How can I avoid being fined or penalized because my accountant might have failed to file my taxes on time?

Question

I decided to use a CPA because my tax situation got complicated this year. I have attempted to contact my accountant several times and cannot get a response from him at all. It is now after the filing date, and I am concerned that he has failed to file my taxes and that I may now face some kind of penalty.

I feel that if he was unable to accomodate my taxes this year he should have communicated that to me so that I could have sought out an alternative means to filing my taxes properly.

So, my questions are:

First, what can I do about my tax situation? Is it possible to avoid being fined or penalized?

Second, are CPAs held to some any kind of practicing or licensing laws? If so, is there a complaint process? Is it possible to hold him accountable for any fines or penalties that I might incur?

Answer 1

Contact the IRS to see if your return has been filed. If you can, try to obtain information on your CPA prior to calling, like the PTIN, CAF (if any), CPA number, etc. It may be in other documents you've gotten from the CPA - particularly previously filed IRS documents. The IRS has a process and form for complaints against CPAs and preparers.

I would be careful not to do much against the CPA until your taxes are filed, either by this CPA or by another CPA (or preparer or by yourself). If you're resolved to go somewhere else now, then pull that trigger and don't pay the CPA's bills until the full amount due is negotiated (presumably down to zero due).

You can ask for forgiveness from late penalties if you can show "reasonable cause" for the lateness. You can also freeze any interest from accruing by estimating and paying your taxes now through eftps.

If the CPA has not told you an amount due, then there's good reason to believe the return was not filed. However, if you had some arrangement or prior discussion of the amount due, then it may be possible that he submitted your taxes and attached a bank account payment number (did you provide him one?).

You really need to get in contact with the CPA to understand what's been done, if anything. Try contacting other people in the enterprise, if there are any. If you know other clients of the CPA, contact them. If you were referred by friends or family, use them. If you know where the office is, try going down there (be direct but never aggressive).

Remember to file a complaint with the IRS for "preparer misconduct" on Form 14157. You can file compaints with the state board of accountancy or other responsible licensing agency (e.g. CA, TX, NY). I believe Form 843 is the appropriate form to request abatement of the late penalties (with brief explanatory attachment), but you can review the instructions and let your next CPA consider it.

Answer 2

The first thing that you need to know is the fact that you hired an accountant gives you considerable protection against a "negligence" charge. Specifically, the burden of proof now shifts to the IRS to prove that you were negligent; before you hired a professional, the burden of proof was on you to show that you were not negligent.

The main thing you have to do is to prove that you hired the CPA. If there was a mistake or oversight, a good tax accountant will own up to it, putting you in the clear. Possibly s/he didn't have time to do your taxes and filed for an extension on your behalf (although you should have been notified).

Not all accountant's are that honest, however, so the first thing you need to do is to prove that you hired the accountant in a timely fashion. Eventually, the proof will be in the bill. But any correspondence to or from the accountant would be very helpful, and at the very least, you should have a phone bill that records your calls to his/her office.

There are procedures to be followed to remedy the problem if one exists, but I'm not qualified to discuss them. Shortly after April 15, you may want to go to the IRS office, explain the situation, and ask them about the status of your return (filed or not) and how to fix any problems.