Will doing your taxes yourself cause a red flag if you previously used a tax preparer & your income increased?

Question

I have used the same person at H&R block to do all my tax stuff. This year I sold a lot of stock (ESPP & own) which increased my income into the next & most audited tax bracket. When I handed the paper work to H&R block, the eyes glazed with confusion, didn't do any cost basis calculations, and said I owed $10 grand more than the number I got from turbo tax. I ended up filing an extension, paying what I thought I owed and am now in a pickle.

Will the IRS throw a red flag up if I do my own taxes on turbo tax when my income increases this year and not use a tax preparer, and next year when my income reduces to something more realistic use a tax preparer again?

Answer 1

You may want to try an experienced tax professional other than H&R Block. Look for an E.A. (Enrolled Agent). They will have the knowledge necessary to prepare your return and more than likely at a lower cost. To find one in your area try NATP.com (National Association of Tax Professionals).

I don't believe the securities transaction will draw any extra scrutiny from the IRS no matter what you do. It is clear it is a one time item on your schedule D.

Answer 2

You obviously ran into an incompetent boob at Block.  Sadly they have far too many of those clowns on the payroll.

The only time a tax preparer's information on your return increases your odds of an audit is if the tax preparer has a record of fraudulent or improper return preparation.  Other than that, the odds of an audit are solely based upon the numbers you reported on your return.

If you used Turbo Tax and followed the instructions carefully and used valid cost basis information then your return should pass muster with the IRS.  If you are challenged by the IRS, as long as you have your proof of your cost basis available, an audit will be a simple paper exercise and won't result in any extra tax.  The auditor will typically take a random sample of the reported transactions and ask for proof of your cost basis.  If that passes muster, they'll generally pass on the rest of the transactions on the odds than an error is unlikely and the chance to levy additional tax is low.

Now that you've handled it on your own -- probably successfully -- don't waste your money on Block or the other tax prep mills.  Using modern tax software, most taxpayers can handle it themselves at lower cost and often do a BETTER job, as you are now learning.

Answer 3

No, no red flag for that.  But why would you pay a preparer next year if your situation is simpler?

Answer 4

Nope.

Answer 5

Probably not.  But it doesn't really matter... as long as it's right, it doesn't matter who prepared it.