Navigating the maze of federal and state tax forms is difficult. It’s no surprise that so many of us are willing to pay someone else (accountants, financial planners, etc.) to do our tax forms. According to the IRS, 53.5% of filers employed a professional tax preparer in 2016, the most recent year for which data is available.
- Most states have limited regulation of independent tax preparers.
- Accountants, attorneys, and enrolled agents are all well-versed in tax preparation.
- If you discover a mistake on your tax return, submit an amended return as soon as possible.
- If you suspect your preparer of wrongdoing, register a complaint with the IRS.
However, some filers discover that even pros make errors. And when the experts make a mistake, the results might be disastrous for you, not for them. You may lose qualifying deductions and credits, resulting in you paying more tax than you owe or missing out on a refund. Worse, you may get a reimbursement that you are not entitled to. The IRS will eventually come knocking to take it back.
Who Are the Professional Tax Preparers?
Part of the difficulty stems from the relatively flexible laws governing who may prepare a return for someone else.
Although we often identify the work with accountants, in most of the United States, anybody may receive a preparer tax identification number from the IRS and begin accepting customers. Few states require a test or continuing education before an individual may hang up their shingle.
Some professionals, such as chartered accountants, tax attorneys, and enrolled agents, are now highly trained to prepare returns and must follow a number of government rules. However, most freelance tax preparers, who account for the vast majority of the industry, suffer minimal monitoring.
Some people have had a high level of trust in the same independent tax preparer for years. However, given the existing system, it’s simple to choose a preparer who isn’t qualified or, worse, would purposefully falsify your return in order to produce a greater charge.
Fixing Errors on Filed Returns
If the issue seems to be the product of an honest mistake, you may request that your preparer take the appropriate remedial actions, which may include submitting an updated return.
When a mistake results in costs or penalties, the service provider may often reimburse the consumer directly to make things right. Others may offer to contact the IRS on your behalf in order to negotiate forgiveness of the mistake or a reduction in penalties, but not all preparers have the necessary qualifications.
If you suspect your preparer of wrongdoing, you must take a different approach. Specific forms are available for download from the IRS website and must be completed and sent or faxed using the contact information on the form.
On the IRS website, Form 14157 (“Complaint: Tax Return Preparer”) addresses preparer misconduct. If the mistake affects your tax return or refund, you must additionally complete Form 14157-A. (“Tax Return Preparer Fraud or Misconduct Affidavit”).
If the IRS has notified you of a problem with your return, send the forms, together with copies of any supporting evidence, to the address specified in the letter. If you did not get a notification, you should submit it to the same address as your Form 1040.
The IRS will look into the matter. If it discovers willful misconduct, it has the authority to revoke the individual’s preparer tax identity number. Licensed preparers may potentially face action from the regulating agency in their state.
In the worst-case situation, you may have to take the issue to court to recover the expenses of the mistake. However, this will result in significant legal bills, not to mention lost time. When dealing with an erroneous tax return, going to court should be your last alternative.
Avoiding the Bad Apples
To prevent having these kinds of issues with a tax preparer, do your homework before hiring one. Get references from individuals you know who can attest to their talents and integrity, if feasible. Furthermore, the IRS maintains a database where you may hunt for experts with certain certifications, such as lawyers and CPAs.
Also, just because you’re employing someone else to perform the majority of the figure crunching and box-checking doesn’t mean you should ignore your tax return entirely. Finally, it’s your duty, and you’re responsible for any taxes and penalties that result from an incorrect return. Before signing your name on the dotted line, double-check everything, from the statistics to the specific paperwork.
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