A tax question

[auburngrad82]

I have a friend who paid one of the tax prep chains to do her taxes a few years ago. The lady preparing the taxes screwed up and has been audited and the Fed wants a couple thousand dollars back. Is the tax preparer not liable because they basically contracted to provide a service and then failed miserably at it? She says the company tells her that she didn't buy the insurance they offered at the time they prepared the taxes so any mistakes they made are her responsibility.

If that's accurate, I think it sucks that the company has no incentive to accurately prepare your taxes unless you buy the extra insurance.

Any ideas as to whether she's SOL or if she can actually get the chain to pay for their mistake?

[MrCoffee]

1. She's SOL as far as the IRS is concerned.

When you sign your return, you're attesting to the accuracy of the information. It's her return, she's responsible to the IRS for any errors.

That being said, it's pretty crappy of the tax preparer to require "audit insurance" before they help her fix their mistake. However, they don't have any real obligation to do so. Did she sign some sort of contract or agreement with the tax preparer? She should review all documentation from them to see if she has some recourse.

[auburngrad82]

2. thanks, I'll pass that along

I thought it kind of sucked that the preparer is under no obligation to ensure that they are accurate.

[MrCoffee]

3. Well, there are basic standards of accountancy that should be followed...

If the preparer was grossly negligent or if they actively engaged in fraud without your friend's knowledge, that would be one thing. Unfortunately, math errors and "unintentional" errors are generally the responsibility of the taxpayer.

Most tax preparers will support a client during an audit or dispute with the IRS. This particular one sounds awfully shady if they require "audit insurance" before they'll help.

Tell your friend to be VERY CAREFUL in how she deals with the IRS on this. There are 9,000 ways to screw up and find yourself in a worse situation, and the IRS will actively try to get her to stumble on all of them.

She might want to consider consulting a tax attorney in her area. FULL DISCLOSURE - I used to be a tax attorney.

[Midlodemocrat]

4. Man, no kidding.

We learned that the hard way this year. $60,000 in back taxes because of the accountant's mistake.

We actually only owed about 20K, the rest was interest and penalties.

never, ever, ever going let that happen again.