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If a CPA makes a mistake that results in interest and penalties from the IRS....
Posted on 1/28/24 at 11:38 am
Posted on 1/28/24 at 11:38 am
Does that CPA bear responsibility for the cost incurred to their client? Or, can they create the problem and just throw their hands up?
I am in this situation right now where a large sum of interest was submitted with tax prep paperwork, but left off the actual tax preparation in 2021.Pretty substantial interest and penalties due.
I am in this situation right now where a large sum of interest was submitted with tax prep paperwork, but left off the actual tax preparation in 2021.Pretty substantial interest and penalties due.
12
Posted on 1/28/24 at 11:54 am to Tigahs24Seven
You can always request that the IRS waive the interest and penalties and typically no, the CPA isnt responsible since you ultimately signed off on the tax work. Read your engagement letter carefully.
You can always amend your tax return to include the interest as well and pay the liability on the interest income
You can always amend your tax return to include the interest as well and pay the liability on the interest income
Posted on 1/28/24 at 12:06 pm to Tigahs24Seven
I have never come across the IRS besides writing checks to them, but I assume that if you do have a CPA they are more lenient on any screw ups. Having a CPA means you don't know how the tax rules are, and you want to pay your fair share and not hide from or avoid paying taxes, but you also want to take advantage of the laws on the books that will help save you on taxes.
The CPA is not liable, although if it was a crooked CPA I am sure some attorney can go after him.
Maybe someone with experience can chime in.
The CPA is not liable, although if it was a crooked CPA I am sure some attorney can go after him.
Maybe someone with experience can chime in.
This post was edited on 1/28/24 at 12:09 pm
Posted on 1/28/24 at 12:17 pm to Mariner
You are in my experience responsible for your own return even if it’s prepared. Typically the engagement letter will explain how they will handle this. We had a couple instances where maybe we’d discount our fees for good faith.
Only thing I could think may change this is if the CPA could be shown to be intentionally negligent or fraudulent. But even then you probably are paying the IRS and trying to get it back elsewhere.
Only thing I could think may change this is if the CPA could be shown to be intentionally negligent or fraudulent. But even then you probably are paying the IRS and trying to get it back elsewhere.
Posted on 1/28/24 at 12:27 pm to Tigahs24Seven
quote:
Does that CPA bear responsibility for the cost incurred to their client? Or, can they create the problem and just throw their hands up?
The CPA does not bear responsibility to the IRS, unless they are knowingly preparing fraudulent returns or conspiring with someone to cheat the government. Your obligation is to the IRS. The CPA has a professional responsibility to you, not the IRS. I’d send a letter to your accountant telling them to put their E&O carrier on notice.
Posted on 1/28/24 at 3:06 pm to TigerinOkieHell
quote:
Only thing I could think may change this is if the CPA could be shown to be intentionally negligent or fraudulent.
That’s what I am thinking. The problem is is that if he is doing that, the client is likely in on it.
Posted on 1/28/24 at 3:27 pm to Tigahs24Seven
You earned the income, so you would definitely be responsible for that portion.
In my limited experience, if you work w the IRS, they are often willing to waive/negotiate the penalties & interest if you’re able to make payments timely.
If it’s truly the error of the CPA, they will often waive their fees to correct the mistake when it’s an obvious oversight on their end and will do their part to reduce/eliminate the fees & interest
In my limited experience, if you work w the IRS, they are often willing to waive/negotiate the penalties & interest if you’re able to make payments timely.
If it’s truly the error of the CPA, they will often waive their fees to correct the mistake when it’s an obvious oversight on their end and will do their part to reduce/eliminate the fees & interest
Posted on 1/28/24 at 4:12 pm to Tigahs24Seven
They can throw their hands up all they want, it just depends on how much they want you as a client and how much you are willing to press it.
If they truly made a mistake it’s a professional decision on their end on how to fix it.
I’ll say, my experience in the past with CPA’s briefing me on what we did was poor. I’m not sure how they can’t take blame if they can’t take 5 mins to make sure I understand what they did for me in an email or phone convo. Most of the time I’m sending them my info and they are asking for a signature and sending it in, no real chance for a discussion. So I’m not sure how I’m supposed to really review anything.
If they truly made a mistake it’s a professional decision on their end on how to fix it.
I’ll say, my experience in the past with CPA’s briefing me on what we did was poor. I’m not sure how they can’t take blame if they can’t take 5 mins to make sure I understand what they did for me in an email or phone convo. Most of the time I’m sending them my info and they are asking for a signature and sending it in, no real chance for a discussion. So I’m not sure how I’m supposed to really review anything.
Posted on 1/28/24 at 7:08 pm to Tigahs24Seven
IRS wants their money and isn’t likely to waive anything. I doubt their staff is allowed any leeway in that.
Posted on 1/28/24 at 8:37 pm to Tigahs24Seven
The thing that burns my arse is when they come up with some random underpayment and take 18-24 months to let ya know. I once underpaid by like $4 on my 2020 return, sometime in 2022 I owed 12-13 bucks, all that interest built up over time.
I would have been seriously hot had it been a sizeable under payment and subsequent penalty.
I would have been seriously hot had it been a sizeable under payment and subsequent penalty.
