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    • Ronson J. Shamoun, ESQ., LL.M.
    • Chandara Diep, ESQ., LL.M.
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  • Home
  • About
    • Ronson J. Shamoun, ESQ., LL.M.
    • Chandara Diep, ESQ., LL.M.
    • Joseph Cole, ESQ., LL.M.
    • Devon J. Arabo, ESQ., LL.M.
    • Lauren Suarez, ESQ., LL.M.
    • Daniel Huynh, Esq., LL.M.
    • Christopher Engelmann, ESQ., LL.M.
    • Leslie Miranda, Esq., LL.M.
    • Brian M. Malloy, Esq.
    • Steve S. Mattia, Esq.
    • Sam Imandoust, ESQ., LL.M
    • Kaveh Imandoust, JD, MBT, CPA
    • Andrea Cisneros Valdez, Esq., LL.M.
    • Martin Schainbaum, ESQ., LL.M.
    • Dod Ghassemkhani, ESQ.
    • Vincent Renda, Esq.
    • Pedro Bernal, Esq.
    • Melanie M. Shamoun
    • Sandie Portilla
    • Renae Arabo
    • Sabri P. Shamoun
    • Hilary Dargavell
    • Lupita C. Torres
    • Jewell Cornejo
    • Kesia Belford
    • Remy Hogan
    • Judith Jeremie
    • Marley Smith-Peters
    • Melanie Chan
    • Tanner DeMera
    • Charles Ecker
    • Anna Gurr
    • Asia Smith
  • Practices
    • ERTC – Call Us Before It’s Too Late!
    • Tax
      • IRS TAX MATTERS
        • IRS Appeals
          • IRS Appeals Process
          • Contesting an IRS Levy
          • Why Retain RJS LAW for IRS Appeals
          • 4 Tips For Navigating The IRS Rapid Appeals Process
        • IRS AUDITS
          • IRS Correspondence Audits
          • What are IRS Field Audits?
          • Initial IRS Compliance Center Audits
          • IRS Office Audits
          • What happens in an IRS Audit?
          • Taxpayer Rights Under IRS Publication 1
          • IRS Warns Taxpayers About Scam
        • NOTICES
          • IRS Notices
          • IRS Letters
          • FTB Notices
          • Avisos en Español
        • IRS Collections
          • Avoiding and Eliminating IRS Tax Liens
          • Collection Due Process Hearing
          • CP 501 – IRS Notice
          • Failure to file a tax return: What happens?
          • How the IRS calculates interest
          • How to get a tax levy released
          • ACS – Automated Collection System
          • IRS Collections Process
          • IRS Interest Abatement
          • IRS Revenue Officers
          • Jeopardy Assessments and Jeopardy Levies
          • National Tax Agencies
          • RJS LAW Approach to Collections
          • IRS Statute of Limitations on Collections
          • Streamlined Installment Agreements
          • Tax Penalty Abatement
          • Taxpayer Assistance Orders
        • IRS Payroll Tax
          • Independent Contractor Reclassification Audits
          • IRS Forms 940 and 941
          • IRS Trust Fund Interviews
          • Payroll Tax Liability Payment Options
          • Trust Fund Recovery Penalties
        • IRS Wealth Squad
        • Offer in Compromise & Tax Settlements
          • OVERVIEW OF OFFER IN COMPROMISE PROCESS
          • The Offer in Compromise Process
          • Appealing an Offer in Compromise
          • How does the IRS evaluate an Offer in Compromise
          • Offer in Compromise and Dissipated Assets
          • Offer in Compromise Requirements
          • Pros and Cons of an Offer in Compromise
          • Why Choose RJS LAW?
          • Offer in Compromise Alternatives
          • Actual IRS Offer in Compromise Results
      • STATE TAX MATTERS
        • EDD California Payroll Tax Lawyer
          • EDD Investigations
          • EDD Collections – Liens, Levies, and Garnishments
        • CDTFA – California Sales Tax
          • California Sales Tax Appeals
          • California Sales Tax Audits
          • California Department Of Tax And Fee Administration – CDTFA
        • California State Tax Matters – California Franchise Tax Board | FTB | EDD
          • California Residency Audits
          • Discharging State Income Taxes in Bankruptcy
          • State Tax Practice – Outside of California
      • CRIMINAL TAX ISSUES
        • Criminal Investigation Division
        • IRS Criminal Investigation Division Tactics
        • Criminal Tax Defense – Tax Crimes
        • Currency Transaction Records & Suspicious Activity Reports
        • IRS Methods of Proof: Tax Fraud and Evasion
        • Methods IRS Agents Use to Locate Assets
        • IRS Special Agent Visits
        • Are You a Criminal Investigation Target?
        • Criminal Tax Attorney vs. White Collar Defense
      • CORPORATE TAXES
      • TAX COURT LITIGATION
      • Innocent Spouse Relief
    • International Tax
    • Estate Planning
    • Trust Litigation
    • Trust, Estate & Probate Litigation
    • Trust & Estate Administration
    • Probate
    • Bankruptcy
    • Civil Litigation
    • Criminal Defense
    • Accidents & Injury
    • Corporate & Transactional
    • Private Wealth Services
    • Real Estate Law
      • Landlord Tenant Law
    • Employment Law
  • Tax Institute
    • 8th Annual USD School of Law – RJS LAW Tax Controversy Institute – July 28th, 2023
    • 7th Annual USD School of Law – RJS LAW Tax Controversy Institute – July 15th 2022
    • 6th Annual USD School of Law – RJS LAW Tax Controversy Institute
    • 5th Annual USD School of Law – RJS LAW Tax Controversy Institute
    • 4th Annual USD School of Law – RJS LAW Tax Controversy Institute
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  • Giving
    • Giving
    • RJS Law Donates Billboard to the Girl Scouts
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Tax Preparer Penalties – When Your Accountant Makes an Error

