Doing your own taxes and finding errors from past preparer and company!

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RubyTuesday
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Doing your own taxes and finding errors from past preparer and company!

Post by RubyTuesday »

So I’m planning to prepare my own tax returns for 2019 and hopefully forward. Since this will be the first time I’ve done my taxes, I thought I would use freetaxusa.com to enter my 2018 information and compare it to what my previous preparer filed. This would allow me both to better understand the forms, etc., and test my ability to get it right.

When I entered the information, I was able to match the tax filing exactly, AFTER I adjusted for several errors I found!

First, I found that my former employer screwed up and indicated on their W2 that they had contributed to my HSA in the amount that I had contributed. They had actually only made a small contribution in January (I terminated in January). Since I was leaving the HDHP for DW’s PPO, I had calculated the max prorated amount I could contribute to the HSA. It was only a few hundred buck total with about $40 from company and the rest from my deferral. The company took credit for my contribution! Their mistake resulted in several hundred $ increase to my taxable income. I had not noticed or understood the W2 entry when I provided info to CPA. I overpaid a little Fed and State tax, but not worth trying to correct.

The second error was by my CPA. They used an outdated state tax form 2210 to calculate under payment penalty. Freetaxusa indicated a different penalty than my actual return, so I compared the 2210 form freetax used and the one my CPA used to the 2210 available at the state’s website for tax year 2018. Freetax was correct and CPA form was wrong. I may actually ask about this one since it resulted in a couple hundred $ in extra penalty. I suspect I could either get this penalty back from the state or have previous CPA make me whole.

The ultimate value from this experiment and experience is the increased confidence in doing my own taxes going forward.

Anyone else find errors in paid preparer’s filings after doing them themselves?

RT
“Doing nothing is better than being busy doing nothing.” – Lao Tzu
senex
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Re: Doing your own taxes and finding errors from past preparer and company!

Post by senex »

No personal experience, but in another thread someone recently posted a govt document stating that tax returns filed by paid preparers have a 60% error rate, which is higher than the 50% error rate for self-prepared: https://www.gao.gov/assets/670/662356.pdf
Ace1
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Re: Doing your own taxes and finding errors from past preparer and company!

Post by Ace1 »

Ruby,
I cannot comment on your 2210 issue since you did not indicate what state....however, if you believe there is an error,
you should go back to that cpa to rectify the issue.
I will comment on the w2 hsa withholding.
ALL employers correctly show what is withheld from the employees pay as “company contribution”.
This shows in box 12 code w, and is the combined total of both company and employee contributions.
I suggest you revisit the tax return you prepared and record the numbers exactly as is on the w2.
And since you will return to the cpa to clarify the 2210 issue, ask the cpa to review the hsa deductions as well.
Ace
Last edited by Ace1 on Mon Nov 11, 2019 10:14 am, edited 1 time in total.
cas
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Re: Doing your own taxes and finding errors from past preparer and company!

Post by cas »

RubyTuesday wrote: Mon Nov 11, 2019 9:52 am
First, I found that my former employer screwed up and indicated on their W2 that they had contributed to my HSA in the amount that I had contributed. They had actually only made a small contribution in January (I terminated in January). Since I was leaving the HDHP for DW’s PPO, I had calculated the max prorated amount I could contribute to the HSA. It was only a few hundred buck total with about $40 from company and the rest from my deferral. The company took credit for my contribution! Their mistake resulted in several hundred $ increase to my taxable income. I had not noticed or understood the W2 entry when I provided info to CPA. I overpaid a little Fed and State tax, but not worth trying to correct.
It isn't entirely clear to me what you are seeing on your W2, but if it is what I think it is, the employer is correct.

Quoting SpiritRider (forum subject matter expert) from another thread ( viewtopic.php?t=274809#p4418804 ):

"Both employee contributions by payroll deduction and employer contributions are pre-FICA and pre-tax and are reported as employer contributions. Therefore, they are not deductible on your return" [and should show up under code W on your W2, unless you have some other weird situation such as discussed in the thread]

This particular issue of what is called "employer contributions" shows up fairly frequently on these forums. I just grabbed the first post that showed up when I googled "w2 hsa employer contribution spiritrider site:bogleheads.org" . There are lots of other threads you can read if you want to know more. Or google just "w2 hsa employer contribution" and plenty of other sites will say the same thing.

Or maybe I'm just not understanding what you are trying to convey.
Shallowpockets
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Re: Doing your own taxes and finding errors from past preparer and company!

Post by Shallowpockets »

Tax software has been out for a long time. Now you have found out what you didn't know. How far back are you going to go for comparisons? Who knows what extra taxes you paid due to past errors. Because if you found it this time, surely you wonder about the other years.
Buy the applicable years software and use it from now on. Why would you not?
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Raybo
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Re: Doing your own taxes and finding errors from past preparer and company!

