Does using a paid tax preparer guarantee a correct return?
- March 23, 2023
- David Greene
- Comments Off on Does using a paid tax preparer guarantee a correct return?
Unfortunately, the answer is “no.” Many preparers make mistakes from time to time for various reasons on both personal and corporate returns. In fact, the IRS recently released a study that found that 71% of S corporations who used paid preparers to prepare their Form 1120S tax returns were non-compliant due to mistakes that usually benefited the taxpayer-shareholder. They also found that S corporations are one of the fastest growing business types in the country. Common mistakes are (a) deduction of ineligible expenses – this usually occurs when personal expenses are deducted as corporate expenses. You must keep your personal spending and corporate spending entirely separate. The best way to do this is to maintain separate bank accounts: one for the business and one for personal use. (b) miscalculation of shareholder basis in the assets of the business. The IRS is looking at this more and more closely today. (c) payment of inadequate wages to shareholder-employees. There is no hard and fast rule but the compensation must be reasonable in relation to the wages of other non-shareholder employees.