Monday, October 26, 2009


Last week I discussed, in a 2-part post, my legal and ethical obligations, responsibilities and requirements, to my practice, my clients, and the IRS and state tax authorities, as a paid tax preparer.

What if, while reviewing a prior year’s return, I discover an error made by the client or another tax preparer – either in favor of the client or in favor of the government? Or if, after preparing a tax return myself, I discover an error or omission, either on my part or made by my client? What are my legal and ethical obligations, responsibilities and requirements in such a situation?

If I discover an error on a return, regardless of who prepared the return, I am obligated to report the error to the client and advise him/her that he/she should file an amended return. That is the extent of my legal and ethical obligation. I am under no obligation to prepare or file an amended return, nor am I under any obligation to notify the IRS or state tax authority of the existence of the error. All I must do is inform the client that the error exists and that an amended return should be filed to correct the error.

If the client asks me to prepare an amended return I will gladly do so. If the client does absolutely nothing that is not my problem.

Let me quote from IRS Publication 470

Any unenrolled preparer who knows that the client has not complied with the revenue law, or that the client has made an error in or omission from any return, document, affidavit, or other paper that the client is required by law to execute in connection with any matter administered by the {Internal Revenue} Service, shall advise the client promptly of the fact of the noncompliance, error, or omission.”

If I discover “after-the-fact” that I have made an error on a client’s tax return I will automatically prepare and send to the client an amended return(s) free of charge. Whether or not the client actually submits the amended return(s) is of no concern of mine. If there is a balance due on the amended return(s) and the client submits the return(s) with the additional tax – that is fine. But if the client simply files the return away and does not pay the additional tax due – that is also fine. It is his/her choice.

If, while attending a continuing education class, or after reading a blog post or article, I discover that I did not claim a deduction or credit to which a client was entitled on a return I prepared, I will automatically prepare an amended return and send it to the client. If I had to prepare an additional form or schedule that was not filed with the original return to claim the deduction or credit I will bill the client for the additional amount I would have charged if I had filed the additional form or schedule with the original return.

If, as occasionally happens, Congress passes a tax law change, or the Tax Court issues a decision, or the IRS has a change in heart, that is retroactive to “all open years”, and this change would generate an additional refund for a client, I will automatically prepare amended returns for all applicable “open” years and bill the client the normal fee for an amended return and appropriate additional forms or schedules.


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