How Your Tax Preparer May be Making Mistakes. And What to Do About it Right Now.
Updated: Apr 1
I once got someone out of a CRA debt of over $100,000.
That’s nothing compared to the stress, anxiety, and worry I’ve saved others. You might think you’re in safe hands when hiring a tax preparer, but they can’t all be treated equally.
I’ve seen it all! Use of improper return forms, missing business deductions, and improperly calculating HST. The purpose of this article is to assist you in gaining awareness and to help keep money in your pocket. My intention is also to provide some comfort that with the right help, any error can be identified and fixed – although the taxpayer may still owe interest and penalties.
How to Avoid Tax Preparer’s Errors
At the end of the day, you are responsible for how your tax return is submitted. So, choosing the right tax preparer is on you.
Often, I clean up messes — the messes of other tax preparers. I love the challenge of finding and fixing an error almost as much as I love helping taxpayers save as much money as possible.
I’m meticulous. Which is an absolute must when handling people’s financials. I mean, most people know nothing about their tax returns. They hand off their documents to their tax preparer trusting they know what they’re talking about and trusting they do the right thing.
To boost your awareness of the importance of hiring a real professional tax preparer, I’ve put together the following list of some of the common errors I’ve come across when it comes to errors made in tax returns.
Tax Preparer’s Common Errors - HST Remittances
Not only do HST remittances need to be submitted by the applicable deadline to avoid penalties and interest, but the amounts indicated on the returns must also be accurate.
To give you a better idea of this kind of situation, I once had a sole proprietor hire me to look into the last two years of tax filings. Upon review, there were errors made on both returns. The returns claimed sales revenue with the HST value included in the total amount; however, the tax preparer neglected to deduct the HST amount, resulting in the taxpayer paying income tax on HST.
The tax preparer also failed to file HST remittances for both years. Therefore the taxpayer was penalized for two years of late filing penalties plus accrued interest on the amounts owing over the two years.
In this particular case, I corrected both years of tax returns. The taxpayer received their money back for overpayment in income tax, and I also filed the two years of HST remittances.
When it comes to entering income received, accuracy is crucial to ensure the individual does not end up owing more income tax than necessary.
For example, I was previously hired by a senior who was on the hook for over $3,000 because their tax preparer claimed one pension slip twice on their tax return. This meant the taxpayer was required to make instalment payments in the current year.
The taxpayer in this situation had previously advised the tax preparer of this error, and they proceeded to file a T1 adjustment. Unfortunately, the T1 form was filled out incorrectly by the tax preparer, and nothing further was done at that point. That’s when the individual came to me.
I quickly identified the discrepancy in the T1 adjustment form, fixed it, and submitted it to the CRA. The taxpayer was no longer required to make instalment payments. The taxpayer also received a tax overpayment refund of almost $1000.
Purchase Price of Properties Sold
When tax returns include items that don’t come up often, they’re more likely to either get missed or not entered correctly. For example, this could occur when a property sells, and the tax preparer is not entirely confident in handling such a transaction.
To show you what I mean, let me tell you about a time when a taxpayer hired me because they couldn’t figure out why they owed tax. The tax preparer had advised that the taxpayer owed due to the level of the taxpayer’s income.
Upon reviewing the tax return, I explained that the tax owing was calculated on a property sale that had a portion of time subject to capital gains. Upon review, I also noticed that the initial tax preparer had made an entry error in the property’s purchase price, which resulted in higher capital gain, hence owing more tax. After fixing the entry error, I was able to identify to my client that she would no longer owe tax and would also be getting a refund back from the CRA.
Improper Business Filings
Using the correct type of return and status on a return is essential to ensuring the tax owed is accurate. You might think this is obvious, but in a world where a tax preparer has multiple clients, it’s easy to overlook something as simple as their business status.
For example, I once had a client come to me as their tax preparer was three years behind filing tax returns. After reviewing the paperwork, I confirmed that although the taxpayer had been incorporated for 13 years prior, the tax preparer was filing his returns as a sole proprietorship. This caused the corporation to be arbitrarily assessed with an income inputted, which indebted this taxpayer with CRA for over $100,000.
I have since corrected the returns for the last 13 years, filed the applicable HST remittances, and now this taxpayer is no longer indebted with the CRA.
Inaccurate Business Deductions
Business deductions are not something to be taken lightly. Taking full advantage of all deductions is crucial and beneficial to all taxpayers within a business. It can be the difference between receiving money back or owing money.
For instance, I once had a taxpayer hire me as they suspected something was incorrect in their tax return. After reviewing their return, I discovered numerous business deductions were not claimed, including capital cost allowance. After correcting the tax return, I was able to get this taxpayer back an additional $1,600 in refund.
How Accurate is Your Tax Return?
Although it’s inconvenient to suspect or have an error on your tax return, the process for fixing such errors is straightforward. It is possible if you’re working with the right tax preparer. One who pays attention to detail, knows the procedures and policies, and actively learns new tax-related legislation.
If you suspect there’s something wrong with your recent tax return, I suggest you get a second opinion from another tax preparer. The first step to fixing a problem is understanding it. If it’s not something you know yourself, it’s wise to hire a competent tax preparer who does.
I have a knack for finding errors and fixing them for my clients. I am confident that I can fix yours too! Don’t hesitate to call me for an initial consultation, and we can get you started on the right path in advance of this year’s tax season.