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5 Common Mistakes Tax Preparers Make and How to Avoid Them

5 Tax Preparer Mistakes to Avoid

By: National Association of Tax Professionals

As a tax professional, you can take all the training available to you, but you’re still human and mistakes can happen. Keeping up with your education is a great step toward minimizing errors, but becoming aware of the top mistakes tax preparers are vulnerable to is a great first step to avoiding them.

one

Not using due diligence for certain credits and filing statuses

Tax professionals are required to follow due diligence requirements when preparing their clients’ returns that claim the earned income credit; child tax credit, other dependent credit, or the additional child tax credit; the American opportunity tax credit; or the head of household filing status. This means asking the right questions, listening for key words in your clients’ answers, and requesting supporting documentation, for a few examples. The IRS has a form Opens in new window to help preparers confirm they’ve met all the due diligence requirements. This year, it’s also important to ask about advance child tax credit payments and stimulus payments. (NATP members receive a yearly on-demand webinar on this topic to keep up with current requirements.)

two

Assuming Tax Day is always April 15

As a rule, Tax Day generally falls on April 15. However, if April 15 falls on a weekend or holiday (like in 2022), Tax Day is pushed to the next business day. Tax Day 2022 is April 18, 2022. Taxpayers in Maine or Massachusetts have until April 19, 2022, to file their returns due to their Patriots’ Day holiday in those states, and some taxpayers in disaster areas have additional extended dates.

three

Foregoing the most advantageous filing status for your clients

Filing statuses can set the tone for your clients’ returns and can impact quite a few different credits or deductions for which they may be eligible. If you have clients who are married, your first instinct may be to have them file ‘married filing jointly;’ however, they might get more financial benefits from filing ‘married filing separately.’ Tax pros should communicate clearly with their clients and use due diligence to ensure the best filing status for their clients’ financial situations.

four

Failing to report cryptocurrency transactions

You’re likely to see an increase in virtual currency transactions in the coming years. The IRS is preparing for it too, and is ramping up its compliance enforcement efforts in this area. There’s even a specific question on the 2021 Form 1040 about virtual currency. Don’t make assumptions that your client may or may not have income from virtual currency – make sure to ask the question and properly report any capital gain or loss on virtual currency.

five

Spelling, math, and bank account errors

Even if you’re using tax software, it’s important to double-check ALL information on your clients’ returns. This includes spelling of names, reporting the correct SSN and EINs, checking the math on important credits, having your client sign the appropriate places on the return, and confirming bank account information.

Join the National Association of Tax Professionals (NATP)

Members of the National Association of Tax Professionals (NATP) receive year-round support and discounts on education to help tax preparers ensure they understand the most current tax law updates and can apply them to their clients’ returns. New members can join today Opens in new window and receive $25 off their new member application fee by applying code 22SOCIAL at checkout.

About the NATP

The National Association of Tax Professionals (NATP) is the largest association dedicated to equipping tax professionals with the resources, connections, and education they need to provide the highest level of service to their clients. 23,000 members rely on NATP to deliver professional connections, content expertise, and advocacy that provides them with the support they need to best serve their clients. The NATP headquarters is located in Appleton, WI. To learn more, visit http://www.natptax.com Opens in new window.