Tax accountant made error on return?

Question

I found a error on our taxes filed this year. They had filed my capatial gains all as short term gains vs long term. I had around 4,500 of long term capital gain. Our joint income was around 70,000. What is the difference on ther error of it all being in short term vs long term? I called out accountant and waiting for a reply back. What is the process and is there any additional cost to me? Also what is the tax saving from the mistake?

Answer 1

The accountant should prepare an amended return for you and shouldn't charge you for doing it.

Your capital gains tax on the LT gains could be around $450 less when they're filed properly instead of at short term. Don't worry about trying to get it done before the 4/17 deadline, since you won't owe penalties on the mistake.

Answer 2

Good catch.

The difference will probably be several hundred dollars. Long term rate is 15% (which is what you should have paid) and it's impossible to know your marginal rate (which is what you actually paid) without more info.

Assuming this is your accountant's mistake and not a miscoummunication or mistake on your part in giving incorrect information then your accountant should cover the cost of filing the amended return, 1040X.

If they balk at taking care of this point out that all of the computerized programs such as TurboTax ask very specifically about the holding period for investments to avoid this.

I'd suggest you use one of the computerized systems next year anyway. With income of $70k they're ready for the issues you'll face and cost much less than your accountant.

Answer 3

You will save some money if your gain was long term. Keep in mind that you must have own the item for more than 1 year in order to qualify for long term capital gain. You should amend but there is no rush since you will get some money back (if any). For sure you will not owe any additional money to the IRS based on what you said.