Huge error on our income tax by enrolled agent

[jess100 53]

We have a new tax preparer for 2018. I made it really clear at the outset I did not want to cut any corners.  When we looked over our taxes (sadly after I had signed off on them) I found that  she had missed $6000, of income-one of four rental incomes.  I can't say for sure that I gave her that amount specifically, but I did supply 4 sets of deductions and explained in detail which places were rented, and actually asked about specific deductions pertaining to this rental.   To me, it should have been obvious there were 4 rentals (and hence 4 incomes) but she only put 3 on our 1040, and put someone else's rental income (under 3000) with those expenses.   I think she misunderstood everything I explained to her about our rentals and didn't follow up to clarify.   I take responsibility for some of this confusion, and if it ended here that would be fine.  But there was also a Roth conversion (for which she had the 1099R ) that she failed to put as a taxable rollover. 

I asked her to amend the return, and discussed the rent and the rollover, and a few other items. She had assumed the rollover wasn't taxable based on the 1099R (which clearly showed the money in "taxable"  box). So I called the investment company and called her back immediately after our meeting. 

When I got the amended return there were a few more errors not on the first 1040 (like not taking taxes from my husband's gross income).  But the worst is that the rollover is still listed as not taxable.  In her email about this she said "You will not have to pay tax on the $xxxx Roth distribution as you held it as a Roth IRA for more than 5 years – this results in it not being taxable." 

This is clearly wrong-it was a Roth conversion-not a Roth distribution.  Her lack of understanding about this makes me question her "enrolled agent" status.  How could anyone think I could move money from a tax deferred account to a no tax account and the IRS would never get their taxes?

Because she missed this amount (twice) other income of mine then should have been included in our total income, and hence should have been taxed.   The amount we will owe is about $4000 with whatever penalties and interest is due.

She billed us $700 plus $250 to amend (I have not yet paid her).  I have paid a CPA $500 to review the amended returns for errors and will need to pay this new person approx $400 more to send in a better amended return. 

Does anyone have ideas about my recourse for this?  How do I proceed?  I don't think she should be paid for this, and I'm especially worried it will affect our immigration case, and I'd like to avoid the stress of an audit. If I don't pay her will this affect my credit score? Any ideas?

Edited June 15, 2019 by jess100

[bakphx1 789]

I don’t think for immigration purposes it’s an issue as they only look at whether your income meets the amount to sponsor a beneficiary.  I don’t think anything you described will change that.  They won’t review your taxes in detail.  They’re not trained for that.  

 

The rest sounds like an issue of competence.  As non tax experts, we can only give laymen answers.  I’d ask a tax attorney if you have grounds to not pay and/or sue the preparer for refiling to fix the errors.  

[Randyandyuni 2,682]

On the tax side you want to report the error before they find it, penalties are huge but interest on self reported problems is manageable. I am not a tax expert by any stretch but an $8000 in underreported income cost me close to $17000 with penalties and interest

[jess100 53]

Thanks everyone for your advice.....