The IRS issued a consumer alert warning taxpayers to beware of tax preparers who tell clients to give them their health insurance payments.

According to the IRS alert on Friday, “reports are coming in from around the country describing unscrupulous preparers who instruct their clients to make individual shared responsibility payments directly to the preparer.”

The IRS reminded individuals who owe the payment that it should be made only with their tax return or in response to a letter from the IRS.

“The payment should never be made directly to an individual or return preparer,” said the IRS. “Most people don’t owe the payment at all because they have health coverage or qualify for a coverage exemption.”

The IRS said it has received 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,” said the alert. “In some parts of the country, unscrupulous return preparers are targeting taxpayers with limited English proficiency and, in particular, those who primarily speak Spanish.”

Tax preparers are asking for direct payment to them for different reasons, including telling 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.

The IRS told taxpayers that if they have been targeted by an unscrupulous preparer or have been financially affected by a tax return preparer’s misconduct or improper tax preparation practices, they 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 the IRS’s 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.

The IRS acknowledged in the alert that “the vast majority of tax professionals provide honest, high-quality service.” However, the IRS is encouraging taxpayers to avoid dishonest and unscrupulous preparers by choosing their preparer wisely and using a new, online, searchable public directory of tax preparers who currently hold professional credentials recognized by the IRS or certain other qualifications. The IRS also offers advice on its Choosing a Tax Professional page on IRS.gov.

Michael Cohn is the editor-in-chief of AccountingToday.com.

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