Unreported Income

[mstaxresolution@gmail.com]

If taxpayer fails to provide all income documents and subsequently receives an IRS adjustment letter, who is at fault? Tax preparer wasn't aware of additional income when return was prepared.

[Anarchrist]

Sounds like the taxpayer. A typical client agreement would clearly state that the taxpayer is responsible for providing all info and is responsible for the completeness of the returns.

[ATSMAN]

Happens all the time unfortunately. Taxpayer is ultimately responsible for the accuracy of their tax return. You can help them to be more accurate by providing checklist and organizers. Also if you have a prior year copy of their return see what are the sources of income. Typically that is how I catch missing 1099 forms!

[RWG1950]

In my office, all returns to be prepared must be accompanied by a data organizer sheet signed by the taxpayer.
This way the customer (in their own hand) tells you what their income and deduction sources are.
I allow no exceptions to this procedure.
The sheet I use is a simple front & back one pager of my own design. Sometimes the customer needs help with completion.
This sheet is copied & provided with the taxpayer's return copy.
A letter of engagement that outlines the responsibilities of both parties also should also be used.
Many years ago a customer showed me an IRS CP-2000 letter stating a pension had been cashed for $40-K, 2 years earlier.
Because of the data sheet, who was at fault for the under-statement of income was not an issue.
Good luck to you.

[Jiggers]

From my Engagement Letter that all clients sign:

"I will depend on you to provide the information I need to prepare a complete and accurate return. Under the Internal Revenue Code, taxpayers are required to maintain records supporting their return, including receipts and canceled checks for all deductible expenditures. You are acknowledging that you have reported all of your income. You will be responsible for maintaining all necessary tax records and for the accuracy and completeness of the information submitted to me in connection with the preparation of the 2020 Federal Income Tax Return.

You represent that the information you are supplying to me is accurate and complete and that your expenses for meals, entertainment, travel, business gifts, charitable contributions, and vehicle use are supported by records as required by law. I do not and I cannot audit or review this information. I may ask you to clarify some items or may request additional information. I will rely on any documentation you supply to me that is from third parties such as W-2's, 1099's, K-1's, 1098's, and W-2G’s. If I have to classify and organize your information to prepare this return, it will be based on the description on your deposit slips, checks, or other information you have furnished."