My Tax Preparer Made a Mistake. What Can I Do?

Discovering an error on your tax return can be stressful, especially when you trusted a professional to prepare it. While the law holds you, the taxpayer, responsible for the accuracy of your return, there is a process for correcting mistakes.

Initial Steps and Information Gathering

The first action is to precisely identify the mistake. An error could be anything from unreported income from a freelance job, a missed deduction for which you have receipts, or an incorrect filing status. You must then gather all relevant paperwork, including your original tax documents, such as W-2s and 1099s, a copy of the incorrect return, and any new documents that substantiate the change.

With the error identified and documents in hand, contact the tax preparer who made the mistake. Many reputable preparers and firms want to maintain their professional standing and will take responsibility for their errors. They will often prepare and file the necessary corrective paperwork at no additional charge, as they are already familiar with your tax situation.

The official document for making corrections is Form 1040-X, Amended U.S. Individual Income Tax Return. This form is not a new return but is used to report changes to a return you have already filed. It has a three-column format for your original figures, the net change for each line, and the final corrected figures. You must also provide a written explanation for each change on the form. The form and its instructions are available on the IRS website.

Correcting the Return with the IRS

Once the Form 1040-X is completed, you must submit it to the IRS. You can e-file amended returns for the current and two previous tax years using a tax software product that supports this option, which is often the most convenient method. You can also file by traditional mail.

If you mail your amended return, send the completed Form 1040-X to the IRS service center listed in the form’s instructions. The package should include the Form 1040-X and copies of any other IRS forms or schedules affected by the change, such as a corrected Schedule C. If the amendment results in additional tax owed, include payment with the mailing to minimize penalties and interest.

After filing, you can monitor your return’s progress using the IRS’s “Where’s My Amended Return?” online tool. You can begin tracking your return about three weeks after filing. Be prepared for a waiting period, as the IRS generally takes 8 to 12 weeks to process an amended return. In some cases, if the return has errors or is incomplete, processing can take 16 weeks or longer.

Addressing Potential Penalties and Interest

An error resulting in an underpayment of tax will likely lead to IRS penalties and interest. Interest is charged on the unpaid tax from the original due date of the return and compounds daily. The IRS also assesses penalties, such as the failure-to-pay penalty, which is 0.5% of the unpaid tax per month, up to a maximum of 25%. Another penalty is the accuracy-related penalty, which is assessed if the underpayment was due to negligence or a substantial understatement of tax and is generally 20% of the underpayment.

You may be able to have these penalties reduced or eliminated through penalty abatement. One common ground is the First-Time Abatement waiver. If you have a clean compliance history for the previous three years, meaning you filed all required returns and have no outstanding penalties, the IRS may waive certain penalties as a one-time courtesy.

Another path to relief is arguing for “Reasonable Cause.” This requires demonstrating that you exercised ordinary business care and prudence but were still unable to comply with the tax law. Relying on a tax professional can constitute reasonable cause, but you must prove you provided the preparer with all necessary and accurate information. To request abatement, attach a written statement to your Form 1040-X or respond to the IRS penalty notice.

Options for Recourse with the Tax Preparer

You also have options for seeking recourse from the tax preparer. Your first step should be to request that the preparer reimburse you for any penalties and interest assessed by the IRS due to their mistake. Many professional tax preparers and firms carry errors and omissions (E&O) insurance for these situations, which covers the financial fallout from their professional mistakes.

If the preparer is uncooperative or you believe their conduct was fraudulent, you can file a formal complaint with the IRS using Form 14157, Complaint: Tax Return Preparer. On this form, you will provide the preparer’s information and a detailed description of the misconduct, such as failing to sign the return, altering your return without consent, or other unethical practices. The IRS uses these complaints to investigate preparers.

Further action can be taken if your preparer holds a professional credential. For a Certified Public Accountant (CPA), you can file a complaint with their state board of accountancy. For an Enrolled Agent (EA) or an attorney, complaints can be directed to the IRS Office of Professional Responsibility. These bodies can investigate and impose disciplinary actions, including revoking the preparer’s license.