Not that you really need another reason, but we have a pretty good one. When a potential client balks at your prep fees, remind them that filing mistakes can add up to costly penalties for taxpayers! Just because they haven’t heard from the IRS doesn’t mean they should be free from worry.
In most cases the IRS has 3 years to complete an audit after taxes have been filed. However, if a taxpayer fails to report over 25% of their income, the IRS calls this substantial understatement of income, and this gives the IRS an extension so they can conduct an audit up to six years after the fact.
If someone declines to include more than $5,000 foreign income on a tax return, the number of years the IRS can audit is increased to six as well.
Then it gets even better, the IRS has no statute of limitations if a taxpayer doesn’t file a return. That’s right; unfiled returns, criminal violations and fraud cases give the IRS the green light to audit indefinitely. In some cases they take advantage of this opportunity and have been known to go back at least 10 years or longer.
Amazingly, some DIY preparers actually forget something small like signing their returns or submitting a form. In cases like these the IRS doesn’t count the returns as valid which means the three year window doesn’t EVER begin.
These are just a few more reasons for your clients to trust you, the tax pro, to do what you do best!
