What to Do When Your Tax Preparer Screwed Up

It can be unsettling to discover an error on your tax return, especially when it was prepared by a professional. Tax preparer errors are not uncommon and can range from simple data entry mistakes to complex misinterpretations of tax law. Taking corrective action promptly is important to ensure your tax obligations are met and to potentially avoid further issues with tax authorities. This guide outlines the steps you can take to address and resolve such errors.

Identifying and Documenting the Error

Recognizing an error on your tax return is the first step toward resolution. Common signs of a tax preparer error include an unexpected refund amount, an unusually high balance due, or a notice from the Internal Revenue Service (IRS) or a state tax agency flagging discrepancies. These notices might highlight issues like missing income, incorrect deductions, improper filing status, wrong Social Security numbers, math mistakes, or miscalculated credits and deductions.

To confirm an error, carefully review your tax return against your personal financial records. Cross-reference information from documents such as W-2s, 1099s (for interest, dividends, or other income), receipts for deductions, and records of estimated tax payments. Ensure all income sources are accurately reported and claimed deductions and credits align with your eligibility. Collect all supporting documentation that reflects the correct information, as this evidence will be crucial for any subsequent discussions or filings.

Communicating with Your Tax Preparer

Once you identify and document a potential error, communicate with your tax preparer. Initiate contact promptly to discuss the inaccuracies you’ve found. Have all your documented errors and supporting records readily available. Clearly articulate specific issues, referencing relevant forms and figures on your tax return that appear incorrect.

A reputable preparer should acknowledge the mistake and agree to correct it. They will review the return, understand the error, and take responsibility for fixing it. Keep a detailed record of all communications, including dates, times, the content of discussions, and the names of individuals you spoke with. This record can be a valuable reference if further action becomes necessary.

Amending Your Tax Return

After identifying the error and discussing it with your preparer, file an amended tax return with the IRS. Use IRS Form 1040-X, Amended U.S. Individual Income Tax Return. This form corrects errors related to income, deductions, credits, or even your filing status on a previously submitted Form 1040, 1040-SR, or 1040-NR. File a separate Form 1040-X for each tax year you need to amend.

To complete Form 1040-X, use your original tax return for the year in question and any new or corrected tax documents that support the changes. The form has three columns: Column A for original amounts, Column B for the net increase or decrease of each line item, and Column C for corrected amounts. Provide a clear explanation for each change in Part III of the form. Attach supporting documentation, such as corrected W-2s or 1099s, to the amended return.

You can file Form 1040-X electronically for current and two prior tax periods; paper filing remains an option. The IRS typically processes amended returns within 8 to 16 weeks, but some cases may take longer. Check the status of your amended return using the IRS “Where’s My Amended Return?” tool online approximately three weeks after submission. If your amended return affects your state tax liability, file an amended state tax return using the corresponding state form, which often follows a similar three-column format.

Addressing Penalties and Interest

Even if a tax preparer made an error, the taxpayer is generally responsible for any resulting penalties and interest. However, avenues exist for seeking relief from these charges. The IRS offers penalty abatement options, most notably “first-time penalty abatement” and “reasonable cause” abatement. First-time abatement is typically available if you have a clean compliance history for the preceding three tax years and have filed all required returns or extensions.

For other situations, you can request penalty abatement based on “reasonable cause,” which applies when non-compliance was due to circumstances beyond your control. Examples that may qualify include serious illness, natural disasters, or the inability to obtain records. Relying solely on a tax advisor’s advice typically does not constitute reasonable cause for abatement. To request abatement, you can call the IRS or submit Form 843, Claim for Refund and Request for Abatement. On Form 843, you must clearly explain the reason for your request and provide supporting documentation.

The IRS generally processes initial penalty abatement requests within two to four months, though appeals can add several months to the process. If your request for penalty abatement is denied, you have the right to appeal. Any interest due on underpayments typically continues to accrue until the tax liability is fully paid, even during the abatement request process.

Reporting Unethical or Incompetent Preparers

If a tax preparer’s actions were unethical, negligent, or fraudulent, or if they refuse to cooperate in correcting an error, report them to the appropriate authorities. The IRS Office of Professional Responsibility (OPR) investigates complaints against tax professionals who practice before the IRS, including certified public accountants (CPAs) and enrolled agents. Report misconduct using IRS Form 14157, Return Preparer Complaint. This form addresses issues like failing to sign returns, not providing a Preparer Tax Identification Number (PTIN), or engaging in fraudulent practices. If you suspect fraud, submit Form 14157-A, Tax Return Preparer Fraud or Misconduct Affidavit.

Beyond the IRS, other bodies may have jurisdiction. If the preparer is a CPA, file a complaint with your state’s board of accountancy. For tax attorneys, direct complaints to the state bar association. State consumer protection agencies also handle complaints regarding unethical business practices. When filing a complaint, provide as much detail as possible, including the preparer’s name, address, and the specific issues encountered, along with any supporting documentation. Reporting misconduct helps hold preparers accountable and protects other taxpayers.