"I'm Sorry": Apologizing for Tax Preparation Errors

It seems like we apologize a lot. Most apologies are pretty innocuous; for example, "I'm sorry that you had to wait so long." But let's face it. Despite our best efforts, we make mistakes and from time to time we need to apologize for serious errors that make a big difference to a taxpayer. Often the person making the apology is not the person who made the mistake. Nonetheless, a sincere apology is warranted.

Let's look at some aspects of expressing regret and taking the blame. In these examples, I have a site manager talking to the taxpayer. It could be a volunteer, but generally, it should be someone in a leadership role with lots of experience handling these tricky situations. All sample scenarios are based on real-life situations. In other words, I have made most of these apologies.

Error Discovered by the Taxpayer

Two weeks after having her joint return prepared, a taxpayer returns to the site. She is concerned because her refund is so much lower than usual. Her neighbor looked at their return and pointed out that she didn't get any EITC. The taxpayer wants to know, "Where's my EITC?"

Site Manager: The reason that you didn't get the EITC is because you and your husband both have ITIN numbers instead of social security numbers. The law does not allow someone with an ITIN to claim the EITC.

Taxpayer: Are you sure? Because my refund is usually at least $1,000 more.

Site Manager: Yes, I'm sure about the EITC. Do you have a copy of your return from last year? I could compare the two returns and explain the difference. It probably has something to do with the withholding.

Taxpayer: I don't have it with me. I guess I could find it and bring it back in.

The site manager takes a closer look at the return and sees a $1,390 individual shared responsibility payment on Form 1040, line 61. Uh oh.

Site Manager: I just noticed that the return includes a penalty for not having health insurance. That is an error. I'm sorry. Because you have an ITIN you are not required to have health insurance and you do not owe a penalty. I will prepare an amended return and you will get another refund for $1,390.

Taxpayer: I knew it!

Site Manager: I am so sorry that we made this mistake and I am glad that you questioned the refund amount. This second refund may take several weeks. I apologize for the delay in getting the rest of your money.

Comment: I like the fact that the site manager apologized casually, but repeatedly. Even though someone else probably made the error, the person dealing with the taxpayer is representing the site and that person is responsible for the apology

Here's a similar scenario with a different outcome.

Two weeks after having her return prepared, a taxpayer returns to the site. She is concerned because her refund is so much lower than usual. Her neighbor looked at their return and pointed out that she didn't get any EITC. The taxpayer wants to know, "Where's my EITC?"

Site Manager: The reason that you didn't get the EITC is because your filing status is married filing separately. The law does not allow someone filing married separately to claim the EITC. I'm sorry if that wasn't explained to you before.

Taxpayer: I don't think that the preparer really understood my situation. The thing is, I'm not really married anymore. I haven't even talked to him for years.

Site Manager: Do you have any children that live with you?

Taxpayer: No, we never had any kids.

Site Manager: You may not be with him anymore, but did you get a divorce or legal separation?

Taxpayer: I feel like we're separated.

Site Manager: Did you go in front of a judge and make it a legal separation?

Taxpayer: No, I can't afford all that.

Site Manager: Well, in that case you must file as married – either married filing jointly with your husband or married filing separately.

Taxpayer: There's no way I'm filing with him. I don't think you really know how to handle this right. I've filed as single for two years now and I got the EITC with no problem.

Site Manager: Well, actually since you were married, those returns were wrong and that EITC was claimed in error. You have the option of filing an amended return and paying back the EITC.

Taxpayer: No way. I'm going to find a tax preparer that understands my situation.

Site Manager: That's certainly your choice. You might want to keep in mind that from an income tax perspective you would be better off getting a divorce. There are some legal clinics who provide low-cost assistance.

Comments: Sound familiar? The thing is, married is married and unless the taxpayer has dependent children who qualify her for head of household, she is stuck with no EITC. The last comment about getting a divorce is not appropriate in some cases. It probably depends on how the conversation is going. We want to be careful not to interfere with personal matters while providing good tax assistance.

Error Discovered by the IRS

Taxpayer: I just got this letter from the IRS that says that you made a mistake on my return. I thought you guys knew what you were doing. Aren't you certified by the IRS?

Site Manager: Yes, we are certified by the IRS and I'm sorry about the trouble. Let me look at the letter and see how I can help.

Taxpayer: Here it is. Will this take a long time? I'm parked by a meter that runs out soon.

Site Manager: We'll take care of this as quickly as possible. Your letter indicates that you purchased health insurance through the Marketplace, but it wasn't reported on your tax return. Do you have a Form 1095-A?

Taxpayer: You mean this? (Taxpayer extracts an envelope from a big messy pile of documents. It contains a Form 1095-A, Health Insurance Marketplace Statement.) I gave all my papers to the gal who did my forms.

Site Manager: Good, you have the right form. I'll use it to prepare the Form 8962, Premium Tax Credit, mentioned in this letter. Then you can send the Form 1095-A and Form 8962 back to IRS. This should only take a few minutes. I'm sorry that this wasn't done when we prepared your return last month. I apologize that we missed this.

