photo credit: Unsplash/Sanwal Deen
Who is Responsible?
Did you know that when you sign your name to your tax return, you are liable for any inaccuracies? Even if you used a government service or paid a tax professional to complete the paperwork for you, you are still on the hook for any mistakes.
If you choose to use a third-party preparer, evaluate their background beforehand to decide if their qualifications inspire enough confidence to sign your name to the documents they prepare.
VITA is an Internal Revenue Service (IRS)-sponsored program where trained volunteers do your taxes for free. What’s the catch, you ask? You have to make less than $54,000 per year, and you likely will have to wait at a VITA location (typically at schools or community centers) for an available volunteer. The wait might be long, especially close to the tax filing deadline, but you won’t have to worry about paying any hidden fees or administrative costs. The good news is that it’s all free.
While VITA volunteers typically are not certified public accountants (CPAs), there is no guarantee that preparers at tax chain stores are either. VITA volunteers attend an eight-hour class, or get their instruction online. To acquire basic certification, potential volunteers must pass a multiple choice test with a score of 80 percent or higher. Some VITA volunteers go on to obtain advanced certification, and others specialize in areas such as military returns or health savings accounts (HSAs).
As long as they follow strict compliance rules, you can’t sue VITA volunteers if they mess up your return. (But, at least you didn’t pay them in the first place.)
Big Box Companies
Big box tax preparation companies typically do not attract CPAs either. Their base pay is sometimes barely above minimum wage, and often they earn incentives for how many returns they do, with higher incentives for more complex returns. These are seasonal workers, and not all of them come from a tax law background.
The training process usually is fairly intensive, involving 84 or more hours of classroom time in preparation for a basic certification test. Additional certifications require more training.
While some companies offer an accuracy guarantee, customers report that the process to submit claims can be dragged out unnecessarily. In the meantime, inaccuracies in a return will leave customers paying the penalties to the IRS. Some customers also question if the preparer had incentives to make their return more complicated to increase their fees.
Before agreeing to any paid tax preparer deal, read and understand all the fine print on refund anticipation loans (RALs) as well as administrative fees, additional charges and any add-ons.
Certified Public Accountants
CPAs are accountants by profession, and their title means that they have put in the time to become certified in the field. But even CPAs can make mistakes, and holding them liable for damages in court can be an uphill battle that may not be worth fighting after legal fees. Typically, CPAs are more likely to accommodate their clients when they genuinely have made an error; after all, they have a code of professional conduct and the reputation of their business to maintain.
If You’ve Been Screwed by Third-Party Tax Prep
Whether you choose to file your taxes solo or use a prep service, it’s always smart to double check the work before you file.
Have questions? Don’t worry, we’ve got your back. — The OYO Team
[Any reference to a specific company, commercial product, process or service does not constitute or imply an endorsement or recommendation by On Your Own, the National Endowment for Financial Education or any of its affiliate programs.]