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When Can I Sue a Tax Accountant?

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By Christopher Coble, Esq. on March 22, 2016 3:57 PM

You gathered up all your W-2s, expense receipts, and other tax documents and handed them over to your accountant. Now you're looking at an IRS audit and possible fines for filing improperly, late, or not at all.

If your tax accountant screwed up, are you on the hook for their mistakes? And if so, do you have any legal recourse?

The Bad News

In terms of penalties, it's your tax return, so it's your responsibility. Even if it was your accountant's mistake, or even if your accountant didn't file anything at all, any late fees or fines instituted by the IRS go on your bill, not your accountant's. So you'll have to pay IRS tax penalties, if applicable, and probably before going after your accountant.

The Good News

It may be possible to recoup those fines and fees from your tax accountant. If your accountant refuses to fix any errors or reimburse you for IRS penalties, you may be able to sue your accountant for malpractice and claim those penalties as damages.

Accountant malpractice claims are very similar to standard negligence lawsuits. You need to prove that:

  1. The accountant owed you a duty of care (that you hired him or her to handle your tax return)
  2. The accountant breached that duty (that he or she negligently or purposefully violated standard accountant procedures)
  3. You were injured (that you suffered some financial harm like additional fees, fines, and/or penalties)
  4. The accountant's breach is what caused the injury (that you wouldn't have been fined had the accountant not made mistakes)

If your malpractice claim is successful, the accountant may need to reimburse you for any IRS penalties. And if your accountant purposefully misleads you, makes material misrepresentations about your tax obligations or his or her services, or otherwise misappropriates your funds, you may be able to sue your accountant for fraud.

If you're thinking of suing your accountant, you may want to consult with an experienced tax attorney beforehand.

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