Discussion:Tax Preparer Mistake
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| 21 March 2007 | |
| I just found out that a client of mine received a letter form the IRS and she owes an additional $1,400 on her 2005 return. I prepared her return for her and her husband and I hit the comparison button in my tax program and it showed it would be more beneficial if they filed separately. Unfortunately it did not pick up that her Social Security benefits would be taxable. I've never had a taxpayer receive a notice of additional tax that was because of my error. What is the protocol in this situation. I'm willing to pay any penalty and interest. How do I explain this to my client. She is not very reasonable. | |
Death&Taxes (talk|edits) said: | 21 March 2007 |
| Ask her if she wants you to buy the nails for your cruicifixion.
Seriously, if you can save tax by amending and making the return joint, suggest that, but let her know you are not going to pay her tax. | |
| 21 March 2007 | |
| All you can do is make a reasonable offer to make her right, which you have done. (Actually, your offer to pay the interest in addition to the penalty is more than fair, in that she had the use of the money for the time.) She'll either take you up on the offer and remain a client, or she won't. | |
| March 21, 2007 | |
| On the MFS return, did you check the box that the spouses lived together in 2005? That would be why your software didn't calculate the taxable SS.
I would pay the penalty and interest. Explaining is not the easiest thing to do when the client is not understanding. But it's something you'll have to do, and then go on with your life. Just mention that you make very few errors, that you're sorry, and you'll pay the penalty and interest. | |
| March 21, 2007 | |
| And, yes, amend the return, if MFJ would have been the best way to file. | |
| 21 March 2007 | |
| Yeah - MFS - social security automatically picked up at max - 85%. Apologize - just tell them your program had a glitch in the system - that you have called the software company and complained - you should have received some sort of error message alerting you to the possibility of a problem with the social security - if you didn't definitely software issue. I usually then offer to pay the penalty or to prepare next year's taxes for free.
I just did a tax return for free for a client where I failed to check the box on Schedule C stating that it was the spouses business - caused a problem with the taxpayers wage limitation by social security last year. It was definitely my fault - I admitted it to them and then did what I felt was right to try to minimize the repercussions. | |
| 21 March 2007 | |
| If the error is mine, I pick up penalty and interest. But the tax would still have been theirs to pay no matter when the return was done. You're trying to do the right thing. Apologize, and then move on. If they fuss, say goodbye - they're not worth any loss of sleep. We're all human. | |
| 21 March 2007 | |
| remember you can always go back to MFJ with an amended return. | |
Michaelstar (talk|edits) said: | 21 March 2007 |
| None of us get 100% of them right all of the time. Your doing the correct thing. I have found it rare to file MFS and pay less tax but it does happen - very rare though. If nothing else - remember that. Usually there are "other" reasons to file MFS and paying less tax is not one of them. | |
| 21 March 2007 | |
| According to my old boss: If you're not making mistakes, you are not busy enough! | |
| March 21, 2007 | |
| Vbcpa - just a comment. I think blaming the mistake on the program is just plain wrong. It was not the program's fault. It was the preparer's fault -- for whatever reason. I just couldn't let that slide by because I think there are too many instances when people want to blame someone or something else for things they should take responsibility for. | |
| 21 March 2007 | |
| SCOTT.....after EVERY season I say a prayer! ....Just let it go!! We are all human. You have done the right thing by offering to pay any penalty and interest.If she still baulks after that, show her the door!! We all try to do the best with our clients. I know, when money is owed, I pick the return apart looking to see if there wasn't something else to deduct. If not, I usually phone and ask for any other deductions not given in. I feel like it's MY money going out! And, believe me, your clients who are worthy will always be with you.....mistakes or not!! This is one client you could well afford to cut lose!!
DJ | |
Death&Taxes (talk|edits) said: | 21 March 2007 |
| As I was sitting with a client the other morning, one with about 40K of income, I noted her itemized deductions were so low this year, then realized there was a 13K deduction for state & local last year. I opened 2005 and discovered that instead of entering 1082 for Phila School Income Tax, I entered 12082. WE've known each other since 1982, she has money and when she comes in, she insists on giving me checks for everything, even paying four quarters of estimated tax on one voucher, but that is no excuse. So I prepared the amended return, worked out the interest charge and told her I'd send her a check for it. My stupidity. | |
| 21 March 2007 | |
| DT, that happened a few years ago with my neighbor's taxes. I did the next year's free too. If you're honest about a mistake and make it good (penalties and interest and fix it for free) then anybody who still holds something against you is not someone you would want as a client. | |
| 21 March 2007 | |
| After all, we are only human - we all make mistakes.
Do your best to make it right; admit that you made a mistake; amend the return if it is possible, pay the penalty and interest, but not the tax. Move on, we all learn from our mistakes. | |
| 21 March 2007 | |
| I think we should all just plan on losing a client now & then because of a mistake. It could be worse - if we were surgeons, we would really lose the client. | |
Anabelle7399 (talk|edits) said: | 21 March 2008 |
| My tax preparer made a mistake and overlooked the W2 "Retirement" box, she said we could contribute the max to our IRA which we did, a year later the IRS sent a letter telling us we didn't qualify for contributions as we made too much $ and whatever, we are now paying interests and hit with the 6% penalty for excess contribution, is there a chance I can take her to the small claims and win?, have you heard of any cases where this happens?, she didn't sign my tax returns but I have the email she sent me with the pdf files and copy of the check for the services. | |
| 21 March 2008 | |
| Gee, let's see. You want us tax professionals to tell you how to take "your" tax professional to court? Get a grip. They should have signed your return if you paid them. At least they should pay your penalty. But we are all human and as such, subject to making errors. | |
Michaelstar (talk|edits) said: | 21 March 2008 |
| Be as fair with them as you would want them to be with you. Small claims court - if you have not talked to them first - your being unreasonable. | |
| 21 March 2008 | |
| I have a similar situation that I need to try and fix. I was ill for several weeks and not able to file my client's return by the extension due date. I included a letter explaining the reason the return was late and also included a letter from my physician. Of course, the IRS pulled the old it's the taxpayer's responsibility to file and so on which I know if the truth. Although, they did say they were sorry that I was ill. Now I'm worried about the other clients that I had this same situation. This could cost me a lot of money if I pay the P & I which is what I feel like I should do. Is there any way around this for me? I was thinking of going to the IRS and trying to appeal this in person. I'm really upset about this whole thing. What really makes me upset is that I had my client's records and he was not able to access them while I was away so he couldn't file anyway.
Any suggestions?? | |
| 22 March 2008 | |
| No penalties on Federal S corp late filings. After getting penalty notices, write letters as if the client is writing them blaming you for the mess up. Have them sign them. Hope you feel better. | |
| 22 March 2008 | |
| DZ, I thought this had changed, that the IRS was aggressively penalizing S Corp late returns. I know it used to be rare, if at all, but now? | |
| 22 March 2008 | |
| LJA, you are correct. A revenue balancer - IRS will be charging $85/month/shareholder starting this year, I believe. | |
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