A new client recently walked into our office. He had been self-preparing his personal tax returns for quite a few years using TurboTax and received an audit inquiry from the IRS. He did what many taxpayers do, he ignored the letter. The IRS got his attention when it sent a proposed audit assessment of over $6,000, and with interest and penalties, the total tax bill was $8,100.
We are not bashing TurboTax which makes an excellent product which meets the needs of certain taxpayers. Unfortunately, too many taxpayers believe that the tax preparation software products on the market, including those used by inexperienced tax preparers, will walk them through the intricacies of the tax law and IRS regulations and result in an accurate and correct return being prepared. If you are self-preparing your tax returns or using an inexperienced tax preparer because you are price conscious, you may be significantly overpaying your federal income taxes as this person did.
The taxpayer was undecided as to whether he should simply pay the IRS and have the problem go away, or engage us (an additional cost to him) to address the problem. He wisely chose the latter.
We reviewed the taxpayer’s filed tax return and found several mistakes. The end result was that we prepared an amended tax return for this person and that return showed that the taxpayer was due a refund of $2,000. So rather than paying the IRS $8,100, the taxpayer will receive a refund of $2,000, a savings of over $10,000. Unfortunately, when mistakes of this nature are discovered, the taxpayer may be unable to file amended tax returns for some years because the statute of limitations to file amended returns had expired.
If you would like to discuss your business or personal tax planning, tax preparation and other financial concerns with an experienced tax professional, we invite you to call 610-594-2601 today to make an appointment at our Exton PA CPA office to discuss your situation. You can also schedule a consultation at Click Here.
