Should You be held accountable for the mistakes your Tax Preparer makes?

Question

Most people don't know much about preparing tax returns, that's why we go to those who are supposed to be the professionals. But what about when we are asked to pay for Their mistakes? Is that fair?
H&R Block and Jackson Hewitt now offer "peace of mind" guarantees that are supposed to pay for any errors, but is it what it really seems to be?

Answer 1

There are many different types of errors...some made by the tax pro and some made by the client. Whose error is it if the tax pro asks if the W-2 was the extent of their income and the client says yes, but the client failed to mention that they got unemployment? Is it the tax pro's fault for not explaining the myrid type of income or the client's fault for not bringing it up? What about when someone claim a dependent that the IRS disallows. What about when the IRS insists the activity is a business and not a hobby?

When the tax pro is clearly at fault, most places (H&R included) will pay for the filing of an amended return as well as reimburse the client for any fees or penalties. In the end, financially, to the client, it would be like the error was never made except the client got a chance to sit on some of the IRS's money for a while. For an additional fee, H&R offers the POM which not only pays the interest and penalties, it pays the taxes owed too up to $9999. Since their butt is on the line, the POM also pays for their CPAs, EAs, and lawyers to fight for your cause against the IRS without you even needing to show up. It is this last feature that is the real selling point. And for $27, most people with complicated tax returns or large refunds usually go for it. With the POM, it is actually beneficial to the client when a tax pro makes a mistake because they won't have to pay back the extra refund they never should have recieved.

However, neither occurs when it is the client's fault. If the client says that they are the custodial parent when they are not, if they fail to bring in a W-2, if they say they have records of mileage used for business and they really don't, then the POM won't help.

In general, H&R will lean towards the benefit of the client to avoid PR hastles. However, the more obvious it is that the client is at fault, the less likely H&R will pay out. A lot of times it is the client's word against the tax pro's.

Answer 2

Yes they should because ignorance of the law does not excuse you from the law. People are people and so mistakes will be made, even IRS agents make mistakes on their own tax returns...no one is perfect. What you want to find is someone who will do a good job and if they make a mistake work with you to resolve it in the best possible way. Block and Hewitt offer peace of mind that the software will calculate the math correctly so if you provide bad info or they make a mistake imputing the data guess what.... its not their fault and so you payed money for nothing. Most people make the mistake of switching preparers every year because they are bargain shopping....bad idea. If you find a good preparer or company to do your return, even if they make a mistake, as long as they are willing to help you work through it and they admit the mistake, thats the company or person you want to stay with because chances are they won't make that same mistake again. Every one should also take a tax class at the least every other year so they have a clue as to what is going on with their taxes, I am amazed by how many people don't have a clue and then get upset for not getting a huge refund or something like that.

Answer 3

Some returns are prepared with errors. Even seasonsed professionals make some mistakes. A good policy to look for is maybe you accountant will pay for any interest and penalities that result. There is always a good chance that some interest and penalities can be abated.

I would read their policy very carefully. They may claim that the error was the taxpayers fault and not their own.

Remember tax professionals prepare a return based on what you give them. Like the old saying goes "garbadge in, garbadge out"

Answer 4

Check your 1040...at the bottom of the second page you are signing saying that everything is accurate and correct. Unless your tax preparer is negligent, any errors or omissions are your responsibility. Peace of mind guarantees seem to be a bit of a scam. Read the fine print - you are usually still responsible for any taxes you owe, the company only covers any penalties. With a few letters or calls to the IRS you can probably get those penalties waived (depending on the circumstances).

Answer 5

A) most mistakes are because someone forgot to tell their preparer some part of the "whole" story

B) you sign that return anyhow and I don't think that you would be arguing that EVERY single document that you have ever signed in your life is null and void simply because you didn't educate yourself about what you were signing

C) if your preparer makes a mistake (which they can and you need to check their work to make sure that they don't) then they should take the responsibility of fixing the issue for you and making things right

Answer 6

i have a really related story to this.

a few years back i did my grandmothers taxes using TurboTax...about a year later she got a letter saying she owed a pretty good amount of money. now, being responsible i made SEVERAL paper copies of the return, along with the tax files with the original CD. when we talked to a tax lawyer, he said it wasn't a mistake i had made in entering the information, but a complete miscalculation made by TurboTax.

Intuit paid the entire amount the IRS said was owned.

If it's a mistake that's made COMPLETELY by the professional who prepared it, then they are responsible for any fines. There are exceptions if the return was wrong because you failed to give them information or other required forms. In my case, I had entered everything into the program properly, all the information was right...but the program made it all fubar'd.

Answer 7

You are responsible for what is on your return. Read the statement in the block where you signed your name. Fortunately the preparer said they will stand behind what they did. But keep in mind that only means that they will pay any penalty if they think it was in fact their fault. You still have to pay any additional tax and interest due.
Their guaranty is the same as any reputable preparer would give you anyway.
Next time find someone who has enough experience to pay attention to the details and not make stupid mistakes.

Answer 8

No,
if your return gets audited they can't defend you in any way because they don't have the right to practice law only a C.P.A. or a tax attorney. Places like H&R Block and Jackson Hewitt fill out tax returns based on the information you provide and that's how they'll defend you based on your info. So don't pay for that extra $50 or whatever they charge know, you're just filling their pockets.

Answer 9

The "peace of mind" that H & R Block offers for a fee covers, I believe, tax as well as interest and penalties. There are strings attached so be careful before you hand over an additional for this service. All respectable accountants and tax prep firms will cover interest and penalties to the extent it is their fault. Anyone that doesn't does not deserve your business.

Answer 10

They will go with you and represent you if you are audited. Then it depends on the nature of the error. They are not to blame if you provided them with false or misleading information. If the mistake was their's, they will pay for some or all of the penalty/tax.