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City tax audit

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ryanh800

Junior Member
What is the name of your state? Michigan

I recently got audited for unpaid city taxes dating back to 2001. I was told by my accountant back in 2001 that my residence was just outside the border of the city zone. As I work outside the city, I was not obligated to pay city taxes (do not live/work in city). A couple years ago I noticed an updated zoning map and that my residence was now just inside the border. I brought this to the attention of my accountant and he said that he was unsure when this changed (if it had changed at all) and that if I filed a city form then it would bring up a red flag and make cause for an audit. He stated we could either file then or wait and hope not to get audited. Well, I chose to wait, and now I get audited. I submitted the audit letter to my accountant, then received a packet in the mail with the 1040 forms dating back to 2001 filled out with the missing city tax information. Taxes totalled over $3000. Not happy! To top it all off, he sent me a bill for $150 to prepare it. My question is, is there anything I can do legally to somewhat hold my accountant accountable for these misfilings? As my wife, I, and our 6 kids are struggling to get by as it is, this was not the best timing in the world to rececive this type of letter. Any help would be appreciated!!!
 


tranquility

Senior Member
I don't practice in a state with special city taxes, so I have no direct knowledge. I know if I did, it is unlikely that I would decide if a person resided in a city or not based on geography. I might point out the issues and my thoughts and advise the person to tell me how to treat things. If you accountant actually told you you were not liable for city taxes because you lived outside the city, that may be a problem. That would not absolve you from the tax, it just means you can demand any penalties and could certainly ask for any interest due to the mistake. I find it unlikely you will have the ability to prove it in court, so negotiations is the best strategy. I would never charge to amend returns if the reason I was amending them was my error.
 

TinkerBelleLuvr

Senior Member
To which city do you owe? Grand Rapids, Battle Creek, etc.

Secondly, you may be able to hook the accountant only for the penalties. You have had access to the money since 2001. You will be liable for the interest.

Why would the accountant make a determination as to whether you live in the city or outside the city? On what basis? Did you call the city to find out if you lived IN the city?

Do you own a home and pay property tax?

(yes, I have done Michigan city taxes - that's why I ask)
 

ryanh800

Junior Member
The city in question is Lansing. I never directly contacted the city because I was under the assumption that I did not live or work in the city. For that reason, I never had city taxes taken out of my paycheck. I found out recently I needed to submit a special form requesting my employer to deduct city taxes, of which I did not turn in thinking I was outside the city (I have since turned this form in after finding out about the audit). The problem I have with my tax preparer is why he did not catch this problem earlier if I had indeed been in the city the whole time. I am a home owner and pay city property taxes. I guess it sounds mainly my fault, but my issue is the problem could have been handled 7 years ago instead of resulting in an audit. Thanks.
 

TinkerBelleLuvr

Senior Member
If you were paying city taxes - then you SHOULD have known that you lived in the city. Sorry ...

you'll have to make arrangements with the city on this one.
 

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