tax preparer mistake

In my experience, if you amend the return as a freebie, offer to pay any penalties, and write a groveling letter to the IRS requesting they waive the penalty because it was your mistake and you're going to pay the penalty if the IRS doesn't waive it, the end result is generally no penalty and a non-litigious client.

In my experience, if the IRS catches it first, you've got more exposure. (In the case I'm thinking of, malpractice coverage paid out for the fees to the CPA who handled the audit triggered by the error, penalties, and maybe interest. But malpractice insurance generally will pay out for reasonable expenses, to avoid the cost of litigation.)

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Best Answer - Chosen by the Community

Sure he can sue you. IRMN understated the truth of the situation: This is America -------- everybody does sue everybody else. But this REALLY doesn't sound like a candidate for a lawsuit, unless there was already bad blood between you or something. My policy is, when it's my mistake, I pay both penalty and interest ---- UNLESS it's a client I'd just as soon be rid of. Then I only pay the interest.

What damages, other than P&I, is he going to be able to prove? I don't think any court would force you to reimburse taxes that he legitimately owed.

And one last thing: Failure to check the active participant box should have the opposite effect than what you stated, I believe. It should disallow the deduction of an otherwise allowed Passive Activity Loss.

"Socialism is a philosophy of failure, the creed of ignorance, and the gospel of envy; its inherent virtue is the equal sharing of misery." ~ Winston Churchill

Can a client sue you for an inaccurate return when there was no fraud involved? can they force you to reimburse them?