Who Is Liable When Tax Preparers Make Mistakes?

Tax preparers are human, just like tax payers, but the Internal Revenue Service does not necessarily hold the preparer liable when mistakes are made on a tax filing. The IRS has determined it is incumbent upon the tax payer to ensure that all information provided is accurate.

Mistakes are made more often than most people think, regardless of predetermined intent. The IRS will often repair the claim when simple mathematical mistakes are made, but intently evasive claims could easily result in an audit. Here is a short list of three of the most common mistakes beyond calculation errors.

1) Bad Social Security Numbers

The IRS regularly receives tax filings that do not include social security numbers. This is a common error that should conceivably never happen, but it does.

In some cases, the entire number is missing, most likely because the preparer is also the payer and merely overlooks the space field on the application. Erroneous numbers are common also, especially when a tax preparer is doing the filing.

It is not considered tax evasion because payment is often made with or before the filing and the papers were filed in a timely manner, but the information will eventually need revision. Also, this can easily delay a tax refund, as can failing to sign the return.

2) Claiming the Wrong Deductions

This does not normally occur by the preparer, but tax lawyers who are also accountants may advise a questionable claim. Remember that the IRS will hold you responsible, so tread lightly in this area.

This can be determined as intentional if any inkling of premeditation exists, and a tax lawyer knows this situation. However, whether it is considered a mistake or an evasion tactic, errors in deduction claims can be explained and negotiated in an audit by most professional tax relief companies. The IRS is usually more concerned with finalizing the case.

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3) Failing to Include All Income

– This mistake can also be determined as intentional, but individuals who earn income subject to employer deductions and also have a secondary income source can easily make this mistake. This condition is a prime example of why the IRS holds the tax payer responsible.

Unless there are specific terms of agreement for employing a tax preparer, the preparation company or accountant can be liable to a tort claim for intended negligence and duty to provide accurate information. However, this legal recourse must be pursued by the tax payer in standard state court.

It is important to understand that there is a definite legal distinction between tax avoidance and tax evasion. Mistakes on a tax filing that also include evidence or the possibility of hidden income can raise a red flag to the IRS auditor.

This is especially true for corporate or small business filings with a possibly sizable tax debt. Paperwork problems for an individual tax payer are not necessarily considered serious. The IRS can actually be rather cooperative in increasing refunds when calculation repairs are in the payer’s favor.

Additionally, many companies that specialize in tax preparation actually market themselves with a claim that they will assist in an additional payment required by the IRS, including attending the audit, but be prepared to receive a very conservative assessment of what items can be deducted. Always remember that the tax payer is ultimately responsible.

Jamica Bell is a blogger and small business owner who contributes this article to highlight what happens when tax preparers make mistakes. The aid of tax relief companies has provided peace of mind to many individuals and entrepreneurs alike.  

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