Navigating labyrinthine federal and state tax forms can be a tricky business, even for the financially savvy among us, which is why the majority of Americans designate a professional tax preparer to help compile their tax returns. Indeed, of the 126 million e-filed returns that the Internal Revenue Service (IRS) has processed so far in 2018, more than 72 million were done with professional help.
Yet some filers find that professionals, rather than ensuring the accuracy of their tax forms, actually do the opposite. And when the pros mess up, the consequences can be tragic. Filers can end up forgoing deductions and credits for which they’re eligible, resulting in an inflated tax bill. In other cases the preparer underreports income, forcing the IRS to claw back refunds that the filer should have never received.
Professional Tax Preparers – Who Are They?
Much of the problem lies in the nation’s relatively lax rules regarding who’s allowed to file a return for someone else. Some professionals, including chartered accountants, lawyers and "enrolled agents," have to comply with a series of government regulations. But most independent tax preparers, who make up the lion’s share of the market, face little oversight. In most parts of the country, anyone who obtains a preparer tax identification number from the IRS at a cost of just $50 can start seeking clients. Currently, only a handful of states require testing and ongoing education before someone can hang up a shingle.
Some taxpayers have been going to the same independent preparer for years, with a high degree of confidence. But given the current system, it’s easy for individuals to choose tax specialists who either aren’t qualified – or, worse, who intentionally try to manipulate your return in exchange for higher fees.
Fixing Errors on Filed Returns
What can you do, then, when a return filed by a pro ends up being wrong? If the error seems like the result of an honest mistake, you can ask your preparer to take the necessary corrective steps with the IRS, including filing an amended return. When the mistake results in unwarranted fees or penalties, the service provider will often compensate the filer directly in order to smooth things over. Some may even decide to contact the IRS on your behalf in an effort to forgive or lessen the charges – though not all preparers have the credentials to do so.
Should you suspect misconduct, however, you need to take a different tack. You’ll want to print out Form 14157 (“Complaint: Tax Return Preparer”) on the IRS website and mail or fax it using the contact information on the form. In the event that your tax return or refund was affected by the error, you’ll also need to complete Form 14157-A (“Tax Return Preparer Fraud or Misconduct Affidavit”). If you received a notice from the IRS, mail the forms – together with any supporting documentation – to the address shown in the letter; otherwise, you should send it to the same address where you’d mail Form 1040.
The IRS will conduct an investigation and, if it finds intentional wrongdoing, it could rescind the individual’s preparer tax identification number. Preparers who are licensed also may face action from their state's regulatory body. In a worst-case scenario, you may have to take the matter to court in order to get relief from undue taxes or fees. But doing so could mean incurring substantial legal fees, not to mention a lot of your time, so going to court should really be your last resort. (Read more about what to do after an inaccurate tax return.)
Avoiding the Bad Apples
To avoid having these sorts of problems with a tax preparer, research candidates before selecting one. If possible, get referrals from people you know who can vouch for their abilities and ethics. In addition, the IRS has a website where you can look up professionals with valid credentials, which may give you a little extra confidence that the person you’re dealing with is competent.
What's more, just because you’re hiring someone else to do most of the legwork doesn’t mean you should take a totally hands-off approach to your taxes. Ultimately, you’re on the hook for any taxes and penalties that arise from an inaccurate form. Make sure you review the numbers it contains before signing your name to it.
The Bottom Line
Most tax preparers do a good job for their clients, but professionals can make mistakes too. To avoid heartache down the road, make sure you employ someone who’s up to the job. (For related insight, read about how to find the right tax preparer.)