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

Discovering an error on a filed tax return, especially one prepared by a professional, can be unsettling. Many taxpayers rely on preparers for accurate submissions, and mistakes can raise concerns about compliance and financial implications. Procedures exist to address these issues. Ultimately, taxpayers are responsible for their own tax returns’ accuracy, even when prepared by someone else.

Recognizing a Tax Error

Identifying an error on a filed tax return begins with reviewing submitted documents against personal records. Discrepancies often arise from incorrect income reporting, such as missing W-2 forms or 1099 statements for various income sources like investments or contract work.

Another common type of error involves overlooked deductions or credits, which can lead to a higher tax liability than necessary. This could include expenses for education, medical costs, or eligible business deductions that were not included. Reviewing supporting documents like receipts, bank statements, and loan interest statements can help identify these missed opportunities. Mathematical errors, such as incorrect calculations or transposed numbers, are also possible and can often be spotted by re-calculating key figures. A wrong filing status, like claiming single instead of head of household when eligible, can also significantly impact the tax outcome and should be verified against personal circumstances and IRS guidelines.

Engaging Your Tax Preparer

Once a potential error has been identified, gathering all pertinent documentation is an important step before contacting the tax preparer. This includes a copy of the original tax return, all supporting documents used for its preparation, and any new documents that reveal the discrepancy. Clearly noting the suspected error, along with supporting evidence, will facilitate a productive discussion.

Initiating contact with the tax preparer should be done promptly, ideally by scheduling a direct meeting or sending a detailed email outlining the concerns. During the conversation, clearly explain the suspected error and provide the documentation that supports your findings. Asking for clarification on how certain figures were derived or why specific deductions were not taken is a reasonable approach.

Tax preparers have professional obligations to their clients, which often include correcting errors they made. Documenting all communications, including dates, times, and summaries of discussions, can be helpful for future reference.

Amending Your Tax Return

Correcting a previously filed individual income tax return requires the submission of Form 1040-X, Amended U.S. Individual Income Tax Return. This form allows taxpayers to correct various items, including income, deductions, credits, or filing status. Obtaining the official Form 1040-X and its instructions directly from the IRS website is advisable to ensure the most current version is used.

When completing Form 1040-X, taxpayers must enter the original amounts reported on the initial return, the corrected amounts, and the net change in tax liability. A clear and concise explanation for each change must be provided in Part III of the form. For instance, if an error involved missing income, the explanation would detail the source and amount of the previously omitted income. Any new or corrected supporting documents that substantiate the changes should be gathered and prepared for submission alongside the amended return.

Once Form 1040-X is completed with all necessary supporting documents, the amended return must be mailed to the Internal Revenue Service. The specific mailing address depends on the taxpayer’s current address and original tax form filed, and is provided in the Form 1040-X instructions. Allow approximately 8 to 12 weeks for the IRS to process an amended return, though processing times vary. The IRS communicates its decision or requests further information through mail.

Addressing Penalties and Interest

If the IRS assesses penalties or interest as a result of an error on a tax return, understanding the notice received is the first step. Common notices include CP2000, which indicates a discrepancy between income reported by third parties and what was on the tax return, or notices directly assessing penalties. These notices will detail the reason for the assessment and the amount due.

Taxpayers may be able to request abatement of penalties if they can demonstrate reasonable cause for the error. Reasonable cause refers to circumstances where the taxpayer exercised ordinary business care and prudence but was still unable to meet their tax obligations. This could include providing evidence that the tax preparer’s error was the direct cause of the underpayment, and that the taxpayer provided all necessary and accurate information to the preparer.

A request for penalty abatement is made in writing, as a letter to the IRS, explaining the reasonable cause and providing supporting documentation. While penalties may be abated under certain conditions, interest charges are not abated, as interest is compensation for the use of unpaid tax. However, if the underlying tax liability is reduced, the associated interest will also decrease. Responding promptly to all IRS notices is important to effectively address any penalties or interest.

References

• IRS Newsroom: https://www.irs.gov/newsroom/heres-how-to-check-your-tax-return-for-accuracy-before-filing
• About Form 1040-X: https://www.irs.gov/forms-pubs/about-form-1040-x
• Where’s My Amended Return: https://www.irs.gov/filing/wheres-my-amended-return
• Penalty Relief Information: https://www.irs.gov/payments/penalty-relief-due-to-first-time-abate-or-other-administrative-waiver