Taxpayer: That's OK. At least you can fix it. I know that you guys try to get things right.

Site Manager: All finished. It turns out that your refund is $200 less. The advanced premium tax credit that you received during the year was more than your actual premium tax credit. Let me show you…

Comment: Is this mess the tax site's fault? Maybe. Who knows? The taxpayer may have answered "No" to the Marketplace question, may not have had the Form 1095-A with the other tax documents, the preparer may not have asked about Form 1095-A, or the preparer may have stared right at the thing and just goofed and ignored it. At any rate, it's nice to go ahead and say, "Sorry," anyway rather than try and determine who was at fault. In a case like this, we are sorry that the taxpayer was inconvenienced, no matter what the cause.

Error Discovered by the Tax Site

Things are a little trickier when the tax site discovers an error; for example, a miscalculation by the tax preparation software – you know what I'm talking about. There is the issue of breaking the news to the taxpayer and then the logistics of making the correction. Should you call or write to the taxpayer and have the taxpayer return to the site? Send the taxpayer an amended return in the mail? Call the taxpayer first and then send something? The protocol is up to each site and depends on the kind of error and the action that needs to be taken.

Any effort to get a taxpayer to return to the site should include:

  • name and address of the tax site
  • tax site hours and the best time to come
  • the reason the taxpayer needs to return
  • an alternative to returning to the site
  • a phone number for follow-up
  • an apology for the inconvenience

Many sites probably start with a phone call:

Site Manager: Hello? Is John Doe there?

Answerer: No.

Site Manager: Would you please tell him that his tax preparer called and that there is a problem with his tax return and he needs to come back and get it fixed.

Answerer: Sure. OK.

Site Manager: This is really important! Make sure that you tell him this right away. He needs to take care of this to avoid big problems with IRS.

Comments: This unfortunate exchange is problematic for several reasons. First, the site manager should not reveal to anyone other than the taxpayer that there is a problem. Moreover, the sense of alarm is disproportionate to the situation. The best thing is to be vague about the reason, but insistent that it is important. Also, the caller needs to provide specific information – like the site location and hours of operations. When a taxpayer can't be reached by phone, a letter might be preferable.

Site Manager: Hello? May I speak to John Doe?

John: This is John.

Site Manager: This is Mary from the Center for Tax Help and Financial Fun. I'm calling about your taxes. (John hangs up.)

(Second try.)

Site Manager: John Doe, please.

John: Yes.

Site Manager: Please don't hang up. I need to talk to you about an issue with your tax return.

John: There must be some mistake. I get my taxes done at the Main Street Library.

Site Manager: Yes, I'm calling from the library where we did your tax return. When we sent your return to IRS, it was rejected because you were claimed as a dependent on someone else's tax return.

John: Oh. Maybe my parents did claim me after all. Can I come back on Saturday?

Comment: Despite the best outreach efforts, many taxpayers are not aware of the organization that runs a VITA site. They just remember where it was done. Be clear who you are.

Once a taxpayer is back at the site:

Site Manager: We asked you to come in today because we think that we found an error on your tax return.

Taxpayer: Am I in trouble?

Site Manager: No. This is something we can address. When we prepared your return last week, it did not include an individual shared responsibility payment - even though you had no insurance. There was a glitch in our system and we did not recognize the omission. I apologize for the error.

Taxpayer: Huh? I don't get it.

Site Manager: Most taxpayers are required to have health insurance and if they don't, they must pay a penalty on the tax return. In your case, the penalty is $695. Instead of a $2,000 refund, you should get $1,305. I can prepare an amended return to make the correction.

Taxpayer: What if I don't do anything? Maybe I can get away with not paying the penalty? You said they accepted my return, right?

Site Manager: I am confident that IRS will discover the error. If you don't file an amended return, IRS will eventually send you a letter asking about this. Whether you file an amended return now or wait for the IRS notice is up to you.

Taxpayer: Gee, I don't know what to do.

Site Manager: Let me remind you that this office closes after April 18. So if you want our help, you may want to just take care of this today.

Taxpayer: Yea, OK. Let's do the amended return and get this over with now.

OR

Taxpayer: Why would I want your help when you already messed things up? No thanks. Good-bye.

Comment: All we can do is apologize and offer advice and assistance. The rest is up to the taxpayer.

Summary

Tax law is complex and sometimes mistakes are made. As tax preparers, VITA staff often end up in the position of breaking the bad news and making the apology. The important things are that we say we're sorry and make things right.

Speaking of foul-ups, here's one of my all-time favorites. I never tire of the story of Mrs. Whitcher and her social security number that was used by thousands of people. Makes our little reject problems seem pretty easy, right?

For more information on how to navigate the ACA miscalculations, click here to learn more about what you can do to help taxpayers potentially impacted by the TaxSlayer software error.

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