What is CPA/Tax Preparer's Liability?

[lala-lou]

What is the name of your state (only U.S. law)? NH

Hello, my friend, who is a CPA, prepares my taxes each year and I pay her for her services. I give her all of my paperwork and she signs them as my preparer. This year, she forgot to include one of my w-2 forms, and as a result, I received a letter from the IRS and owe them $800. I cannot afford this, and the amount I owe is adding up. She is trying to help me fix this or work out a payment plan, but although she admits this was her error, she clearly has no intention of helping me pay. Since I payed her as the tax preparation professional, is she liable for any or all of this, as it was her mistake which caused this to happen?

 

[davew128]

What is the name of your state (only U.S. law)? NH

Hello, my friend, who is a CPA, prepares my taxes each year and I pay her for her services. I give her all of my paperwork and she signs them as my preparer. This year, she forgot to include one of my w-2 forms, and as a result, I received a letter from the IRS and owe them $800. I cannot afford this, and the amount I owe is adding up. She is trying to help me fix this or work out a payment plan, but although she admits this was her error, she clearly has no intention of helping me pay. Since I payed her as the tax preparation professional, is she liable for any or all of this, as it was her mistake which caused this to happen?

Had the return been done correctly you'd still owe the money. A preparer has no liability to pay your correct tax.

 

[single317dad]

Some preparers will pay interest and/or penalties due to their error. It does not sound like you have that sort of arrangement with your CPA.

You can sue for the price of the tax preparation, since the service was clearly not properly rendered.

 

[tranquility]

What is the name of your state (only U.S. law)? NH

Hello, my friend, who is a CPA, prepares my taxes each year and I pay her for her services. I give her all of my paperwork and she signs them as my preparer. This year, she forgot to include one of my w-2 forms, and as a result, I received a letter from the IRS and owe them $800. I cannot afford this, and the amount I owe is adding up. She is trying to help me fix this or work out a payment plan, but although she admits this was her error, she clearly has no intention of helping me pay. Since I payed her as the tax preparation professional, is she liable for any or all of this, as it was her mistake which caused this to happen?

You signed the return that it was correct under penalty of perjury. Even with electronic filing, the return was given to you before you signed the forms to allow for the filing. Mistakes are made and who would be better to know if one of your jobs was missing from the return but you? This is not like a complex matter of reporting where knowledge of the law is required to know the correct result, this is a simple thing anyone who reviews their return should catch.

Now, that being said, if the information was given to the preparer (which is not always easy to prove), he has a responsibility to report it correctly. If he did not, the tax you were required to pay if reported correctly is not his responsibility. As dave128 said, if the return was prepared correctly, the amount owed would still be your responsibility. As well, the interest on the amount owed is not usually the preparer's responsibility as the theory goes you had use of the money for the time and the value of it would require interest. Penalties are where an incorrectly prepared return puts the preparer at risk legally.

Now, there are certainly times where we have forgiven the preparation fees for a return when we have made an inexcusable error. Say a copy of your W-2 was made for your file and you wrote the job on the organizer given to you to aid in return preparation; then we might return the preparation fees as well. I can't recall more than a couple of times out of decades and tens of thousands of returns were we messed up that bad. Because of the client's responsibility to review his return and the issue of what actually happened being difficult to know for certain, a mistake like this (absent the condition already stated) is unlikely to occur. If the client were really a pain about it and the return was small, we might refund and then disengage. I am not aware of any tax preparation lawsuit that was successful for preparation fees for an incorrectly prepared return.