People misunderstand the concept of liability. Yes your tax professional is liabile for fraud or gross misconduct, but if they make a mistake which results in unpaid taxes or fees you're still the one on the hook.
replyTypically you are on the hook for paying the actual taxes and penalties, but if you acted in good faith on the negligent advice of a tax professional many jurisdictions allow you to recover the costs of penalties and interest accrued as a result of the negligent advice.
replyHow much money does that take?
replyHow long is a piece of string?
replyYeah, I looked him up just now actually, and he has a 3-star rating on Yelp... Which I think is pretty low for accountants?
replyI think the red flag should have been when he printed out all my tax returns and made me pick them up in person, and didn't even send a digital copy.
In this case accountant DID NOT take liability for mistakes.
replyIt's not the accountant that paid $20k for his mistake but the accountant's client.
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replyi'm a bit unclear who has the liability even when you use a CPA. accountants are humans that sometimes make mistakes.
replyThe IRS made it crystal clear to me long ago. The tax filer is responsible for everything on the tax return, regardless of the preparer. Of course, accountants can be liable in other ways, but the filer has to pay the fines if the accountant makes a mistake.
replyFrom the IRS' point of view, the tax-payer is responsible for paying all of it. You can then turn around and sue to recover any of the fees/fines or penalties incurred as a result of an error made by the accountant, not the actual taxes though.
replyIt seems disingenuous by our government. Create a tax strategy that is so complicated, people feel like they have to hire professionals. However, if the professionals err, it's the citizenry that pays the penalty.
replySeems like simplify or just erradicting the tax code would be more just at this point.
In NZ the liability is generally on you and not the accountant.
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reply> Someone still needs to take liability for mistakes.
replyI am not aware of setups available to me that would transfer liability onto accountant.
So in either case I am taking liability.
(also, I am pretty sure that if corporation loses 10 millions over accountant making bad decisions, they are not going to recover that funds either)
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replyyeah i think liability ultimately lies on the individual. of course, you could sue your accountant, but that feels hard, maybe almost as hard as suing the model providers.
replyYes, at least in the US the individual must sign their own return.
replyAt least in Poland it is not viable. Friend's business lost noticeable amount of money because accountant has not filed taxes and lied that they filed and lied that they checked it.
replyAnd there was no real path to recovering funds, except small part, after long court case.
At least they were able to fire them without severance pay.
This seems to be usual. Accountants are liable for crimes like embezzlement, but tax authorities hold individual tax payers responsible. If tax payers want to recover losses they have to go to court, which is often risky because accountants will say the client didn't do A, B, and C.
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