Each year, millions of Americans rely on tax preparation services to accurately file their tax returns with the IRS. From big-box names known on the national level to smaller firms and businesses that offer tax preparation services, these are lower-cost options that individuals, families and business owners use to meet their obligations to the IRS.
Tax preparers often require no minimum experience or education
Unfortunately, the tax preparer industry is not regulated and many of the individuals who prepare your taxes through these services do not need to meet any basic skills or qualifications. Unlike an accountant or CPA, who must complete post-secondary education and testing for certification in the field, a tax preparer has no uniform standard of background or experience to handle complex and intricate tax returns.
During the busy tax season, tax preparers will see a constant demand for their services, which means they must often work as quickly as possible to get through as many returns as they can. This can result in their overlooking important details. Mistakes or errors on a tax return can create serious consequences and complications, especially for business returns and complex tax scenarios.
Consequences you can face after a tax preparer’s mistake
When there is a mistake on your return, the impact will be felt directly by you rather than by your tax preparer. At the end of the day, you personally are accountable to the IRS for what you may owe in taxes and the accurateness and timeliness of your annual tax return. The following are some examples of situations in which the client of a tax preparer can face serious consequences for errors or omissions made by a tax preparer.
Losing refund money that you are eligible for
Mistakes on your return by a tax preparer could cost you some or all of the refund you may be eligible for. Beyond careless errors, sadly, not all tax preparers are legitimate, and some may take advantage of access to your crucial personal information in the process and steal some or all of the refund that is meant for you. Always use caution in the selection of a tax preparer and choose only reputable companies.
Red flags on your return leading to an IRS audit
When numbers do not add up, mistakes or numbers are incomplete on your return or the designation of deductions is missing, the IRS may flag your return. Certain flags on a return can result in an IRS audit.
Mistakes in calculations resulting in higher taxes owed, IRS penalties and/or fines
Ultimately, any error on a return can influence the final calculation of your tax liability. When mistakes lead to you paying less than what you should have, you may receive notices for additional tax payment, penalties, interest and potential fines from the IRS.
Before choosing to use a tax preparation service, it can help you to speak with an experienced tax lawyer.