Post by Raybo »

Many years ago (when my business was organized as a corporation), I went to a CPA to have my taxes done. It cost me several hundred dollars. Like you, I discovered an error (on depreciation) and went back to have the CPA fix it. The CPA charged me more to fix the error than the error was for.

After that, I started doing my own taxes, figuring that even if I made mistakes it would be less than the CPA charged. I have been doing my own taxes ever since and now have a much better understanding of where my taxes come from and how to plan to minimize them.

I haven't had any tax problems since!
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ICMoney
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Re: Doing your own taxes and finding errors from past preparer and company!

Post by ICMoney »

Yes. I actually get a bit worked up about my experience with this. Paid preparer put medical expense withdrawals from HSA as nonqualified withdrawals, but they had all been for qualified medical expenses. The next year I decided to try to figure out our taxes for the first time and found this error. Called/appeared in person several times to paid preparer, explained the error, they said they would submit a ticket to refund our preparation fees. I had already submitted 1040x to correct this $1000 error in the IRS's favor. Months and several encounters later, no refund from paid preparer. Husband, getting upset at how upset I am getting about not having preparation fees refunded, calls once. Refund is issued immediately. I still get riled up at running into gender discrimination by this paid preparer...
Topic Author
RubyTuesday
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Re: Doing your own taxes and finding errors from past preparer and company!

Post by RubyTuesday »

senex wrote: Mon Nov 11, 2019 9:59 am No personal experience, but in another thread someone recently posted a govt document stating that tax returns filed by paid preparers have a 60% error rate, which is higher than the 50% error rate for self-prepared: https://www.gao.gov/assets/670/662356.pdf
Interesting, but no longer surprising.
“Doing nothing is better than being busy doing nothing.” – Lao Tzu
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bertilak
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Re: Doing your own taxes and finding errors from past preparer and company!

Post by bertilak »

You can probably get things corrected easily by contacting the IRS (or other agency involved) and asking about it.

I didn't do my own taxes last year but found a tax preparer's error anyway. The error bumped me into a massive Medicare "Income-Related Monthly Adjustment Amount" (IRMAA) and that got my attention! I had the preparer file a corrected 1040 then used that to petition the SSA for a corrected IRMAA (form SSA-561-U2).

I called the local SSA office to understand the procedure and was told the form number and the name of the person who would process it and to put "Attention to" on the envelope. If I remember correctly I was sent the form via email and I returned the form both via email and USPS. That was painless and it was processed very quickly.
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Topic Author
RubyTuesday
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Re: Doing your own taxes and finding errors from past preparer and company!

Post by RubyTuesday »

Ace1 wrote: Mon Nov 11, 2019 10:06 am Ruby,
I cannot comment on your 2210 issue since you did not indicate what state....however, if you believe there is an error,
you should go back to that cpa to rectify the issue.
I will comment on the w2 hsa withholding.
ALL employers correctly show what is withheld from the employees pay as “company contribution”.
This shows in box 12 code w, and is the combined total of both company and employee contributions.
I suggest you revisit the tax return you prepared and record the numbers exactly as is on the w2.
And since you will return to the cpa to clarify the 2210 issue, ask the cpa to review the hsa deductions as well.
Ace
I’ll review the HSA issue further as I’m likely confused or using FreeTaxUSA incorrectly. After review if it’s not clear to me what is correct I’ll discuss with CPA when I ask about 2210 issue.

Thanks!
“Doing nothing is better than being busy doing nothing.” – Lao Tzu
Topic Author
RubyTuesday
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Re: Doing your own taxes and finding errors from past preparer and company!

Post by RubyTuesday »

cas wrote: Mon Nov 11, 2019 10:07 am
RubyTuesday wrote: Mon Nov 11, 2019 9:52 am
First, I found that my former employer screwed up and indicated on their W2 that they had contributed to my HSA in the amount that I had contributed. They had actually only made a small contribution in January (I terminated in January). Since I was leaving the HDHP for DW’s PPO, I had calculated the max prorated amount I could contribute to the HSA. It was only a few hundred buck total with about $40 from company and the rest from my deferral. The company took credit for my contribution! Their mistake resulted in several hundred $ increase to my taxable income. I had not noticed or understood the W2 entry when I provided info to CPA. I overpaid a little Fed and State tax, but not worth trying to correct.
It isn't entirely clear to me what you are seeing on your W2, but if it is what I think it is, the employer is correct.

