Yes, you can sue your tax preparer for professional negligence or malpractice if their failure to file your taxes resulted in financial harm, such as penalties or interest. While taxpayers are ultimately liable for their own tax obligations to the IRS, you may seek damages for mistakes caused by a preparer’s incompetence or neglect.
You may sue a negligent tax preparer if their actions caused financial harm, but you cannot recover legitimate taxes you were required to pay. Researching credentials and watching for red flags, such as refund guarantees or refusal to sign your return, can help you avoid fraudulent or unqualified preparers.
Attorneys, certified public accountants, enrolled agents or anyone who gets paid to prepare tax returns may owe a penalty if they don't follow tax laws, rules and regulations. We mail you a notice or letter if you owe a penalty and charge monthly interest until you pay the amount you owe in full.
Preparers Liable for More Than Just Income Tax Returns
Additionally, tax preparers can face penalties for failing to sign a return or exercise due diligence (e.g., IRC §6695), breaching client confidentiality (IRC §6713), and promoting abusive tax shelters (IRC §6700).
You may also be able to file a complaint with the Internal Revenue Service (IRS) for certain mistakes made by a tax professional. Improper tax filing can result in late fees, penalties, interest payments, and the risk of tax audits.
If convicted, you could face a prison term of up to 1 year for every year you did not file or pay. The IRS could also charge you with tax evasion. This offense is a felony that is penalized by up to 5 years in federal prison for every year you willfully evaded tax by not filing your return or payment on time.
If your accountant isn't responding at all, despite your efforts to communicate clearly and directly, it may be time to reevaluate your relationship with your accountant. A professional relationship, especially one as critical as that between a client and their tax advisor, is built on trust and reliable communication.
The negligence penalty is 20% of the amount you underpaid
This is a steep penalty, and the IRS usually charges it (or, “assesses” it) when taxpayers overstate their deductions or don't report all their income. Negligence is defined under the law as any failure to make a reasonable attempt to comply with the tax laws.
Tax services generate 55% of all accountant lawsuits. Average lawsuit costs start at $54,000, with contract disputes costing $90,000 or more. Third parties (lenders, investors) file 30% of claims, often after client bankruptcies. Common claim types include negligence, breach of contract, and fraud.
There's no official limit to how many years you can go without filing taxes, but the IRS expects you to file if required, and the statute of limitations on the IRS assessing tax or collecting never starts until you actually file, meaning they can pursue unfiled returns from any year, even decades old. While the IRS often focuses on the last six years, waiting increases penalties and interest, and you risk losing any potential refunds after three years; proactively filing past-due returns is always best.
You can report an individual or business to us if you think they're not complying with tax laws.
The IRS 3-year rule generally refers to the statute of limitations for claiming a tax refund, which is typically 3 years from when you filed your original return or 2 years from when you paid the tax, whichever is later, for the IRS to process your claim. For an audit, the IRS generally has 3 years from the date your return was filed or due (whichever is later) to assess additional tax, though this can extend to 6 years if you significantly underreport income or omit foreign income.
First and foremost, reach out to your tax professional. Misunderstandings and oversights can happen or there may be a valid reason for the delay. Give them a reasonable period of time to respond (three days is generally reasonable before attempting to contact them again).
Common Types of Accounting Malpractice
Failing to submit required tax forms or documents on time can have severe consequences. If your accountant's delay caused your business to face late fees, penalties, or loss of a license, you could be entitled to damages.
It is a crime to knowingly prepare a false tax return. Many return preparers are not aware of the severity of civil and criminal penalties for a false tax return. Not only can a CPA lose the ability to represent their client to the IRS, but the CPA can lose their CPA license and potentially go to prison.
One-time forgiveness, officially known as First-Time Penalty Abatement (FTA), is an IRS program that allows qualified taxpayers to have certain penalties removed from their tax accounts.
The IRS routinely brings criminal tax charges against preparers. Tax fraud is serious for the accused and for their clients, especially if the client had knowledge, or should have known that a false tax return was filed on their behalf.
As per the Income Tax Act, Section 194P, individuals above the age of 75 are exempted from filing an ITR. Are NRIs liable to file income tax returns? Filing an ITR is not mandatory for an NRI, but if an NRI has earned more than ₹2,50,000, they must file an ITR.
On the front lines of ensuring ethical practices within the accounting profession are professional organizations and regulatory bodies. These entities play a crucial role in setting standards, providing guidance, and enforcing regulations to uphold the integrity of the accounting profession.
Consequences of Not Filing ITR
Failing to meet this deadline could result in a penalty of ₹ 5000 if the return has been submitted after the due date under Section 234F. The penalty is reduced to ₹ 1000 if your total income is under ₹ 5 lakh for the concerned year.
You can sue an accountant for negligence if their failure to follow professional standards (like GAAP, GAAS, or AICPA rules) causes you financial losses.