Volunteer Income Tax Assistance (VITA) Certification Practice Test

If a taxpayer claims to have health insurance but does not provide proof, what should a preparer do?

1. Request that the taxpayer return with proof

2. Prepare the return using the information provided

3. File the return as if the taxpayer had no insurance

4. Notify the IRS of the lack of documentation

The correct answer is: Prepare the return using the information provided

When a taxpayer claims to have health insurance but fails to provide proof, the most appropriate action for the preparer is to prepare the return using the information provided. This approach recognizes that the taxpayer has made a claim regarding their health coverage, and it is important for the preparer to accurately reflect the taxpayer’s situation based on the information they present. The Internal Revenue Service (IRS) does allow taxpayers to self-attest to health insurance coverage during the filing process. The preparer can proceed with the return as long as the taxpayer can reasonably attest to having met the requirement for minimum essential coverage, as long as there might be no penalties if the taxpayer's income is below certain thresholds. This is particularly relevant for forms like Form 1040, which require tax filers to indicate their health coverage status. Choosing to prepare the return with the information given allows for compliance with IRS rules while ensuring that the taxpayer's statement is documented in good faith. Additionally, the preparer should encourage the taxpayer to gather the necessary documentation, as it may be needed for future inquiries or for verification purposes. The other options either create unnecessary complications or do not align with the practice standards for tax preparation based on the taxpayer's affidavit regarding their health insurance status.