Posted on 1/28/24 at 9:33 pm to Billy Blanks
Alabama is the worst for this. If they say you underpaid by $1 they add two $50 late fees and underpayment fees to the bill. I always overpay by $5 just to not have a $100 fee.
Posted on 1/29/24 at 11:00 am to Tigahs24Seven
If I make the mistake, based on the information you provided to me, I will refund my fees to cover the interest and any penalty. I will also not charge you for an amended return / contacting IRS if required.
Typically, we can try to get penalty abated, but IRS doesn't typically remove interest.
You are responsible fot the tax (as you would have been had the return been correctly filed).
Yes, you should review your return before filing, and you should know enough to know if a "large sum of interest" was left off, and you should alert to the fact.
In my experience, it is very, very rare for a CPA to just completely leave off an income item if it was provided. Usually, the client did not provide it, and it was a new one-time item, so the CPA did not know to ask for it. The engagement letter also says you have provided us with all amounts of income.
If a CPA admits to fault, and also won't help you fix it, that's a problem.
Typically, we can try to get penalty abated, but IRS doesn't typically remove interest.
You are responsible fot the tax (as you would have been had the return been correctly filed).
Yes, you should review your return before filing, and you should know enough to know if a "large sum of interest" was left off, and you should alert to the fact.
In my experience, it is very, very rare for a CPA to just completely leave off an income item if it was provided. Usually, the client did not provide it, and it was a new one-time item, so the CPA did not know to ask for it. The engagement letter also says you have provided us with all amounts of income.
If a CPA admits to fault, and also won't help you fix it, that's a problem.
Posted on 1/29/24 at 11:05 am to Tigahs24Seven
Only time in my life I ever used a CPA I almost got fricked. He made a big mistake that resulted in me owing $2,000 so I looked it over and he counted something twice. Simple mistake that a CPA never should’ve made. I pointed it out to him and got a simple “oh I’m sorry about that” like it happens all the time.
I went back to using TurboTax and haven’t looked back since then.
I went back to using TurboTax and haven’t looked back since then.
Posted on 1/29/24 at 11:06 am to baldona
quote:
I’ll say, my experience in the past with CPA’s briefing me on what we did was poor. I’m not sure how they can’t take blame if they can’t take 5 mins to make sure I understand what they did for me in an email or phone convo. Most of the time I’m sending them my info and they are asking for a signature and sending it in, no real chance for a discussion. So I’m not sure how I’m supposed to really review anything.
CPAs are busy at certain times of year (you know that) and the amount of time I can provide going over it is related to the time of year.
For every client, I will e-mail them a very short summary, pointing out significant changes if any.
If I finish your tax return by early March, or anytime in May - August, I am more than happy to discuss it with you in full detail.
If you sent me your stuff late, and I'm finishing and sending your return on April 13th, your options are to sign without discussion, or, extend and we can talk about it in May.
No, I do not have 5 minutes, that time of year, to go over every tax return. By April 1, I'm no longer answering any phone calls. I'll call you back - or have someone call you back - when we can. E-mail is best.
And by the way, sending your info "late" to me means I receive it after March 8th.
Any good CPA wants you to understand your tax situation. But, time is hard to come by at certain times of the year.
Posted on 1/29/24 at 3:23 pm to LSUFanHouston
quote:
CPAs are busy at certain times of year (you know that) and the amount of time I can provide going over it is related to the time of year.
Haha, oh I know. I extend every year immediately I'm busy right now also so I just say frick it and punt until the summer. Just not worth it.
That was mostly tongue in cheek, I know March and April is hell for you guys. I was just saying that for a CPA to tell a client they should have reviewed it is akin to a lawyer telling a client they should have reviewed their submitted legal work.
Posted on 1/29/24 at 4:12 pm to baldona
You should absolutely be reviewing your return. It's wild to me that people don't or think they shouldn't.
Posted on 1/29/24 at 6:03 pm to Tigahs24Seven
My CPA is a JD. If he loses a case in which he was CPA (never has), he pays his costs.
Posted on 1/29/24 at 6:33 pm to LSUFanHouston
quote:
No, I do not have 5 minutes, that time of year, to go over every tax return. By April 1, I'm no longer answering any phone calls. I'll call you back - or have someone call you back - when we can. E-mail is best.
And by the way, sending your info "late" to me means I receive it after March 8th.
Any good CPA wants you to understand your tax situation. But, time is hard to come by at certain times of the year.
Mine wanted my expense by Jan 24th
And 1099 list by Jan 8th.
Posted on 1/29/24 at 7:12 pm to Tigahs24Seven
quote:
Does that CPA bear responsibility for the cost incurred to their client? Or, can they create the problem and just throw their hands up?
I am in this situation right now where a large sum of interest was submitted with tax prep paperwork, but left off the actual tax preparation in 2021.Pretty substantial interest and penalties due.
CPAs carry errors & omissions insurance for this very reason.
Posted on 1/30/24 at 6:17 am to FinleyStreet
quote:
You should absolutely be reviewing your return. It's wild to me that people don't or think they shouldn't.
Sure, and I do. I like to stay educated on what and why without a doubt. But I’m not a cpa??? Isn’t that what I’m paying them for?
Does a lawyer request someone review their work before submitted? Does an engineer ask to review their math? A CPA’s errors and omissions excuse should not be ‘the client should have reviewed it’. That’s absurd
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