Bad tax preparer leads to audit trouble
Thursday, March 24th, 2011
We recently met with a new client who had been invited to the IRS local office for an examination of two years of her tax returns. She called the tax preparer, who told her she would not need the preparer at the meeting (red flag number one). After the meeting, she called the preparer back for help, but the preparer was not available (red flag number two). She has not been able to reach the tax preparer since then (red flag number three).
At the IRS meeting, she was shocked to learn for the first time that several items on her tax return were incorrect, mostly improper deductions. She came to us, and we opened her eyes to many ways that her tax preparer had misled her. We will be able to help her minimize the damage, but she was very unhappy to learn that her tax preparer had botched her return, and that she would owe a big chunk of money as a result.
Here’s the catch-22: The tax laws are so complex, the average taxpayer cannot possibly keep up, but you bear the burden of the accuracy of your tax return. Whether or not you rely on a professional to prepare your return, you are personally responsible for everything on the return. You must have documentation to back it up. “That’s how the tax software did it” is no defense. So finding a reputable, credentialed professional who will talk honestly with you is a good investment. No one can guarantee that the IRS won’t have questions about your return, but the process goes much better if your return is properly and accurately prepared based on good records.
Until this year, there has been no federal-level program to ensure at least a minimum level of competency for tax return preparers. There still is no way to get feedback about a tax preparer’s competency or quality of work, other than word of mouth. There is no authority given to the IRS or any other agency that can be used to force bad preparers out of business, other than harassing their clients. Watch for those red flag warnings before trouble comes. A reputable CPA firm (us, for example) or enrolled agent is your best choice.