Preparing tax forms is a tricky business. Those who pursue this profession are able to help better ensure that their clients make the most of their returns while also balancing obligations to the Internal Revenue Service (IRS). This balance is a slippery one, and a single misstep can result in a slip that is dangerous not only for the client, but for the tax professional as well.
There are certain steps that can help reduce the risk of a slip. A recent publication in the CPA Journal discussed a number of these strategies. Three of the more applicable tips from the piece include:
- Gather all needed information. It is very difficult to produce an accurate tax return without all needed information. As such, it is not wise to sign off on a return until all this information is available.
- Stay realistic. Tax preparation for clients is designed to provide the client with the lowest possible tax obligation. There are likely situations that arise that are questionable or require an aggressive tactic. In these situations, a tax preparer is wise to ensure that there is a “realistic possibility” that the recommended course of action would survive the scrutiny of the IRS. A failure to do so can result in criminal prosecution for an action that is deemed too aggressive or thought to promote abusive tax schemes.
- Communicate. It is also wise to keep the client fully informed. If a decision is questionable, discuss the options with the client. Let the client make an informed decision on whether or not take the potentially riskier option.
A failure to complete these returns accurately can result in serious penalties for the tax professional. These penalties can include a negligence penalty of $1,000 or 50 percent of the fee. This penalty is applied when the preparer is found to have operated with a disregard of the law or to misapply regulations or the Internal Revenue Code.
Tax professionals that are facing accusations of negligence, willful understatements or other violations should take the allegations seriously and seek legal counsel. An experienced tax return preparer lawyer can advocate for your interests, better ensuring a favorable outcome.