Robert Flach at his “The Tax Professional” blog asks the following question regarding Affordable Care Act penalties assessed on tax returns against people who do not carry health insurance:
What is our legal responsibility as tax preparers when it comes to calculating the new convoluted and potentially expensive Obamacare penalty for clients who are not covered by health insurance?
Or perhaps a more inclusive question –
Are we as tax preparers legally required to assess a client an IRS penalty “up front” when preparing a tax return?
It appears from Robert’s statements elsewhere that he’s “not gonna” when it comes to calculating the penalty on tax returns he prepares. Robert also says he doubts the penalty will apply to any of his clients anyway. I’m in the same situation. I estimate that I might have literally 1 or 2 clients who this will apply to (and it may be 0).
I agree the ACA penalties are convoluted and potentially expensive. But I disagree with a preparer saying they’re “not gonna.”
Just because we think a law is stupid doesn’t mean we don’t deal with it. I think a lot of the things the government makes me do are stupid … but I do them because I don’t want to lose my license!
This reminds me of an ex-client who was operating a business in multiple states. I discovered that he had never filed tax returns in those states nor collected sales tax like he was supposed to. When I told him about this, he launched into a profanity laced tirade toward me about how much he hates the government and how unfriendly the government is to small businesses.
His exact words to me, regarding collecting sales tax, were: “F@ck it. I’m not doing it. I’m not gonna serve as a f@cking collection agency for the G@ddamned government.”
I parted company with that business after that exchange. I understand the anti-government sentiment. I really do. But you can’t just ignore the law.
If “I’m not gonna” was a concerted effort of AICPA or NAEA telling the IRS “Our members aren’t going to calculate this penalty,” then there might be some traction. If either organization were to say this, I would support it and would jump on the “I’m not gonna” bandwagon.
But the lone preparer saying “I’m not gonna” isn’t going to change the world, they’re just going to make problems for themselves and for their clients.
So are we as preparers required to calculate the penalty on people’s tax returns? Probably.
Robert mentions that he never calculates the underpayment penalty on client tax returns. But that’s okay because the instructions to the Form 1040 specifically state, regarding the underpayment penalty:
Because Form 2210 is complicated, you can leave Line 77 blank and the IRS will figure the penalty and send you a bill.
Perhaps the IRS will have similar instructions for the ACA penalties. If not … I think we’ll need to calculate the penalty on tax returns we prepare.
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