The mistakes your accountant makes could cost you
If you’ve ever prepared tax returns, you know firsthand that they are a veritable minefield for potential errors and omissions. Some mistakes simply involve recalculating how much you need to pay while others can end up triggering full-blown audits by the IRS.
In order to avoid the time, hassle, and all of the headaches that come with preparing your personal and/or your business tax returns, you may employ the services of a tax accountant to take over the job of preparing and filing your taxes. And, as such, you have an expectation that the work will be done properly by your accountant.
However, what happens if your accountant makes a mistake on your tax return, and it is caught by the IRS? Unfortunately, this can trigger an audit which could result in an assessment of how much you owe plus additional tax penalties and interest.
According to Bloomberg Tax and Accounting’s in-depth research, some mistakes that accountants make include:
- Assuming the wrong due date
- Entering wrong information such as bank account numbers, SSN/EIN
- Incorrect filing status
- Not claiming the EITC
- Failing to list all information for dependents
- Forgetting to include interest and dividends
- Forgetting to include early withdrawals from retirement accounts
- Failing to report transaction in cryptocurrency or other virtual currency
Are you liable for these mistakes?
Amending tax returns to fix errors
Mistakes on your tax returns can end up costing you money. If your accountant makes a mistake that results in you having to pay additional taxes, penalties, or interest, you have to pay these fees. Your tax return, your responsibility. However, the accountant may bear some of the liability for some of the additional penalties and interest. In the end, it depends on the one who is responsible for the mistake.
Whether your accountant found the mistake or you ended up catching a mistake, the first step is to determine the reason for the error. Was the information that you submitted incomplete or inaccurate or was it the fault of your accountant?
The best way to rectify the problem is by submitting an amended tax return which should be prepared by your accountant at no cost to you. In the majority of cases, a reputable accountant will cover the penalties and interest related to their own mistakes.
However, if your accountant isn’t cooperative and the mistake on your return was a result of his or her oversight, negligence, or incompetence, you have a legal right to file a lawsuit for monetary damages.
What to do once the mistake is resolved
Tax mistakes can be so minor that no action needs to be taken to correct them or the magnitude of the error can be so great that it creates a significant financial hardship for the taxpayer. Regardless of the situation, you may feel that it’s time to find a new accountant. If so, what are some guidelines on how to fire your accountant?
GYL CPAs and Advisors provide tax and other accounting services for individuals as well as businesses. Call us today to discuss hiring a new CPA.