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Business Perspective: Drake Software

Advice for serving multicultural and mixed-status clients

| December/January 2018-19 Footnote

Multicultural and mixed-status families are some of the fastest growing groups in the country. Since the Latino Tax Professionals Association (LTPA) provides educational resources for tax professionals looking to enter this market, Drake Software's Taxing Subjects Podcast interviewed LTPA Executive Director Carlos Lopez, EA and LTPA Vice President of Business Development Tony Martinez, EA to learn more about serving these taxpayers.

What are multicultural and mixed-status clients?

While the terms "multicultural" and "mixed-status" sound similar, the LTPA representatives drew a clear distinction between them. Lopez explained that multicultural clients are "a vast group of individuals who are of varying ethnicities [who] have arrived to the United States by various different means." On the other hand, Martinez said that mixed-status families are households with different immigration statuses: "One parent may be undocumented and the other may be a legal resident, [while] one child may be a citizen [and] the other ... may be a DACA recipient. When it comes to those types of families ... there's a lot of confusion."

What complications might multicultural and mixed-status clients face?

To illustrate how difficult multicultural tax situations can be, Martinez compared the Affordable Care Act eligibility of a resident DACA recipient to a nonresident H2A visa holder:

[The DACA recipient has] authorization to work in this country; however, technically, they're not lawfully present. If they're not lawfully present, the Affordable Care Act individual mandate does not apply to them. That means they will not receive a penalty in 2018 for not having insurance. At the same time, they do not qualify for the Premium Tax Credit.
Now compare that group to an H2A visa holder. That individual also has authorization to work; however, they are also lawfully present, so the Affordable Care Act may apply. Making it even more complex, the H2A visa holder may be considered a nonresident because he or she may not be here for an extended period of time to meet the substantial presence test.

Martinez also highlighted an ACA-related difficulty for mixed-status families. In a household where the parents are ITIN holders and the children have Social Security numbers, the parents may be exempt from the penalty for not having insurance, but their children could trigger the penalty if they do not have coverage. After all, the Tax Cuts and Jobs Act may have reduced the penalty to zero in 2019, but taxpayers will still have to indicate if they had health insurance when they file their taxes.

ACA-related issues aside, ITIN holders may also have questions about the Child Tax Credit, the qualified business income credit and more.

Where is a good place to start when you want to enter the multicultural market?

Tax professionals interested in serving multicultural and mixed-status taxpayers who lack experience in that market may be reluctant to start devoting resources to attracting those clients. Lopez reassured anyone with second thoughts: "Don't be afraid. Expand your horizons. This is the emerging market, and if you're going to be in this tax preparation industry, you have to stick your toes into where the market is."

If you're a tax professional interested in "dipping your toes," you may be wondering about first steps. Lopez recommended hiring employees who understand the community you're interested in serving. In a second podcast featuring the LTPA, Martinez highlighted the pivotal role that social media plays in successfully marketing a tax practice.

To hear "LTPA on How to Help Multi-Cultural Clients -- EP13" or "LTPA on Common Issues Facing Tax Pros -- EP15," visit DrakeSoftware.com/Blog/Categories/Podcasts or download the episodes directly from iTunes.  

Drake Software

Contact: Becky Reed

Address: 235 E. Palmer St. Franklin, NC 28734

Phone: 800-890-9500

Email: sales@drakesoftware.com

Web: drakesoftware.com


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