Many individuals turn to tax preparation services to file their taxes. In some years, more than 50% of filers use a paid preparer. Unfortunately, not all tax preparers are created equal, and you could find yourself facing questions from the IRS if your tax preparer makes a mistake.
Understanding tax preparer qualifications
Any individual preparing or assisting in preparing federal tax returns is required to have a Preparer Tax Identification Number (PTIN) before preparing a return. This requirement leads many to believe that an individual with a PTIN is highly qualified to prepare tax returns. In reality, it takes just 15 minutes to obtain a PTIN online and no professional credentials are needed.
Some categories of tax preparers are more qualified, such as Certified Public Accountants (CPAs), attorneys or enrolled agents licensed by the IRS. Others have simply provided information about their past filing status and felony convictions. Many major tax preparation services do not require their tax preparers to have professional credentials.
Fixing an honest mistake
If the error in your return is the result of an honest mistake, your tax preparer should file an amended return. The tax preparer might offer to pay any fees or penalties arising from their error. If not, review your agreement with the tax preparer to understand if they are obligated to pay fees, penalties or any other damages accrued due to tax preparation errors. If your tax preparation agreement included guarantees of accuracy or high-quality work, your preparer should compensate you for the impact of the error.
Unfortunately, regardless of any errors, you are responsible for taxes owed to the government. If you owe more than you expected or budgeted, it can create serious financial difficulties. Your only option might be to negotiate a payment plan with the IRS.
Reporting misconduct to the IRS
If you believe the mistake was not an honest error but instead misconduct, file a tax return preparer complaint as well as a misconduct affidavit with the IRS. The IRS will conduct an investigation. If it uncovers misconduct, the preparer’s PTIN will be revoked and they may be subject to discipline from the state’s regulatory body.
A tax preparer is likely to make every effort to avoid significant liability for a tax preparation error. You may need to file a lawsuit to secure the recovery you deserve. An experienced and trusted tax attorney will be a critical partner as you seek compensation and avoid trouble with the IRS.