Now that tax season is winding down, countless filers are undoubtedly breathing a collective sigh of relief knowing their returns are done with. This especially holds true for those who hired professionals to do their taxes for them. After all, those preparers rarely make mistakes, right?
Wrong. Unfortunately, hiring a tax preparer does not in any way guarantee an error-free return. So if you come to find out after the fact that your preparer did indeed botch your return, you may be wondering what steps you can. Your course of action will depend heavily on the extent to which your preparer messed up, but here's a basic guide to tackling this all-too-common scenario.
1. Figure out who's to blame
Tax preparers are humans, too, which means that they're not immune to basic mistakes. (Besides, think about it: Some of these folks are absolutely inundated during tax season, and those 60- to 70-hour weeks area apt to catch up with them at some point.) On the other hand, your tax preparer isn't a mind reader, so if you neglected to provide that person with the right information or failed to hand over certain tax forms you received in the mail, then he or she can't be held responsible for an error-ridden return.
Imagine, for instance, that your tax preparer asked you to provide details on every bit of income you received during the year, only you neglected to hand over a 1099 form listing earnings of $2,000. Since the IRS receives copies of all 1099s, it's likely to notice that missing income, and therefore might send you a bill for its share of it after the fact. But that's not something you can pin on your tax preparer.
Before you make contact about an error, see whose fault it really is. If it's yours, you can still reach out and ask for help, but you'll certainly need to approach that conversation differently.
2. See what your tax preparation agreement entitles you to
Many professionals will have you sign an agreement outlining the terms of your tax preparation arrangement, and that document should spell out your recourse in the event your tax preparer makes an error. Therefore, it pays to consult that agreement to see what protections it gives you. You may be entitled to free audit support or follow-up assistance if your preparer's mistake subjects your return to further scrutiny or causes you a problem. Even if those allowances aren't spelled out in writing, your tax preparer might offer the support you need as a courtesy -- so reach out, review the situation, and see what he or she says.
3. Be prepared to pay -- or get paid
Here's some bad news you may not want to hear: If your tax professional's error results in you owing additional taxes, or interest or penalties on unpaid taxes, you're the one on the hook for that money -- not your tax preparer. But that doesn't mean you're totally out of luck. You can, for example, try asking your preparer to cover a penalty associated with his or her mistake -- meaning, not your tax underpayment itself, but perhaps the interest on that sum for being late. That said, don't count on getting help footing your bill unless that obligation is spelled out in writing.
On the other hand, it could be that your preparer's mistake results in you overpaying your taxes. In that case, you have up to three years to file an amended tax return stating you're due a refund. Will your preparer file that amendment for free? Again, it depends on your arrangement, but in many cases, that person will step up and help.
4. Notify the IRS if needed
There's a difference between having a tax preparer make a mistake and having one engage in illegal or unethical behavior as it relates to your return. In other words, a miscalculated deduction is a legitimate error. An attempt to hide income, however, is a whole other story. If you're dealing with the latter and were completely unaware of what your preparer tried to do, you may want to notify the IRS as well as whatever professional organization that person is associated with, such as the American Institute of Certified Public Accountants or the National Association of Enrolled Agents.
Though you'd think your hefty tax preparation fee would result in an error-free return, things don't always shake out that way. If you discover that your tax preparer botched your return, don't just stay quiet about it. See what recourse you have and get that person to right that wrong. Oh, and consider hiring a different professional next year -- just in case.