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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