Before you decide to hire a tax preparer
Before deciding to have someone else prepare your tax return, consider the following:
- More than half of all income tax returns prepared by paid preparers contain errors, according to an IRS study. What were the most common mistakes? Failing to claim the standard deduction; entering dollars and cents in the area for dollars; failing to claim (or incorrectly stating) the amount of a refund; failing to total the multiple entries on Schedule C; filing a Schedule SE even though net self-employment earnings are less than $400; using the wrong filing status (joint, head of household, etc.); and failing to check the age/blind box.
- Paid preparers are subject to a penalty of $1,000 per return (or 50 percent of the income they earned for preparing the return, if greater) for any understatement in taxes that is due to an "unreasonable position," which is defined by law to mean a lack of a reasonable basis. IRC 6694. As a result, competent paid preparers generally avoid overly aggressive positions when completing ministers' tax returns.
- The IRS has established a Return Preparer Program that can trigger audits of all returns prepared by certain return preparers who intentionally or negligently disregard federal tax law (code, regulations, and rulings). Ministers and church staff should be cautious when dealing with nonprofessional or "mail-order" return preparers, especially those who promise significant tax savings or are not attorneys or CPAs. See IRS Internal Revenue Manual § 4.11.51.
Adapted from the Church & Clergy Tax Guide.
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