Discussion:Tax Preparer Error
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Discussion Forum Index --> Tax Questions --> Tax Preparer Error
| 29 January 2007 | |
| My situation - client's '03 NYS resident return has been assessed an additional $900 of tax and about another $190 of interest, no penalties. I'd call this a "communication error", client thinks otherwise (says it was faulty tax preparation) and is not happy. (Assessment related to partial disallowance of $20,000 retirement exclusion from decedent...my notes indicate that I asked if my client was the only beneficiary which was answered yes but, as it turns out she was a 30% benef and accordingly only entitled to a $6,000 exclusion).. Problem is that my notes aren't that great and other than asking I didn't do anything else to document the answer. In any event, I offered to split half the interest with her; she's still annoyed but you can't please everyone!
So, my question - what are the various policies being followed by you practitioners when it comes to preparer errors? We'll start by saying that my wife and I are CPA's (small practice, just the two of us) and we've always maintained a policy of making our client's whole for penalties (subject to our right to ask for penalty waiver/reduction); prior to this occurence we've never offered to compensate any portion of interest and we've always considered the tax to be the client's responsibility. Fortunately, we've only had several instances to deal with but the issue remains nonetheless. | |
| January 29, 2007 | |
| I've always considered the tax to be the client's, as well as the interest, and fortunately have succeeded in getting them to understand that the interest is merely for the use of the money, and the tax is money that would have paid anyway...but what I've done with success is offer to provide the next year's returns for no charge if they're willing to let me...and that usually soothes hard feelings. Keeps the client. Costs me a lost fee for one year, but otherwise, no cash. | |
| 29 January 2007 | |
| My policy is that if it is my error I will pay any penalties. In this case it is questionable whether it was your error, but it is a moot point because there are no penalties. I would point out to the client the interest charge is for money he received that he wouldn't have received otherwise. Depending on how much you want to keep this client you could consider splitting the interest with him. I wouldn't, but that's your decision. | |
| 29 January 2007 | |
| Tax is client's responsibility...penalties may or may not be mine depending on the issue...interest is client's as they had the use of the money.
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| 29 January 2007 | |
| My policy is, if it's my fault, I pay penalty & interest. My opinion, in your case where you have notes that indicate it was client's fault but the notes aren't great; I think you are being fair in offering to pay half. If I were in your situation and I wanted to keep the client, I'd pay the 190 to keep a good client (penalty & interest, but never tax). But the client might still be unhappy because he will still have to pay the tax. You might not want the client anymore depending on how unhappy the person is. | |
Death&Taxes (talk|edits) said: | 29 January 2007 |
| Of course the preparer argument goes 'you earned interest' which sounds well and good, but as I heard an aggrieved client say once, 'you made me take out a loan when I did not want to borrow.' It is an argument you can't win. Often I would end up adjusting this year's bill, or giving some type of discount on it. | |
| 29 January 2007 | |
| Why don't you have a copy of the 1099R that was issued? You may not have asked the correct question.
Client may not have understood the question. What did you do in the following years? Make the client happy and pay the interest(even though we all agree it's for the client's use of money) You may not save the client. But don't give the client a reason to complain to the NYSSCPA or anywhere else. | |
| January 29, 2007 | |
| Same as Kathy. If the error is mine, I will pay the interest and penalty (or reduce the next year's fee by the amount of the interest and penalty). If the error is the client's fault, he pays the interest and penalty. If my notes aren't good enough to know whose fault it is, I'll agree with Kathy...it would depend on the client and how long they've been my client and whether I want to keep them or not (but I don't remember ever having a situation where I didn't know whose fault it was). | |
| 29 January 2007 | |
| I agree with just about everyone. But in the overall scheme of things and the time of the year, is $190 (or half that) worth arguing over? Lost time, lost prodcutivity, etc. Maybe its just easier to pay the interest or not charge for this years return and be done with it. | |
Rgtaxservice (talk|edits) said: | 29 January 2007 |
| Me too. I pay the penalty and interest if it's my fault.
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Death&Taxes (talk|edits) said: | 29 January 2007 |
| And today's PA Bulletin announces that the Property Rebate has been expanded. http://www.revenue.state.pa.us/revenue/cwp/browse.asp?a=104&bc=0&c=35500 | |
| January 29, 2007 | |
| Strange. Michigan has a maximum $1,200 property tax credit, and the MI-1040CR form can be filed up to four years after the due date of the original tax return. | |
Death&Taxes (talk|edits) said: | 29 January 2007 |
| PA's rebate has little to do with income tax; you use some of the figures but many other items are added to income, like gifts, inheritances and even support from kids I think. PA's was funded through the Lottery and was the original excuse to start a lottery in PA. | |
| January 29, 2007 | |
| It's the same with Michigan. You have to add nontaxable income to household income, like gifts, inheritances, child support, worker's comp, vet's pension, social security (net of medicare premiums), life insurance proceeds (other than spouse), etc., and you can deduct non-pretaxed health insurance premiums. The rent or property tax credit is 60% of the amount that exceeds 3.5% of household income, if under 65, and 100% of the amount that exceeds 3.5% of household income, if 65 or older. Then there's the veteran's or blind PTC and the Farmland Preservation Credit for others who qualify. I'll quit here.... | |
Rgtaxservice (talk|edits) said: | 30 January 2007 |
| Unfortunatley the deadline for the PA rebate is June 30.
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