Tax Preparer Penalties

Tax Preparer Penalties

The IRS (and other taxing authorities such as the Franchise Tax Board) may assess accuracy related penalties against taxpayers when taxpayers tax returns contain errors like understated income and disallowed deductions. At times, taxpayers who hired a CPA, accountant, or other tax advisor may find themselves being audited because the return their CPA or account prepared contained errors.  This blog will discuss tax preparer penalties when your accountant makes an error and when a taxpayer’s accuracy related tax penalties may be excused because due to a preparer’s error.

As I discussed in my recent Procedurally Taxing post, you must actually rely on the professional advice of an accountant or CPA.  A taxpayer whose CPA or accountant incorrectly performs clerical tasks like inputting data may not be eligible for penalty relief because these clerical tasks do not constitute tax advice.  On the other hand, a taxpayer whose CPA or accountant incorrectly advised them on the tax treatment of a complex business transaction may be eligible for penalty relief because this type of professional judgment or analysis may constitute actual advice.

Even if a taxpayer receives what could be deemed advice from their accountant or CPA, the taxpayer is not out of the woods just yet.  To be relieved of penalties, the taxpayer must show:

  1. Their accountant, CPA, or tax advisor was competent;
  2. They provided accurate and complete information to their accountant, CPA, or tax advisor; and,
  3. They relied on the advice of their accountant, CPA, or tax advisor in good faith.

Hiring a tax professional like an accountant or CPA does not offer bullet proof protection against tax penalties.  We would recommend taking the following steps to minimize your risk of penalties.

  1. Make sure your preparer is competent. Believe it or not, pretty much anyone can prepare tax returns for a living.  There are virtually no licensing requirements. That being said, make sure your preparer has the training, credentials, and experience necessary to prepare your tax return.
  2. Make sure you provide your accountant with a complete and accurate tax organizer.  Keep a copy of the tax organizer and any other information you provide your accountant.
  3. Let your accountant make final tax judgments. You may receive tax advice from people like financial planners, family members and other people not necessarily qualified to give you tax advice.  If you engaged supposedly “tax free” transactions, tell your accountant about them and let your accountant make the judgment as to how the transaction should be reported (or not be reported) on your tax return.  
  4. Make sure you have a written record of any advice you get from your accountant. 
  5. Review your return to make sure it is accurate and complete.  If you believe your CPA omitted income from your return or made some other errors, ask your CPA about it.  Keeping some sort of log of your questions like an e-mail chain can be invaluable.
  6. If it is too good to be true, it probably is not true. You may not be deemed to have relied on our accountant’s advice in good faith if your accountant’s judgment calls are completely unreasonable.  Most working adults should expect to pay some tax each year.  If your tax preparer claims to be some wizard that can allow you to get away with paying zero tax year after year, there is a chance your tax preparer may be committing fraud or at the very least your tax preparer may be negligent.  Warning signs to look for include:  claiming high business deductions for businesses you do not have or do not work full time, claiming children who do not live with you as dependents, claiming income that is unreasonably low and inconsistent with your lifestyle (e.g. you have a $3,000 per month mortgage yet claimed $15,000 total income for the tax year). 

Many taxpayers should not take a do-it-yourself approach and should engage a tax professional to preparer their returns. Many taxpayers can and do obtain relief from penalties when their CPA or accountant makes a mistake. Taxpayers who prepare returns themselves and make mistakes are almost certain to incur penalties while taxpayers who rely on the advice of a competent tax professional have a good chance of avoiding penalties.

If you have found yourself in the middle of an audit or are finding yourself second guessing your accountant, we are here to help.  To learn more about tax preparer penalties contact RJS LAW  for a free consultation.

Written by Joseph Cole, Esq., LL.M.

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Filed Under: Tax Law, Tax Penalties, Tax Tips, Taxes Tagged With: Accountant Error, tax law, tax penalties, taxes

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