What If a Tax Preparer Makes a Mistake?
The process of tax filing is not easy, particularly when you are counting on another person to do it on your behalf. This is the reason why a lot of people seek the services of professional tax preparers. However, what should you do when the person you trusted commits an error on your tax return?
Errors in tax forms may result in tax returns being withheld, IRS audit, fines, and more. If you have found yourself in this scenario, you are not the only one, and you can do several things to eliminate the problem.
Understanding the Role of a Tax Preparer
What Does a Tax Preparer Do?
Your tax preparer is obliged to complete and submit your tax return correctly according to the details you provide.
They may be a:
- Certified Public Accountant (CPA)
- Enrolled Agent (EA)
- Tax attorney
- Non-credentialed tax preparer
With tax preparers, this can maximize deductions and credits, meet the IRS rules, and e-file returns. Nevertheless, they depend much on the information provided to them and even the highly qualified professionals can make mistakes.
Common Mistakes Made by Tax Preparers
Experts in the field of tax preparation can still make mistakes.
Some of the most typical mistakes are:
- Incorrect Social Security numbers
- Math errors or typos
- Wrong filing status
- Missed deductions or credits
- Incorrect income reporting
- Failing to include all forms (like W-2s, 1099s)
- Mismatched direct deposit information
These mistakes may cause a small to major issue with the IRS.
Who Is Responsible for Tax Return Errors?
You Are Ultimately Responsible
You are the one who is in charge of the precision of your tax return even though you paid a professional. It does not matter whether the error was deliberate or not.
IRS will make the taxpayer responsible, not the preparer. This is the reason why you should update your return properly, and then sign and send it back.
Can the Preparer Be Held Liable?
It is true that in some instances, tax preparers may be held liable, in particular where:
- They were careless or irresponsible
- They deliberately provided misleading data
- They acted against the rules of the IRS
The IRS can provide the preparer with penalties; however, there is still a chance that you may have to pay the taxes, penalties, or interest as a result of the mistake.
What to Do If Your Tax Preparer Makes a Mistake
Step 1: Review the Return Carefully
Read through before acting.
Double-check:
- Personal details
- Income amounts
- Deductions and credits
- Bank routing numbers
There are times when it may appear like the preparer made an error; it may be because of information that you provided them with was missing or incorrect.
Step 2: Contact Your Tax Preparer
If you identify an error, call your tax preparer immediately. Most reputable tax professionals will assist in rectifying the problem free of charge—more so when the error was done by them.
Step 3: File an Amended Return (Form 1040-X)
If the return has been already filed to the IRS and a correction or re-filing is required, then you will have to file an amended tax return, using Form 1040-X.
This is commonly used for:
- Fixing filing status
- Correcting income
- Modifying allowing or deductions
The turnaround time of an amended return is 16 weeks, and therefore, you must not take long in realizing an error after which you should take action.
Step 4: Respond Promptly to IRS Notices
If the IRS detects the error prior to you, then they will typically issue a letter (like, Notice CP2000) indicating the disparity.
Don’t ignore it. Meet deadlines with supporting materials or corrections. If you do not agree, you may challenge the notice; however, it has to be in a formal manner and within the stipulated time.
What Are the Possible Consequences?
Mistakes can lead to:
- Delayed refunds
- Interest and underpayment fines
- Overpayment of taxes
- IRS audits
- Disqualification on some tax credits
In extreme situations, particularly fraudulent ones, the IRS can impose huge fines or even direct the case to an investigation unit. Nevertheless, honest mistakes can hardly result in serious consequences when they are handled timely.
Can You Sue a Tax Preparer?
Yes, there can be legal recourse if the error of the preparer resulted in financial loss.
You can:
- Make a complaint with the IRS on form 14157
- File Form 14157-A in case of suspicion of fraud or misconduct
- Claim civil damages, e.g. lost refund or fines you were forced to pay
Take extensive notes on communications and documentation if you want to take legal action.
How to Protect Yourself in the Future
Choose a Qualified Tax Preparer
Ensure that you employ a tax preparer who is well credentialed and experienced.
Look for:
- CPAs
- Enrolled Agents (EAs)
- Tax lawyers
Confirm their PTIN (Preparer Tax Identification Number) and inquire of their experience, training, and history with the IRS.
Ask About Error Protection
Other tax preparers or tax software firms will provide accuracy or audit assurance.
Ask whether:
- They provide compensation of fines or interest due to their error
- They will assist in the cases of IRS notices or audit of the return
Review Before You Sign
Do not ever sign any return that has not been examined.
Take time to:
- Check for obvious mistakes
- Voice concerns if something appears wrong
- Take a copy of the final return to keep a record of it
Keep in mind: When you sign it, you are the one responsible.
Don’t Panic—But Act Quickly
Errors occur, even when one is professionally assisted. The trick is to be fast, communicate, and correct the situation within a short time if possible. Though you might be frustrated and/or alarmed, a lot of mistakes that happen on tax returns can be remedied without significant effects, particularly when done in a responsible manner.
