There have been no shortage of consumer alerts this tax season, with warnings about scams from unscrupulous criminals trying to steal taxpayers’ identities through bogus emails or phone calls. Now there are reports of tax preparers using the consumer confusion surrounding the Affordable Care Act (ACA) penalties to make a quick profit.
Protect Yourself with Knowledge
The IRS is urging taxpayers to take great care when choosing a tax preparer, as reports indicate some preparers are instructing their clients to make their individual shared responsibility payments directly to them—not the IRS.
Any taxpayer who isn’t exempt from the provisions of the ACA must pay a penalty fee on their Federal Tax Return. This fee is paid directly to the IRS, not the tax preparer. Most people will have the required coverage or qualify for an exemption, but for those who don’t, wisely choosing the right tax preparer can ensure that the penalty is paid correctly—and avoid additional penalties for failure to pay.
Expats who qualify for the Foreign Earned Income Exclusion via the Physical Presence test or the Bona Fide Residence test are exempt from the ACA provisions. In addition, those expats who hold a US expatriate health insurance policy are also exempt. The government plans to revisit the ACA rules for expats this year, but have cited the above exemptions will remain in effect through at least December, 2015.
According to the IRS, there are several reports of this kind of unscrupulous activity. In some cases, return preparers have told taxpayers to make the payment directly to them, even though the taxpayer had Medicaid or other health coverage and doesn’t need to make the shared responsibility payment at all. In some parts of the country, unscrupulous return preparers are targeting taxpayers with limited English proficiency and, in particular, those who primarily speak Spanish.
Some of the ways these preparers are explaining their request includes:
- Informing 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, or
- demanding money from individuals who are exempt from the individual shared responsibility payment
This last one is most important for US expats, who have been unclear on their requirements to obtain the proper coverage for the ACA. Under the Physical Presence test, you must simply be inside a foreign country for 330 of any 365-day period—note that this 330 days doesn’t include travel time so track your time carefully to ensure you qualify, and thereby remain exempt from ACA’s provisions.
The IRS encourages you to report any improper tax preparer behavior in the following ways:
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, you can report it to the IRS on Form 14157, Complaint: Tax Return Preparer.
Taxpayers who are unsure if they must make a payment can use our Interactive Tax Assistant tool – Am I required to make an Individual Shared Responsibility Payment? – to help determine if they qualify for an exemption or owe the payment.
Trust Greenback’s Experts
If you need assistance with your expat tax preparation, look no further than Greenback to find a highly experienced, honest expat tax preparer. Our experts work with expats 100% of the time and ensure that you are receiving every deduction and exclusion available to you to offset your US tax liability. We have thousands of clients in 155 countries.
See what Kathy B. in the UK had to say about her recent Greenback experience:
“I can’t say enough positive things about my experience with Greenback! I had no idea where to get started and who to go to for help. I’m so glad I chose Greenback! The process is simple and works well across several time zones. The CPA assigned to me (Gabriela) was absolutely fabulous! She was prompt, responsive, professional, friendly, personable, pleasant, patient, answered all my questions, and offered assurances along the way! Money well spent. Value for the money. I will absolutely go back to Greenback next year and have already recommended Greenback to friends!”
To get started on your US expat tax return with Greenback, simply click here and we will be in touch within one business day!