Discount for Tax Preparer errors?

[AZ-Tax]

While we are all subject to errors and/or omissions on tax returns we prepare, when the taxpayer catches it as in entered an incorrect amt from W-2, 1099-R etc., do you automatically discount your fee and if so do you base the discount on the number of E&O's? Is it a flat or % discount?

[Super Mom]

If that were to happen in my office, I'd be embarassed but just fix it, may give them a little break when I calculate bill or may not. If it's after they've left my office, I ammend my errors free of charge.

[JohnH]

This is an area where any sort of "policy" will come back and unexpectedly bite you big time. There are so many little ways errors can creep in, with no way to catch all of them. Some can be significant, some might be a minor inconvenience, and some are just nuisance errors.

Your response to your error should be proportional to the invconvenience it may have caused the client (if any). Some preparers may feel compelled to give a "red face" discount - I don't think that's a good idea as a general rule, but even there one may find exceptions. IMO, best practice is to handle it on an individual basis - one client may require a discount for an error, while in another case there maybe no reason to offer anything other than a corrected return.

Personally, I had a situation last year where I told the client to just tear up my bill - no charge for that year's return. (He wouldn't hear of it and insisted on paying me anyhow).

[DaveO]

I don’t discount for errors discovered before filing. Errors discovered after filing I amend for free but still no discount. Professional baseball players who can bat.500 would be a national hero’s. A college football team who can string together 12 or 13 error free games can be national champions. Judging by the action of the courts our elected lawmakers are right barely half the time. Why is it that a tax professional is expected to be right every single time on every return?

[BOB W]

Prior to filing I just fix the error. After filing, I fix the problem free and pay any penalties and interest.

Red face, yes. Free return or discount, NO.

[Lion]

Case by case. Fix free if not filed, amend free if filed. If needed to keep a client I want to keep, might offer them a discount next year. If it's caught by government and costs client, might offer them a discount next year on the order of the penalties (tax would've been theirs anyway, and they had use of their money longer so interest is theirs too). Sometimes I've done a child's return, W-2 for a summer job, free to compensate for something I missed. It's really case by case. You want to do enough that the client doesn't bad mouth you if they leave, and enough that you keep the ones you want to keep.

[oceanlovin'ea]

Well, I admit I have made a mistake or two during my time. If it is my mistake, I amend with no charge to client. Hopefully it will be caught before the return is efiled.

I usually go over every return with the client before he takes it and it is efiled. As we are going over the return, sometimes something will pop up that I can see I have left something off. I just tell them this is exactly why I go over the return with them before I file it...if there is an error we will catch it. No one has ever had a problem with my method of doing this.

In fact this year I had to amend a couple of S corp returns because of depreciation issues. Both resulted in the client getting an additional refund. So they were happy.

I will give them a discount on the next years return if I did a really bad booboo, although I might not tell them I am giving them a discount for that reason.

Linda, EA

[BOB W]

The problem with discounts is that they might expect it every year thereafter.

[Roberts]

The problem with discounts is that they might expect it every year thereafter.

Never had that. If I like the client, I give them a discount. If I don't, they get no discounts. (pushes them towards the door)

[Lion]

If I do give a discount, I show the full price and then have a line for a discount. I might not draw attention to my year-old error, but just label it something like Loyal Client Discount.

[JohnH]

Lion: I like your terminology.

"I made a mistake, but you came back anyhow.
I call that a Loyal Client, worthy of a discount."

[DMICPA]

To err is .....

Mistakes happen.

During the last few days of tax season, mistakes happen more.

If it is my mistake, I fix it. I may even pay the penalties if any. I generally don't pay interest because the taxpayer had use of the funds. If it is a great client and a nomimal amount, I will take care of everything. Why argue about nominal things.

No discount. You are paid to do a return. If you fix any errors, why would you discount your fee. You end up giving the client the correct return.

Many years ago, my partner missed a tax estimate payment on behalf of a client. The penalty was $20,000. We did the next year or so services for nothing. Client was hapyy, we were happy because we retained the client for many more years. Mistakes happen.

[Peachie]

I have a disclaimer

in my office so the client knows I pay no penalties and interest. I tell them HRB has the price built into their fees. If I do that, my cost to prepare the return would be prohibitive for them. I tell them I'm very competitive. They know this already.

I do make any corrections, write any letters and do anything needing to be done short of giving them money. Most times, fortunately, it's their error. Even if it is, I take care of it and if no more forms involved, don't charge for the Amended.

I do give discounts from time to time but not because of a tax error.

Happy Friday.

Peachie

[BP.]

What do you think about keeping a few pre-paid gas cards on hand? Or something like that.

Client called early this morning to see if I had a copy of her 1099-UC. I had left her original in my copier and found it after she left. She needs it for a grant application, and spent the night searching and then trying unsuccessfully to retrieve a copy online.

She is relieved I have it, and is no way upset about it. But I thought it would be so nice to tuck a $10 gas card into the envelope with her copy to say sorry my oversight caused some inconvenience. Seems like an easy way to turn disgruntled into delighted, and no discounting needed.

[oceanlovin'ea]

I'm sure she would appreciate that. I think when we can do something nice for a client it creates good will and might in turn get some referrals from them.

I had some clients that sent me several referrals last year. I got a good deal on one of those groupon sites. I paid $75 for 3 $25 Target gift cards and got 3 $50 restaurant.com cards for free. I gave the Target gift cards to those 3 clients and I kept the restaurant.com cards. Target cards were a tax deduction and I get to eat for free.

I give discounts to some people at my discretion, not because I needed to.

Linda, EA