Individuals and businesses rely on accountants to file timely, accurate, and complete tax returns and ensure compliance with tax laws and regulations. Accountants owe a fundamental duty of care to understand federal and state tax rules and use their knowledge and experience to advise their clients. Those who fail to abide by this duty risk serious legal problems and financial losses for those they should be properly guiding. This is where the issue of malpractice enters the equation.
If you or your business incurred tax penalties because of an error that your accountant or accounting firm made, you might have the right to seek legal recourse. The attorneys of Stanfield Bechtel Law can take a look at your case and get started seeking a positive resolution.
Different Types of Tax Errors
Taxes are complex, and the accountants who handle them should have sufficient experience with the state or federal tax code to render accurate advice to their clients. Potential mistakes include:
- Missing a filing deadline
- Not requesting a filing extension
- Using an incorrect filing status
- Miscalculations and math errors
- Missing tax schedules and information
- Not taking advantage of tax deductions or credits
- Misuses of deductions or credits
- Typos, misspellings, and clerical errors
- Sending the tax return to the incorrect place
- Errors with bank account and Social Security numbers
Some of these errors can cause an individual or company to pay more in taxes than it should. But others can lead to major penalties and perhaps even criminal punishments. In many cases, the person or entity whose name appears on the return may be required to pay penalties and interest because of the mistake.
When Does a Tax Mistake Become Malpractice?
Professionals, including accountants and other tax preparers, are not required by law to be perfect. Making a mistake is not proof of malpractice; rather, the mistake must be unreasonable in light of the circumstances. Proving professional negligence requires establishing the following elements:
- Duty of care: Accountants owe a duty of care to their clients, meaning they must meet certain professional standards concerning their work. With respect to taxes, this means abiding by the Generally Accepted Accounting Principles (GAAP) or Generally Accepted Auditing Standards (GAAS).
- Breach: A breach occurs when, as a result of negligence, the accountant violates the duty of care. Failure to apply GAAP or GAAS could be an indicator of negligence. Generally, the mistake must be something that a competent accountant, under the same or similar circumstances, would not do.
- Causation: Next, the tax preparer’s breach must be the cause of injury to the client. If the mistake did not cause some sort of harm, then the malpractice case fails. Perhaps the accountant made a mistake, but quickly corrected it by filing an amended return. Even though the mistake happened, the IRS or other taxing authority may have levied no penalties because of the correction.
- Damages: Finally, the client must demonstrate exactly how the accountant’s error harmed them. As mentioned above this will likely come in the form of penalties, interest, or paying more in taxes than should have been paid. Criminal repercussions are also possible, however.
What To Do If Your Tax Preparer Makes a Mistake
If your accountant made an error with your tax return or a related matter, it will be essential to act quickly so you do not unnecessarily incur extra penalties and losses. You will need to ask these critical questions:
- What did your accountant do wrong? Find out what exactly went wrong, such as the items listed above. Document as much about the mistake as you can.
- Why did your accountant make the error? Honestly evaluate whether anything you did might have contributed to the mistake. For instance, did you neglect to turn over any records to your accountant?
- What can you do to mitigate the problem? Remedial action will be essential to preventing the problem from getting worse. Call an attorney before speaking with the taxing authority to ensure you take the right steps forward.
How a Malpractice Attorney Can Help
Reaching out to an accountant malpractice attorney is a critical step to protecting your rights and seeking compensation for any losses you have experienced. Your lawyer may advise you, first, on how to best mitigate and begin correcting the situation. Your attorney will also review the circumstances surrounding the mistake and obtain records to document what went wrong. If a lawsuit is ultimately necessary, your attorney can take additional steps through discovery to obtain more evidence which could demonstrate the accountant’s liability.
It may be possible to settle the case out of court with the accountant’s liability insurance carrier. Your attorney can negotiate with the accountant’s insurer and attorney to attempt to reach a reasonable settlement that compensates you for your losses. However, if a settlement cannot be reached, we will take your case to court and seek all available damages.
Contact Our Tax Penalties and Accounting Malpractice Attorney
Accounting malpractice is serious and it demands serious legal representation. If your accountant made mistakes that caused you to have tax penalties, connect with the legal team at Stanfield Bechtel Law. You can review your legal options and schedule your confidential consultation with us today.