It all started at a chess tournament.
My son was deep in concentration, eyes locked on the board, having just shortcastled his king into safety while playing in a local weekend competition.
The room had that quiet, focused energy you only find at chess tournaments… calm, almost meditative. That’s when a fellow father, someone I vaguely knew from recommending our sons share the same chess coach, leaned over and said something that instantly pulled me out of small talk… and straight into tax strategist mode.
“Chris… I know this is what you do for a living, but I need some advice. Man, I just found out I owe the IRS over $7,000 for health insurance I didn’t even know I had. I think I got scammed… twice.”
He wasn’t exaggerating.
What started as an honest attempt to get healthcare while unemployed spiraled into a financial mess involving government subsidies, a dishonest insurance agent, a co-worker potentially committing fraud, and a so-called refund that may have been fabricated out of thin air.
If you’re a business owner, self-employed, or just someone who’s ever had to figure things out between jobs, pay attention. This story is a real-life reminder of how easily good intentions can lead to bad outcomes… and how trusting the wrong people, even if they seem helpful, can land you in serious trouble.
Trying to Do the Right Thing
After getting laid off, my friend (let’s call him Matt) did what any responsible person would do. He applied for government-sponsored healthcare while searching for a new job. He wasn’t familiar with the ins and outs of the ACA (also commonly referred to as “Obamacare”), but he got connected with an insurance agent who claimed to be affiliated with the program.
Her role seemed straightforward: help him get covered while he was unemployed. She guided him through the paperwork, explained his options, and made him feel like everything was under control.
A few months later, Matt landed a solid job. Out of respect, and probably a little loyalty, he called the same agent and told her he needed to switch to a standard, unsubsidized health plan now that he was working again. That’s when things took a strange turn.
The agent told him he qualified for a “special continuation program” – specifically for people who had just regained employment. It would let him stay on the same plan at a discounted rate for 18 months. Convenient, right?
Invoices started showing up. He paid them. Life went on.
Until tax season.
The $7,000 IRS Surprise
When Matt filed his return, he got a gut punch in the form of a letter from the IRS. He owed $7,000! Not in regular taxes, but as a repayment of healthcare subsidies he had received during the year.
That’s when he realized the agent had never updated his employment status. She kept him listed as “unemployed” so he’d continue to qualify for subsidized healthcare, even after he returned to full-time work. And while Matt had been paying her invoices out-of-pocket, the government was still footing the rest of the bill… based on inaccurate income information.
It gets worse. Not only had the agent taken his private payments, but she also continued collecting small commissions from the government to keep him on the books. That meant she was getting paid twice – once from the government, and once from Matt… all while exposing him to a massive IRS liability.
But the worst was still to come.
A Co-Worker Offers to “Help”
Shortly after getting that IRS notice, Matt mentioned the situation to a co-worker at his new job. The co-worker seemed confident and relaxed, saying, “I’ve got a side hustle doing taxes for people. I know exactly what happened here. Let me take a look – I can fix this for you.”
Now, if you’ve ever been in a financial mess, you know how tempting it is to take help from someone who claims they can make it go away. Matt handed over his tax info, trusting that this guy could really help him out.
After a while, $3,500 showed up in Matt’s checking account — not from the IRS, but directly from his co-worker’s personal bank account… and not the entire $7,000 that he expected as a refund.
That was the red flag that finally made Matt dig deeper.
A Refund That Wasn’t a Refund
When Matt confronted him, the co-worker smiled and said, “You owed seven grand, and now you’ve got $3,500 in your pocket. That’s a $10,000 swing in your favor. I think a thank-you is in order.”
At first glance, that might sound like a fair deal. But here’s what really happened:
Matt later found out that the amended return had been filed using the co-worker’s personal bank account as the refund destination. The IRS sent the refund there, not to Matt. Then the co-worker simply transferred a portion of the money to Matt and kept the rest (roughly 50%), as his silent fee.
Worse yet, Matt was never given a copy of the amended return. He had no idea what was changed, what was reported to the IRS, or whether the numbers were even accurate.
What seemed like a favor turned into something much darker… and potentially illegal.
The Hidden Dangers of Unlicensed Tax Help
In the tax world, there are professional standards that licensed practitioners must follow. These rules are outlined in a document called Circular 230, issued by the IRS. It’s not optional. It’s the ethical and legal code we’re all held to.
Here’s why what the co-worker did was completely out of bounds:
First — no tax preparer is allowed to redirect your IRS refund into their own personal account. That’s one of the biggest red flags in tax practice. The only exception is in very rare situations involving escrow or formal fiduciary arrangements – and even those require strict documentation and oversight.
Second — taxpayers must be given a full copy of their tax return. Not only was Matt never given a copy, but when he asked for one, the co-worker dodged the request. That kind of secrecy is a major violation – and it leaves the taxpayer blind to what was actually filed with the government.
Third — tax professionals cannot charge fees based on the size of a refund. That’s known as a contingency fee, and it’s banned by Circular 230. If the co-worker had offered a clearly written engagement letter and charged a flat fee or hourly rate, this story might’ve ended differently. But that’s not what happened.
Instead, Matt found himself with a partial refund that may have been generated fraudulently, and no documentation to back it up.
And here’s the part most people miss…
The Taxpayer Is Still on the Hook
Even though Matt didn’t prepare the return himself, he signed it… and under IRS rules, that makes him fully responsible for its accuracy.
If the IRS audits the amended return and finds that income was underreported, deductions were inflated, or any other misstatements were made, Matt will be the one held liable. Not the co-worker. Not the insurance agent. Matt.
He could face penalties. Interest. Worse, he could be investigated for fraud, even though he was the victim of someone else’s wrongdoing.
That’s the most painful part of this whole story. Matt was just trying to do the right thing. He wanted healthcare for his family, he reported his income when it changed, and he accepted help from people who sounded like they knew what they were doing.
But trust without verification is dangerous.
A Cautionary Tale for Entrepreneurs, Freelancers, and Professionals in Transition
This isn’t just about one father at a chess tournament.
This could happen to any of us, especially business owners, solopreneurs, or professionals going through life changes like job loss, career pivots, or starting a new venture.
When you’re vulnerable, it’s easy to lean on “helpers” who offer quick fixes. But those fixes can carry long-term consequences. Always ask:
- Is this person licensed?
- Will they give me a copy of my return?
- Am I signing anything I don’t fully understand?
- Are there clear expectations about payment and process?
If something feels off, your instincts are probably right. Trust them.
You Deserve Better Advice
If you’re facing confusing tax issues, concerned about your healthcare coverage, or simply don’t know who to trust – we can help.
My team and I work with individuals and business owners across the country to create transparent, ethical, and strategic tax solutions. No games. No backdoor refunds.
Just the right move at the right time.
👉 Book your free consultation here
You deserve peace of mind – and a partner who puts your interests first.
Welcome to the New Age of Accounting. Let’s begin.
Chris is the Managing Partner at Weston Tax Associates, a best-selling author, and a renowned tax strategist. With over 20 years of expertise in tax and corporate finance, he simplifies complex tax concepts into actionable strategies that drive business growth. Originally from Sweden, he now lives in Florida with his wife and two sons.
