Levins Tax Law
Schedule your initial consultation:

Experienced and Trusted
Representation From A Tax
Attorney And Former IRS Agent
And "BIG 4" Tax Partner

Photo of Attorney Gerard J. Levins

Common tax preparer mistakes leading to Internal Revenue Service audits

On Behalf of | Mar 10, 2022 | Internal Revenue Service

Many taxpayers have a preparer to take care of filing their returns on their behalf because they don’t want to make any mistakes themselves. However, that isn’t always the safest approach.

There are plenty of anecdotes circulating online where taxpayers describe instances in which they assumed the preparation of their returns was accurate. Many of these taxpayers only found out that wasn’t the case when they received notifications in the mail from the Internal Revenue Service (IRS) letting them know that an audit revealed some discrepancy.  

There are a few details that you should know if you’re facing problems with the IRS after having your taxes prepared by a national tax preparation chain. 

Preparer training differences

Individuals who have certified public accountants (CPAs) to prepare their taxes may have confidence in knowing that their returns will be prepared properly. These individuals are degreed, licensed professionals that must regularly complete continuing education requirements after all. There’s also often less of a chance of an accountant making certain necessary disclosures if they regularly handle a person’s taxes because they already have their hand in their finances. 

Matters can be much different when a nationwide tax preparation company is involved. Many individuals who prepare taxes don’t have any specialized academic training, professional work experience in a financial field, certifications or licenses. They have only taken time to apply for a preparer tax identification number (PTIN) from the IRS and undergone a few weeks of training to learn how to prepare fairly basic returns. 

Issues that result in tax preparation company mistakes

The more complex a return is, the less likely it is that a tax preparation company will handle it correctly. Situations like the following can make for a complex return:

  • Pass-through business filing obligations, including profits, losses and deductions
  • Investments, such as rental properties or financial portfolios
  • Non-standard income, including consultant pay, commissions and bonuses
  • Ownership of foreign assets, such as homes or bank accounts

While tax preparation companies will often readily agree to take on new clients, claiming to be able to help with any tax return, they seldom have a firm command of these more challenging cases. This increases the likelihood of something like a necessary disclosure not being filed.

Tax preparer mistakes that cause taxpayers problems

The IRS notes that some of the more common oversights they see when auditing returns are done by tax preparers are:

  • Falsely creating credits, deductions or expenses to aid you in recovering a larger refund than you are entitled to
  • Assigning your return using the wrong filing status so that you can receive a higher refund
  • Making changes as to where your refund goes
  • Signing your tax return on your behalf without your knowledge or consent
  • Making modifications to your tax return without your prior knowledge
  • Leaving off or adding in certain income to qualify you for a larger refund
  • Reporting additional dependents or exemptions to net a more sizeable refund

The IRS has a website where taxpayers who have fallen victim to these illegal schemes can report tax preparer impropriety. However, this doesn’t magically resolve any outstanding concerns that may have motivated the IRS to reach out to you. It’s certainly a first step to righting the wrongs, though. 

Archives

FindLaw Network