My Tax Preparer Made a Mistake, What Should I Do Now?

Even with professional assistance, errors can sometimes occur on tax returns. Understanding the proper steps to take when you discover a mistake made by your tax preparer is important. This guide will help you understand common mistakes, your responsibilities, and how to proceed if such an issue arises.

Identifying Tax Preparer Mistakes

Tax preparers can make various types of errors. Simple mathematical errors, such as incorrect additions or subtractions, or transposition errors where numbers are accidentally swapped, are common. Data entry mistakes also occur frequently, involving incorrect Social Security numbers, addresses, or miskeyed income figures like wages reported on a Form W-2 or investment income from a Form 1099-DIV.

A more complex category of errors involves the misinterpretation or misapplication of tax law. This could include incorrectly claiming certain deductions or tax credits, such as the Child Tax Credit or the Earned Income Tax Credit, or misclassifying income or expenses. Preparers might also overlook sources of income that should have been reported, like freelance earnings or rental income, or fail to include all necessary forms. They might also miss relevant deductions or credits the taxpayer was eligible for, resulting in a higher tax liability.

Understanding Your Liability

Despite hiring a professional, the taxpayer ultimately bears the responsibility for the accuracy of their tax return. When you sign your tax return, you are attesting that the information contained within it is true, correct, and complete to the best of your knowledge. If an error is found, you, as the taxpayer, are generally responsible for any additional tax owed. The Internal Revenue Service (IRS) will pursue the taxpayer for underpayments.

Interest accrues on any underpayment of tax from the original due date of the return, even if the error was made by a preparer. Various penalties may apply, such as the failure-to-pay penalty or accuracy-related penalties if there is a substantial understatement of income tax or negligence. While a preparer may face their own professional consequences or penalties from the IRS for errors, the financial burden of additional tax, interest, and penalties falls primarily on the taxpayer.

Steps to Take After Discovery

Upon discovering a potential error on your tax return, gather all relevant documentation. This includes your original tax return, all supporting documents provided to your preparer, and any communications you had with them. Having these items available will help you understand the scope of the error.

Your next action should be to contact the tax preparer who prepared your return. Explain the suspected error clearly and calmly, and inquire about their proposed resolution. A reputable preparer will generally work with you to understand and correct the mistake. Document all communications with the preparer, including dates, times, and the substance of conversations, as this record can be valuable if further issues arise. You should also understand the general timeline for amending returns; you have three years from the date you filed your original return or two years from the date you paid the tax, whichever is later, to file an amended return to claim a refund.

Correcting a Tax Return Error

To correct your individual income tax return, file Form 1040-X, Amended U.S. Individual Income Tax Return. Depending on the nature of the error, you might also need to file amended state tax returns using similar forms provided by your state’s tax agency.

Form 1040-X requires you to provide specific financial figures across three columns: Column A for the original amounts reported, Column B for the net increase or decrease of each line, and Column C for the corrected amounts. You will need to transfer the figures from your original return to Column A and determine the precise corrected amounts for Column C based on the identified error. Part III, “Explanation of Changes,” requires you to clearly explain the reason for the amendment. For instance, you might state, “Corrected wages from Form W-2 due to preparer data entry error” or “Claimed missed deduction for student loan interest.”

After completing Form 1040-X, submit it to the IRS. The form, along with any necessary supporting schedules or forms affected by the change, should be mailed to the appropriate IRS processing center specified in the Form 1040-X instructions. The IRS does not allow electronic filing for amended individual income tax returns. Keep a copy of everything you send for your records. Amended returns typically take about 8 to 12 weeks to process, though processing times can sometimes extend to 16 weeks or longer. You can track the status of your amended return using the “Where’s My Amended Return?” tool on the IRS website, which usually updates three weeks after you mail the form.

Choosing a Qualified Tax Preparer

Selecting a competent and trustworthy tax preparer minimizes the risk of future errors. One important consideration is the preparer’s credentials.

Credentials

Certified Public Accountants (CPAs) are licensed by state boards of accountancy, demonstrating expertise in accounting and tax law, and must meet education, examination, and experience requirements. Enrolled Agents (EAs) are federally licensed tax practitioners authorized by the IRS to represent taxpayers before the agency, having passed a comprehensive IRS examination or gained extensive experience as a former IRS employee. Attorneys are licensed by state bar associations and can also represent taxpayers in tax matters.

The IRS provides an online Directory of Federal Tax Return Preparers with Credentials and Select Qualifications. This tool allows you to search for preparers by credential, location, and specific qualifications, helping you verify their professional standing. Beyond credentials, check a preparer’s reputation by looking for reviews online and asking for references from current clients. Inquiring about their professional affiliations, such as membership in national or state accounting societies, can indicate a commitment to professional standards.

Communication and Due Diligence

Clear communication and transparency are important qualities in a tax preparer. They should explain tax concepts in an understandable way and answer all your questions thoroughly. A good preparer will be transparent about their fees and the entire tax preparation process, avoiding hidden costs or vague explanations. Taxpayers have a role in due diligence by providing accurate and complete information to their preparer and carefully reviewing their completed return before signing it. Asking questions about anything you do not understand on the return ensures you are comfortable with its contents before submission.