Wednesday, September 16, 2015


One of the sessions at the recent National Association of Tax Professionals’ Tax Forum and Expo that I attended reminded me that the potential “shared responsibility” penalty has been doubled for 2015 – going from 1% of annual household income to 2% of annual household income.  This brings up an issue I have with the “self-assessment” of this penalty.

The facts and circumstances associated with a tax return might indicate that the taxpayer(s) may be subject to a penalty for underpayment of estimated taxes.  But as a tax preparer I will not, nor am I required to, calculate the penalty and include it in the filing of the return.  If the IRS wants to assess my client(s) a penalty for underpayment of estimated tax they are welcome to do so.  If they do I will attempt to reduce the penalty assessment via one of the exceptions available on Form 2210.

Preparing a Form 2210 “upfront” involves additional work and an additional fee.  Why should a taxpayer pay me a fee to assess a tax penalty?  If a penalty is assessed by the IRS, which it may not be, then it is appropriate for me to charge the client(s) a fee to reduce or eliminate the penalty assessment.

Would the same logic not also apply to the shared responsibility penalty?  If the IRS wants to assess a taxpayer a penalty for not having full-year minimum essential health insurance coverage then they are welcome to do so, at which point I will attempt to reduce the penalty assessment using one of the exceptions for a fee.  But, as with underpayment of estimated taxes, why should the taxpayer(s) have to pay me a fee to be assessed a penalty? 

To be honest, I do calculate any penalty for premature withdrawal from a pension account on Form 5329 as part of the filing of a client’s return, but I believe this is somewhat different.  The penalty assessment is automatic and straight forward and is simple to calculate.

So fellow tax professionals, what do you have to say about my issue with the shared responsibility penalty?