Before You Sign Your Tax Return

Today the IRS released another installment in its “IRS Tax Tips” series, which is available in the Newsroom of the IRS website.  The IRS lists 10 things to keep in mind when selecting a tax preparer.  But perhaps the most important point is something that many may gloss over — the fact that the taxpayer, not the tax preparer, is legally responsible for what is on the return.  Failure to understand this can result in serious tax problems.

The signature on the return is more important than you might think.  The tax return is not considered complete, and will not be accepted, if it is not signed.  The IRS returns tax forms that are not signed or it sends a separate form that, if signed, has the same effect as a signed original form.  If you file electronically, then you also sign electronically by using a five-digit Personal Identification Number (PIN), which has the same force and effect as a signature made with paper and pen.

When you sign your tax return, you are attesting that the information contained in the return is complete and accurate whether you prepare it yourself or not.

If you have someone prepare your return, you are still responsible for the correctness of the return.

~ Form 1040 instructions

How many of us have carefully read the declaration in the signature box at the very bottom of the Form 1040?  This is what you’re promising when you sign:

Under penalties of perjury, I declare that I have examined this return and accompanying schedules and statements, and to the best of my knowledge and belief, they are true, correct, and complete. Declaration of preparer (other than taxpayer) is based on all information of which preparer has any knowledge.

I can’t imagine many people review every single schedule and every page in any kind of detail, although they should.  It is self-evident that you should never sign a blank tax return (as the IRS points out in its Tax Tip) since you would be unable to truthfully declare that you have examined the return.

If you have a preparer who signs (or EA, CPA, tax attorney), the preparer’s attestation is normally based on what he/she has been given by the taxpayer (or by the IRS), whether it be verbal or documentary information.  The preparer is entitled to rely on that information in preparing the return.  However, as you can see, the preparer’s declaration is actually broader than that — the preparer is obligated to prepare an accurate return based on all information and any knowledge he/she might have.