What happens when a tax preparer does your taxes wrong?
The Bottom Line
If your tax preparer makes a mistake resulting in you having to pay additional taxes, penalties or interest, you have to pay these fees — not your tax preparer. Since it is your tax returns, it's your responsibility.
The IRS mainly targets people who understate what they owe. Tax evasion cases mostly start with taxpayers who: Misreport income, credits, and/or deductions on tax returns. Don't file a required tax return.
Know the Law
No matter who prepares your tax return, you are legally responsible for its accuracy. The law requires a paid tax preparer to sign your tax return and complete the information in the space provided for paid tax preparers. Tax evasion is a crime which can be punishable by penalties, prison, and/or a fine.
File Form 14039.
Fill out and attach Form 14039, Identity Theft Affidavit, with your paper return. If you receive a letter from the IRS or otherwise suspect you're the victim of ID theft, you can also complete and mail this form.
Tax returns prepared by preparers had a higher estimated percent of errors—60 percent—than self-prepared returns—50 percent. Errors refer to changes either to the tax due or refund amount.
According to the IRS , the error rate for paper returns is 21%, compared with less than 1% among e-filed returns.
The maximum penalty is 25%.
The IRS does not check every tax return; in fact, it does not check the majority of them; however, the IRS implements methods that track certain factors that would result in a further examination or audit by them.
- Call the IRS. Wait times to speak to a representative may be long. ...
- Look for email or status updates from your e-filing website or software.
- If you used USPS Certified Mail or another mail service with tracking, check with them to see if your return was delivered.
Does the IRS check every tax return for accuracy?
The percentage of individual tax returns that are selected for an IRS audit is relatively small. In 2020, just 0.63% of individual tax returns were selected for audits, or fewer than one out of every 100 returns.
The IRS manages audits either by mail or through an in-person interview to review your records. The interview may be at an IRS office (office audit) or at the taxpayer's home, place of business, or accountant's office (field audit).
These penalties are calculated as a flat 20 percent of the net understatement of tax. You understate your tax if the tax shown on your return is less than the correct tax. The understatement is substantial if it is more than the larger of 10 percent of the correct tax or $5,000 for individuals.
If the program makes a math error resulting in you having to pay penalties and/or interest to the IRS that you otherwise wouldn't have been required to pay, the H&R Block accuracy guarantee will reimburse you up to a maximum of $10,000.
TURBOTAX ONLINE GUARANTEES
100% Accurate Calculations Guarantee – Individual Returns: If you pay an IRS or state penalty or interest because of a TurboTax calculation error, we'll pay you the penalty and interest.
You make math mistakes
According to the IRS, math errors are among the most common tax filing mistakes. They can range from basic addition and subtraction to more complex calculations.
The Disadvantages of Professional Tax Preparation
While professional tax preparation can offer convenience and expertise, it can also come with potential drawbacks such as high fees and the possibility of errors or omissions made by the tax preparer.
If the address on your return is incorrect, you will need to contact the IRS to have it updated. You can call the IRS directly using their toll-free number: 1-800-829-1040. Send a signed written statement with your: full name.
While simple math errors don't usually trigger a full-blown examination by the IRS, they will garner extra scrutiny and slow down the completion of your return. So can entering your Social Security number wrong, transposing the numbers on your address and other boneheaded blunders.
IRC 6695 – Due Diligence Penalties
The due diligence penalty is $545 (in 2022) for each failure on a tax return. These penalties are imposed for failure to comply with the due diligence requirements. The due diligence requirements are documented on Form 8867, Paid Preparer's Due Diligence Checklist.
Will I get in trouble for amending my tax return?
Are you concerned that if you file an amended return that it will trigger an IRS audit? If so—don't be. Amending a return is not unusual and it doesn't raise any red flags with the IRS. In fact, the IRS doesn't want you to overpay or underpay your taxes because of mistakes you make on the original return you file.
Filing a false tax return or other document is treated seriously by the Internal Revenue Service. If its investigation turns up substantive information, civil cases can be referred for criminal tax investigation.
If the IRS believes you were trying to cheat, you could face a civil penalty of 75% or even criminal prosecution. And remember, most criminal tax cases start with civil audits. Innocent mistakes can often be forgiven if you can show that you tried to comply and got some advice.
Some red flags for an audit are round numbers, missing income, excessive deductions or credits, unreported income and refundable tax credits. The best defense is proper documentation and receipts, tax experts say.
You may have to pay fines or fees if you make errors, especially if you were clearly careless. That being said, the IRS isn't as aggressive about this as most people assume. In many cases, they'll just adjust small errors on their end. You may get a notification in the mail telling you it's been done.
