Up-to-the-minute advice, information, resources, and, on occasion, commentary on federal and New Jersey state income taxes, and the various New Jersey property tax rebate programs, and insights and observations on tax policy and professional tax practice, by 40-year veteran tax professional Robert D Flach.
Thursday, May 10, 2012
CHECK YOUR FINISHED RETURN!
When you receive your finished tax
returns from your tax preparer don’t just sign and submit the return.it is very, very important that you carefully
review the return first, and ask the preparer about any items you do not
The letter that I include with all
finished tax returns I have prepared includes the following statement –
examine these returns carefully to be sure all items of income and deductions
have been accounted for properly.You are responsible for all the information
reported on the returns.If you find
anything that is not in order, or that you do not understand, contact me
It also states –
returns are subject to review and examination by the IRS and appropriate state
tax agencies.I accept responsibility
for the clerical and mathematical accuracy of all returns I have prepared.The burden of proving the facts reported on your tax return rests with
A tax season story from NCPE Fellowship Executive Director Beanna Whitlock (who has been preparing 1040s for
slightly longer than I have), which appears in the Fellowship’s May newsletter,
highlights the need to understand what is being claimed/deducted on your return.
She was approached by a couple when
they received a written request from the IRS for information on deductions and
credits claimed on their 2009 and 2010 tax returns because the person who had
prepared the return was “unavailable to
talk to them”.
The returns included an adjustment
to income for tuition and fees and the full American Opportunity Credit – even though
“neither taxpayer went to school in 2009
It also included an energy credit
for solar power – even though “no energy
improvement had been made on their home during 2009 or 2010”.
And each taxpayer had a separate
Form 2106 to claim business mileage.Beanna
points out – “When I asked how they used
their auto for business they said they went to and from work”.
The taxpayers received refunds for
2009 and 2010 only as a result of these erroneous items.
Beanna tells us –
asked the taxpayers to go back to their return preparer and ask why he had
prepared the returns with the erroneous credits.
response from the return preparer was ‘You should have purchased our audit
insurance and we would have represented you before the IRS.’”
The taxpayers had paid for a Refund
Anticipation Loan, but not for the “audit insurance”.
Clearly the tax preparer, in this
case from “an independent firm with 7
locations in the city”, was a crook.
But, while Beanna says “It was clear these taxpayers were innocent in
the preparation of their return”, this is not entirely true.They were apparently happy to be getting
refunds and did not look at the return they were signing. They are certainly
not without some responsibility in this situation.
A review of the bogus return would
have shown the taxpayers that deductions and credits were being claimed for
expenses that did not exist, at least in the college tuition and energy credit
One would think that, seeing a
deduction on the front page for tuition and fees, and knowing full well that
they did not incur any such expenses, the taxpayers would ask the preparer what
this was about.Or am I giving the
taxpayers credit for too much intelligence?
The moral of the story – carefully review
your finished tax returns before sending them off to Uncle Sam or your
state.As I state in my client memo - You are responsible for all the information
reported on the returns!
A final word of advice on the
topic-If you do indeed find something
on a return that you do not understand do not
call up the preparer and tell him/her, “You made a mistake on my return”.Simply say that you have a question about something
reported on the return.