Mistakes are a real possibility when filing tax returns, even for seasoned professionals. If you've hired one of said pros to handle your return this year, you must know how things will shake out if they make a mistake on your taxes.
Looking at the stats, a fair amount of you out there, if not a huge amount, use or are considering using a tax preparer for your return. A study from GoBankingRates published last year found that around 22%, just shy of one in every four, of respondents planned to use a tax pro, with most of those folks going with a certified public accountant and a few opting for a tax lawyer. I and many other folks I know have generally avoided tax pros, largely because, as younger taxpayers, we can't afford them, and our taxes aren't that complicated.
There are a lot of reasons why one out of every four taxpayers might be paying professionals, more than likely for the peace of mind that said professionals won't make mistakes. But errors pop up when you least expect them, so you should know how to handle one made by a tax professional.
For all the information you'll need, keep reading. For more tax tips and coverage, find out if a government shutdown will delay your tax refund and learn about a deduction based on your student loan payments.
Who is responsible for fixing a mistake my tax professional makes?
In short, almost certainly you. Even if you've paid someone to prepare and file your tax return, you're the one who is ultimately responsible for fixing any problems that the IRS finds. Some tax professionals may offer to help remedy things if they make a mistake, but this is not required by law.
"Under federal law, the consumer is always responsible for the content of their return," IRS Enrolled Agent Jassen Bowman explained in an email exchange with CNET. "That's why you still have to sign it yourself, saying it's accurate, even if you pay a professional to do it. While preparer penalties do exist, the taxpayer is ultimately responsible for penalties, interest, even criminal prosecution in extreme situations -- even for an honest mistake by a reputable tax preparer."
What steps can I take to avoid a situation like this?
When seeking out a tax professional, be sure to thoroughly review the contract you make with them to see if they will offer any help for mistakes they make. If such a promise isn't in the contract, you might also consider asking for it to be part of the arrangement.
Among the more common tax mistakes are ones caused by reporting income incorrectly. This can sometimes mean the IRS owes you more money back, but it can also mean you might owe the government more or that you were overpaid via your tax return. If your tax professional's error caused this issue, you're still on the hook to pay the IRS to make things right.
Since you'll still have to sign off on your tax preparer's work before submitting it to the IRS, you should review the finished return to see if any issues arise. Bowman said he has "definitely seen situations where the preparer did not take responsibility because they said the taxpayer failed to mention something or provide a document."
How do I fix a mistake on my taxes?
Most minor mistakes on your initial tax return, such as incorrectly reported income, can be fixed by filing what's known as an amended return. This is done with Form 1040-X, and you can read all about the process here.
Is there any scenario where the tax professional would be liable?
Generally, for most errors, there's not a lot you can do to compel your tax preparer to take responsibility for a mistake if they don't do it themselves. You can, however, report them to the IRS if they made a potentially serious error or if you believe they were engaged in outright misconduct using Forms 14157 and 14157-A. Using this process, the IRS might be able to level penalties against them, up to and including stripping them of their ability to act as a paid tax professional.
If the matter seems significant, you might also consider contacting a lawyer about suing your tax preparer.
For more, see if you're eligible for a child tax credit this year.
