a taxpayer to pay someone to do this upfront is wrong, and adding insult to injury.  I also believe the concept of protection from “self-incrimination” may be involved.
 
For example, I will never, under any circumstance, prepare a Form 2210 to calculate a penalty for underpayment of estimated tax as part of the filing of any tax return. If the IRS does calculate and assess a penalty I have no problem charging a taxpayer a fee to assist in reducing, removing, or abating it – because the client is getting real benefit and value for the fee paid in that situation.
 
I feel the same way about the “Shared Responsibility” penalty, especially considering –
 
• the IRS announcement that remaining silent about health coverage will not delay the processing of the tax return or the issuance of a requested refund,
 
• collection of the Shared Responsibility Penalty is not subject to criminal or civil penalties under the Tax Code, and interest does not accrue for failure to pay such assessments in a timely manner. The only way the IRS can collect an unpaid penalty is by offsetting a current or future refund, and
 
• Donald T Rump had signed an executive order directing the Secretary of Health and Human Services and other department and agency heads to exercise all available authority and discretion to “waive, defer, grant exemptions from, or delay the implementation of any provision or requirement of the Act that would impose a fiscal burden on any State or a cost, fee, tax, penalty, or regulatory burden on individuals, families, healthcare providers, health insurers, patients, recipients of healthcare services, purchasers of health insurance, or makers of medical devices, products, or medications.”
 
It is different with calculating the 10% for premature withdrawal from a pension account.  I believe this is in reality an additional tax and not a penalty assessment.  There is no additional form actually required for adding this to the tax liability calculation, and I do not charge any additional fee for simply multiplying the distribution by 10%.  I will charge a fee if I prepare a Form 5329 to reduce or eliminate the assessment.
 
The official NATP position, and that of some preparers, seems to be that it is unethical not to calculate the Shared Responsibility penalty when preparing the return, as we are allegedly not preparing a “complete and accurate” tax return.  I disagree.  Assessing the penalty has nothing to do with completely and accurately determining the client’s tax liability.  I believe it may perhaps be unethical to assess the penalty upfront.
 
I do believe that tax preparers must reconcile any Advance Premium Credit and calculate and report on the tax return any required payback.  This is an actual tax credit, and the reconciliation is truly part of completely and accurately determining the client’s tax liability.
 
So, my fellow tax pros, what do you have to say about this issue?
 
FYI 
 
The above item first appeared in the September 2017 issue of my e-newsletter ROBERT D FLACH’S THE TAX PRO.
 
I have decided to give up on this e-newsletter.  The response from tax professionals was not particularly overwhelming.  While I truly enjoy creating and writing email and print newsletters on tax topics I do not have the resources or knowledge to properly market or promote them.  And I am trying to simplify my life as I approach the beginning of my 65th year.
 
Over the years I have tried in several venues to encourage and promote thought and discussion among tax pros on topics of interest that affect our profession.  I have not received the response to these attempts that I had hoped.  I would like to think that I have at least, on some occasions, caused fellow tax pros to think, if not share their thoughts with me in public discussion, about the issues I have raised.  I will continue with these attempts in hopes that I am doing some service for the profession.
 
I will keep writing this THE TAX PROFESSIONAL blog, and will in future posts include items that would have appeared in the newsletter.  For example, I will continue the MEET AND GREET series as blog posts on Wednesdays.  This coming Wednesday I will post the discussion with NATP President Gerard Cannito that appeared in the September issue of THE TAX PRO. 
 
TAFN
 
 
 
 

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