The 3 Worst Mistakes I Ever Made As a Tax Preparer
By Andy Frye
One thing that can be scary about doing tax returns is the potential to screw up. Everyone knows that taxes can be confusing. For a new tax preparer, if you are sitting there trying to do someone’s taxes and you have no idea what you are doing, it can be positively horrifying.
What, then, is the worst thing that can happen?
This is a natural question to ask in a field like this where, “You mess with my money, you’re messing with my emotions.”
As someone who has personally prepared approximately 10,000 tax returns, I feel that I am qualified to comment on the topic of how to royally ruin a tax return—without ruining your career as a tax preparer.
Here three of the worst mistakes I ever made as a tax preparer, if you are a tax preparer and you have one to add to the list please comment in the space below!
Direct Debiting $17,000 from Client’s Bank Account—Twice
Did you know that you can direct debit a tax payment directly out of a taxpayer’s bank account? It’s like direct deposit, except the money goes the other way: from the taxpayer’s bank account to the government’s bank account.
Originally, my clients wanted a direct debit of both the federal and the California tax payments; these clients owed about $56,000 to the feds and $17,000 to the State of CA.
And it was almost April 15, so we needed to get the payments out soon.
Needless to say I was dead tired from tax season.
When the clients came in, on April 10, to finalize their return, sign and pay, etc., they told me that on second thought they’d rather mail in paper checks to pay the tax bills as opposed to direct debit. I then removed the check mark in the direct debit box for the federal, but somehow didn’t remove the check mark for the state.
The taxpayers then paid a paper check by mail of $17,000 to California.
A few days later, another $17,000 was debited from their bank account—since I submitted the California tax return with the direct debit box marked.
My Mistake Costs Out-of-Work Client $4,000
Another really bad mistake I made was the time one of our long-time clients came in and had been supporting three of her great nieces. It was a pretty close call in terms of Earned Income Credit due to the residency requirement that the kids live with the taxpayer more than six months of the year.
But it seemed when I interviewed the client that the nieces were living in taxpayer’s home for last six months of year.
I therefore claimed EIC and taxpayer was getting a $5,000+ tax refund and all was good. Taxpayer was out of work and on disability, so this $5,000 would really help; I was, for the moment, a hero.
Taxpayer then requested that I run a scenario taking the nieces off the tax return and see how much she would get without them. This way, she could give part of the money to the nieces or for their care. I removed the dependents and showed the taxpayer that the refund would go way down to around $1,000.
I then got distracted because other stuff was going on in the office, and by the time I came back to finish up this tax return, I forgot to add back on the dependents.
The tax return was e-filed without the dependents for a refund of $1,000. Needless to say this was not appreciated by the client who was desperate for this $5,000+.
We then tried to amend the tax return to add on the dependents.
IRS then audited the amended return for EIC and the proof of residency that was required (school and medical records showing that children lived at same address as taxpayer) was not available.
Taxpayer was then denied EIC due to lack of proper documentation.
I then gave the taxpayer a $1,500 “loan” out of my personal earnings for my mistake and I haven’t seen this client since. Though I truly wish her all the best! And no, I don’t want my $1,500 back (I already wrote off the $1,500 on my tax return as a bad debt, in fact).
Client About to Be Evicted and IRS Delays Tax Refunds Two Weeks
As you may have heard, the IRS as part of its anti-fraud efforts delayed the first round of tax refunds in calendar year 2012 by about two weeks. As you also may know, the people who do their taxes on the first day of tax season—or before—are commonly the most desperate to get their refunds ASAP.
In or around February 1 of 2012, this delayed refunds + need refund real bad combination became volatile, and with one particular (again) long-term client, his head almost exploded in January of 2012 as he continued to call the office, call the office, call the office, call the office asking where his refund was, what I did to screw up his taxes, and all the rest of it.
Naturally none of this was at all my fault or our fault—it was a delay from the IRS, the payer of the refund. This client was not interested in the specifics, however, he just wanted his money and he wanted it now. He must have called at least 50 times and talked to / bitched out every member of our staff.
Apparently he was about to be evicted from his apartment for unpaid rent and his landlord was on his back to get the refund money. Situations like these are very tough as a tax preparer because you are powerless to make the money move faster and often you are dealing with someone who is under so much financial or “life stuff” stress that the taxpayer is operating from a place of emotion rather than logic.
Eventually the refund did come and the taxpayer was not evicted.
Unfortunately, the client still regards me as “letting him down” for whatever “mistake” I made to cause the delay.
The reason why I call this a “mistake” on my part is because it shows you that a lot of times, maybe even most times, your mistakes as a tax preparer are not so much your mistakes as they are glitches and delays in the system, or the taxpayer’s own problems. Turns out this taxpayer also had back due child support…so that could maybe have added to the delay, sir?
Just remember, “It’s not your fault but it is your problem.”
Every tax preparer who deals with the general public deals with stressed out people who have problems. The only solution is to deliver exceptional service and try to satisfy the client as best you possibly can, regardless of whose mistake it is.
Do you think these are three quite massive screw-ups? They sure felt like it at the time. But you know what?
It all worked out in the end.
It always works out in the end if you work hard and keep learning.
Get started with Pronto Tax Class today and prove that you won’t let the possibility of making mistakes stop you from doing something new and interesting.