Tax preparers, while being ever diligent, but still human, are prone to mistakes. When tax season hits the long hours and intense workload can increase the chances of an oversight. No one wants to make a mistake, especially on a tax return. While filing status is significant, other oversights or errors can also happen.
The “big five” errors
Here are the top five mistakes that tax preparers can inadvertently make:
- Failing to claim the Earned Income Tax Credit (EITC): People who work and earn an income under a specific amount are eligible for this. It reduces, dollar for dollar, the amount of tax owed.
- Not including early retirement account withdrawls: These withdrawls need to be included on the return. There is a 10% additional tax on early distributions before age 59½ which a can also be overlooked.
- Putting in the wrong due date: Because of holidays, April 15 is not always the due date. This can vary by state.
- Entering in the wrong bank account number, SSN, EIN. Numbers can easily be transposed and this can affect a return. This is also true with taxpayer status as a parent, single, married, divorced, etc. All of this can raise a red flag or delay a refund.
- Not making accurate charitable contribution deductions: Taxpayers need to have all of the receipts for every donation made throughout the year. When itemized, each contribution needs documentation.
The interest and capital gains from both property sales and mutual funds also need to be identified on the return.
Clients need to provide complete and accurate information
Tax preparers are reliant on the taxpayer for reliable and complete information. When a client fails to provide accurate information this can be beyond the knowledge and control of the tax preparer. However, tax preparers can be charged under Sec. 6694 for “understatements due to unreasonable positions” and for reckless or willful conduct. Some clients, particularly older clients, may not always remember all of their deductions or each and every one of their investments. In these cases, once a preparer recognizes an unintended omission an amended return may need to be submitted.