Can you sue your CPA or tax preparer if the IRS audits your tax returns and finds a mistake made by the CPA?

Question

I was audited by the IRS for my 2004 federal income tax returns and they found an error, which then affected my 2005 federal returns. I am being charged interest for both years. I am appealing their decision but I would like for my CPA who prepared my returns to share in the mistake. Is it possible to sue your CPA for such mistakes and is it common to sue the tax preparer for mistakes on income taxes? It appears that the CPA was either not aware/familiar with a tax law or just made a mistake. Whatever the case, I was audited and I have to pay for this mistake because I signed the tax returns. Please help!

Answer 1

You can't sue the CPA for the tax amount, you would have had to pay that amount anyways. As for the interest, you had use of the money for the time that you didn't pay the tax on it, but you could ask the CPA to pay for the interest. If there is any penalty the CPA should definitely pay for that. Also, you might see if you can some of the tax prep fee you paid returned to you. You might also want to look for another tax preparer, one who is more up-to-date on tax law changes. If the CPA refuses to pay anything, then you could sue him, more than likely in small claims court, and also report him to your state's CPA society.

Answer 2

Society as a whole is a very litigious one. But don't simply rush out and sue the CPA because you have been audited and assessed additional tax and penalty.

CPAs should back up their quality of work. Therefore, if a mistake was made by the CPA that caused you penalty and interest, that CPA would and should pay that penalty. The CPA will probably stand by his work. The tax due would be your responsibility very simply because the tax was your liability (whether CPA or IRS agent calculates that amount).

Depending on your CPA, I would assume that person would want to research the adjustment by the IRS. The IRS may be wrong - surprise, sometimes they are.

You also may not have supplied the neccessary documents to the CPA to properly complete the return.

In the end, if the CPA is truly wrong in the preparation of the tax return let that CPA know. Don't just sue. The CPA will stand by his/her work and should pay the interest and penalty. The tax law is vast and no CPA knows every rule and regulation.

If the CPA is in the wrong and does not accept his/her responsibility, then yes go the next step. Send/Speak of a "threat" of litigation should the CPA not pay the interest and penalty. Still no satisfaction, then finally litigate.

Good luck.

Answer 3

Yes, you can sue your CPA, but consider that the burden of proof that the error was made by your CPA is yours. You did not state that your CPA was part of the audit process. Most CPA's would have represented you in the audit for returns they prepared for free.
You may have signed an engagement letter, that states you are responsible for the review of your return for accuracy and when you signed the return you accepted the return as being accurate as prepared.
CPA's prepare tax returns based upon the information supplied to them. I am not aware of any CPA that will not stand behind their work, even if an office staff member prepared the return and they signed off on it.
Consider asking your CPA to review the paperwork you received and the returns prepared, and ask them for relief due to their error. if you can not reach an agreement over this issue, consider filing a complaint the licensing authority in your state, it is usually called Board of Accountancy, and can be found on line--often you can find relief this way without the expense of litigation.
You may even want to insure your CPA does not outsource the work, some larger firms are using preparers in India. Which is something I oppose.
I wish you the best.

Answer 4

Have you talked to the CPA? If it was truly his or her mistake, most reputable CPA's would reimburse you for interest and penalties - the tax is yours to pay, since you'd have had to pay that in the first place if it had been done right.

Don't be so eager to run out and sue somebody if you haven't even talked to them first.

By the way, some things are gray areas and couldn't really be looked at as mistakes on the part of the preparer even if an auditor did disallow them. Others are clear law. The case you have to get reimbursed would depend on which type of issue you're dealing with.

Answer 5

Any reputable and competent tax professional should have known about the advanced EIC payments. they show up on the W-2. That being said, the tax payer is ultimately responsible for all items on the tax return. Any additional tax would normally be the responsibility for the tax payer because that is tax yu would have owed if there had been no error. Interest and penalty are also your responsibility, although many preparers will pay interest and penalties, they are not required to. You can always sue the preparer, but you may only get the interest and penalties.

Answer 6

Yes, you can sue. However, if you make him aware of your intention to be made whole by way of a certified letter, you may not have to sue at all. Most people will go to great lengths to avoid the cost, time and trouble of a lawsuit. Give him the chance to rectify the problem out of court first. You can always sue if he won't stand behind his work (just don't wait longer than the statute of limitations allows for filing of a suit).

Answer 7

Yes, you could sue for interest, penalities and your fee. Anything else you would of owed anyway. No way around that but, I would consult whoever prepared your return about your situation before you take them to court.

Answer 8

The same question comes up again