Quoting SpiritRider (forum subject matter expert) from another thread ( viewtopic.php?t=274809#p4418804 ):

"Both employee contributions by payroll deduction and employer contributions are pre-FICA and pre-tax and are reported as employer contributions. Therefore, they are not deductible on your return" [and should show up under code W on your W2, unless you have some other weird situation such as discussed in the thread]

This particular issue of what is called "employer contributions" shows up fairly frequently on these forums. I just grabbed the first post that showed up when I googled "w2 hsa employer contribution spiritrider site:bogleheads.org" . There are lots of other threads you can read if you want to know more. Or google just "w2 hsa employer contribution" and plenty of other sites will say the same thing.

Or maybe I'm just not understanding what you are trying to convey.
I’ll go through that thread and get to the bottom of the HSA issue before doing 2019 taxes as we were back in an HDHP with HSA for 2019.
“Doing nothing is better than being busy doing nothing.” – Lao Tzu
EnjoyIt
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Re: Doing your own taxes and finding errors from past preparer and company!

Post by EnjoyIt »

Raybo wrote: Mon Nov 11, 2019 10:16 am Many years ago (when my business was organized as a corporation), I went to a CPA to have my taxes done. It cost me several hundred dollars. Like you, I discovered an error (on depreciation) and went back to have the CPA fix it. The CPA charged me more to fix the error than the error was for.

After that, I started doing my own taxes, figuring that even if I made mistakes it would be less than the CPA charged. I have been doing my own taxes ever since and now have a much better understanding of where my taxes come from and how to plan to minimize them.

I haven't had any tax problems since!
Same here. Now I do my own corporate and personal taxes with less stress and a lower error rate. Every so often I make a minor mistake that is easily rectified with a pleasant call to the IRS. They are always very nice and helpful.

I will admit, doing my first year's corporate taxes was very time consuming and a bit stressful. The second year was much easier. Now it is a piece of cake.
A time to EVALUATE your jitters: | https://www.bogleheads.org/forum/viewtopic.php?f=10&t=79939&start=400#p5275418
Topic Author
RubyTuesday
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Re: Doing your own taxes and finding errors from past preparer and company!

Post by RubyTuesday »

Shallowpockets wrote: Mon Nov 11, 2019 10:13 am Tax software has been out for a long time. Now you have found out what you didn't know. How far back are you going to go for comparisons? Who knows what extra taxes you paid due to past errors. Because if you found it this time, surely you wonder about the other years.
Buy the applicable years software and use it from now on. Why would you not?
I suspect you’re not being serious, but I may actually do something this for at least 2017, as the last high earned income year for me before retirement. If I find significant issues I would consider looking deeper.
“Doing nothing is better than being busy doing nothing.” – Lao Tzu
Topic Author
RubyTuesday
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Re: Doing your own taxes and finding errors from past preparer and company!

Post by RubyTuesday »

Raybo wrote: Mon Nov 11, 2019 10:16 am Many years ago (when my business was organized as a corporation), I went to a CPA to have my taxes done. It cost me several hundred dollars. Like you, I discovered an error (on depreciation) and went back to have the CPA fix it. The CPA charged me more to fix the error than the error was for.

After that, I started doing my own taxes, figuring that even if I made mistakes it would be less than the CPA charged. I have been doing my own taxes ever since and now have a much better understanding of where my taxes come from and how to plan to minimize them.

I haven't had any tax problems since!
Congrats! That’s my plan as well.
“Doing nothing is better than being busy doing nothing.” – Lao Tzu
Topic Author
RubyTuesday
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Re: Doing your own taxes and finding errors from past preparer and company!

Post by RubyTuesday »

ICMoney wrote: Mon Nov 11, 2019 10:33 am I still get riled up at running into gender discrimination by this paid preparer...
As you should!
“Doing nothing is better than being busy doing nothing.” – Lao Tzu
frugalmama
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Re: Doing your own taxes and finding errors from past preparer and company!

Post by frugalmama »

ICMoney wrote: Mon Nov 11, 2019 10:33 am I still get riled up at running into gender discrimination by this paid preparer...
I would too. However, I've had that type of experience too with medical bills. It is very frustrating.

I have always done my own taxes as I used to work in tax and was a amazed at how many mistakes I would find on tax returns of others. However, it isn't just tax preparers that make mistakes. Tax work requires attention to detail. I've been dealing with an error the IRS made in the process of reviewing my tax return for almost 10 months now. We are talking about a difference of 15,000. Trying to get the issue fixed has been beyond nerveracking. The IRS has finally agreed that we were correct to begin with, but we still don't have the refund we are owed. I have hope that it is all cleared up before we have to file again!

It can be hard to find a good preparer and dealing with the IRS can be beyond frustrating. This year has been a very eye-opening experience for me as I had never had something so black and white in question and had no clue it would be so difficult to fix.
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