When you hire a certified public accountant (CPA) or other tax professional to prepare your state or federal tax returns, you expect to be able to rely on the advice you receive. After all, you are paying for help, and you have chosen to hire a professional who holds himself or herself out as someone who can make sure you meet your legal obligations.
So, what happens when your tax preparer makes a mistake?
If you hired a CPA or other tax professional to prepare your taxes, the first thing you need to know is this: Since they are your taxes, they are ultimately your responsibility. If you underpaid the Internal Revenue Service (IRS) or the California Franchise Tax Board, even if you did so in reliance on professional advice, you are still personally responsible for paying what you owe.
What Do Taxpayers Need to Know about Relying on Tax Preparers?
However, while you are ultimately responsible for meeting your tax obligations, you are not without recourse. Here are some important facts you need to know:
1. You Need to Review Your Contract with Your Tax Preparer.
First, you should review your contract with your CPA or other tax preparer. What does it say about mistakes? Most likely, your contract states that you are responsible for ensuring that you provide all necessary information to your tax preparer, and that you are responsible for ensuring the accuracy of your returns before filing them. However, your tax preparer should have legitimate obligations as well, and your contract should give you reasonable rights in the event of a mistake.
Depending on the severity of the issue – and whether or not your tax preparer agrees that he or she made a mistake – your tax preparer may be able to submit a correction, and he or she may offer (or have an obligation) to pay any fees, penalties, and interest that you owe. However, you, as the taxpayer, will still be liable for the actual tax amount due. Of course, you will need to ensure that this amount has been calculated accurately, and this may mean working with another tax professional.
2. The IRS Penalizes Tax Preparers Who Make Mistakes.
Under Sections 6695 and 6695 (the exact same section is listed twice?) [BP1] of the Internal Revenue Code, tax preparers can face IRS penalties for making mistakes on their clients’ returns. Similar penalties apply under California state law as well. If the IRS determines that your tax preparer made a mistake, this may help you in seeking to avoid fees, penalties, and interest (or having these costs paid by your tax preparer).
3. You Need to Be Certain that the Mistake was Your Tax Preparer’s Fault.
Of course, before you point the finger at your tax preparer, you need to be certain that the mistake was his or hers – not yours. If you provided your tax preparer with inaccurate or incomplete information, then he or she may have had no way of knowing that the numbers stated on your return were incorrect.
4. The IRS May Be Willing to Listen if You Relied on Your Tax Preparer in Good Faith.
If your tax preparer made a mistake, you can prove it, and you can prove that you relied on your tax preparer’s advice in good faith, the IRS or the California Franchise Tax Board may be willing to listen. You should speak with a tax attorney about how best to approach your situation in order to ensure that you end up paying as little as possible.
Do You Need a Tax Attorney in Southern California?
The tax attorneys at RJS Law represent individual and corporate taxpayers in all IRS and California state tax matters. If you are facing an issue due to a mistake made by your CPA or other tax preparer, we encourage you to call 619-595-1655 or contact us online for a complimentary case evaluation.
[BP1]Same code section?