With the internet now part of our everyday life, as many as 43 percent of Americans are going online to find tax preparation services. Many of these websites are helpful, but errors in software can result in missed deductions or, worse case scenario, an audit. Errors in tax preparation software are now part of the yearly tax season headlines
Last year in the state of Michigan, an error caused by outdated government software resulted in many taxpayers receiving notices that said their taxes were past due or to send money they didn't owe.
Unfortunately, you can be held accountable for your preparer's errors, even if it is done online. The tax prep company or a certified public accountant should work with you to fix the errors before you have to take any drastic legal action that may require a lawyer.
Fixing these issues can be an unwelcome chore; therefore it is important to understand the legal remedies to solve tax filing errors and IRS scrutiny.
When an error causes you to re-file, an amendment to your return is necessary. You can amend a return to correct much of your basic information including filing status, the number of dependents, total income, tax deductions or tax credits.
You can amend a return by using a 1040X, Amended U.S. Individual Income Tax Return. Although the state and the federal government are relatively quick with your original return, receiving money back through an amendment can take two to three months.
Although you are ultimately responsible for an error on your return, businesses and CPAs want to uphold their reputation. So, they will probably help you correct the issue.
A tax audit is an official inspection of your financial records. Although the idea of an audit can be scary, many are done at random. An audit is more likely if you are an independent contractor or self-employed. Just because you are subject to an audit does not mean you are being investigated for a crime.
If your audit is the result of a tax form error, return to your tax preparer for help remedying the situation.
When you should call an attorney
People who act in good faith in their financial habits and tax reporting should have few concerns about legal action against them. Here's a rule of thumb for when to ask a CPA or an attorney: Do you need an answer to a tax question or do you need to go to court? If you require the latter, call an attorney. If you are not sure, you can always call an attorney to ask.
If you are charged with a crime or subject to a tax lien, it will be apparent to you in the IRS' notification. It is at this time that you should seek out a tax attorney. If your tax prep service refuses to help you and you are subject to a larger tax burden because of someone else's mistake, a tax attorney can help you with compensation.
Filing your taxes shouldn't go from a yearly chore to a monthly errand. Knowing who to consult for your tax issues can save you the trip.