Hiring a tax preparer can give you some peace of mind that your taxes are being filed correctly. But even a pro can sometimes make a mistake. Depending on the error, you could end up getting a refund you’re not entitled to or paying more in taxes than you actually owe.
The good news is, there are ways to get your tax return back on track if an error was made. Keep reading to learn what steps you can take when you realize your tax preparer made a mistake.
Who Are Tax Preparers?
There are different types of tax return preparers, but typically, they’re enrolled agents, attorneys, or certified public accountants (CPAs). There is no professional credential that qualifies someone to be a tax preparer. However, they do need to have an IRS Preparer Tax Identification Number (PTIN) in order to help clients file their tax returns.
Because a tax preparer is dealing with your sensitive financial information, it’s important to do your due diligence before hiring one. Research potential tax preparers’ backgrounds and references, and if possible, ask for referrals from trusted friends and family members.
It’s also a good idea to look for a tax preparer who specializes in the types of taxes you need help with, such as self-employed taxes.
Pros and Cons of Working With a Tax Preparer
Thinking about enlisting the help of a professional as you prepare for tax season? You may want to consider the advantages and disadvantages of working with a tax preparer.
Pros
• Ample experience (if you hire the right professional)
• Expert insight into potential tax credits and deductions
• Peace of mind that your taxes are filed properly
Cons
• May be more expensive than doing your own taxes
• Mistakes can still happen
• Less privacy
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Are Tax Preparers Worth It?
Whether or not a tax preparer is worth the money depends on a few different factors. These may include:
• How much time it saves you. If you have complicated taxes or are concerned you might miss the tax filing deadline, you may find that an hour or so with a professional tax preparer is more efficient and therefore worth the cost.
• The complexity of your taxes. People who only have one source of W-2 income, take the standard deduction, and have no investments may be able to easily file their taxes without the help of a tax preparer. However, a small business owner dealing with payroll or a freelancer with dozens of sources of income may find that hiring a tax preparer could save them a lot of headaches.
• The tax preparer’s experience. An experienced, qualified tax preparer can ensure your returns are prepared correctly and perhaps even help you identify tax credits or deductions.
• Cost. Some tax preparers charge the same or slightly more than the cost of purchasing tax preparation software, while others are on the more expensive side. Depending on your needs, hiring one may or may not be worth budgeting for.
Fixing Errors on Filed Returns
If you realize your tax preparer made an error on your filed tax return, all is not lost. You can amend it using Form 1040-X, Amended U.S. Individual Income Tax Return. Common errors include having the wrong information regarding income, credit, tax liability, filing status, or deductions.
It’s also possible to amend a return in order to claim an unused tax credit. Generally, mistakes on income tax return need to be amended within three years (this includes extensions).
Am I Responsible if My Tax Preparer Makes a Mistake?
While it may seem like the professional tax preparer would be on the hook for any mistakes made on income taxes they help file, it’s the taxpayer who’s held responsible. However, the tax preparer can help make any necessary corrections.
What Happens if a Tax Preparer Messed Up Your Return
If you realize your tax preparer made a mistake (or multiple) on your income tax return, you need to file an amended return with the IRS. Ideally, the tax preparer would help with this process, but they aren’t required to do so.
What to Do if a Tax Preparer Messed Up
Mistakes happen. Here are the steps you can take to get things back in order in the event your tax preparer makes an error on your income tax return.
Make Sure It’s the Preparer’s Fault
Before you start pointing fingers at the tax preparer, make sure they’re the one who made the mistake. Tax preparers require a lot of detailed information so they can file an income tax return on your behalf, and it’s easy to give them the wrong information by mistake. Do some digging to see who’s really at fault.
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Check Your Contract
Once you’re certain the tax preparer made a mistake, take a look at the contract you signed with them. It should outline whether the preparer will file an amendment for you at no extra charge and what their liabilities are.
Contact the Preparer
The next step would be to contact the tax preparer to alert them of the mistake and to provide them with any related correspondence from the IRS.
Notify the IRS and Professional Organizations
If the mistake is substantial — and not your fault — you’ll need to convince the IRS of the tax preparer’s negligence. You may also want to outline any damages you’ve suffered as a result of the error. The IRS is then responsible for investigating who is responsible and if the tax preparer is at fault, this can result in their tax identification number being rescinded.
It’s also possible to report the tax preparer to a professional organization they belong to, like the American Bar Association or the American Institute of Certified Public Accountants.
Tell It to the Judge
Ideally, the tax preparer will help you remedy the mistake, and everyone can go on their merry way. However, if the error caused a lot of issues for you, you may choose to sue for negligence. Taking the issue to a judge is a last resort, but it’s an option if you want to file a standard professional malpractice complaint with your state court.
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The Takeaway
Even the most qualified tax preparers can sometimes make a mistake. If a tax pro made an error on your tax return, all is not lost. The IRS allows you to fix errors on an income tax return, and in most cases, your tax preparer should be willing to help out. If you suspect the preparer was negligent when filing your return, you can report them to the IRS. As a last resort, you can even sue them (though hopefully it would never come to that).
One way to make getting ready for tax season easier is to gain a holistic picture of your financial life. A money tracker app like SoFi’s can allow you to track spending, set financial goals, and view all bank account balances in one place. You can also monitor credit scores.
FAQ
Is a tax preparer liable for mistakes?
At the end of the day, even if the tax preparer is the one to make the mistake, the taxpayer is the one held liable by the IRS. That said, some contracts with tax payers do include taking responsibility for errors.
How much money will the IRS fine a tax preparer who has made a mistake filing a client’s taxes caused by lack of due diligence?
Simple mistakes are one thing, but if a professional tax preparer doesn’t follow tax rules, regulations, or laws, they can be penalized financially by the IRS. How much that fine is depends on different factors like how many violations occurred.
Can you report a tax preparer to the IRS?
Yes, it is possible to report a tax preparer to the IRS. It’s important to submit a detailed report to the IRS and to outline any damages suffered.
Photo credit: iStock/Rockaa
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Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.
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