When Can I Sue a Tax Accountant?

You gathered up all your W-2s, expense receipts, and other tax documents and handed them over to your accountant. Now you're looking at an Internal Revenue Service (IRS) audit and possible fines for filing improperly, late, or not at all.

If your tax accountant screwed up, are you on the hook for their mistakes? And if so, do taxpayers have any legal recourse?

Tax Return Issues: The Bad News

In terms of tax filing penalties, it's your tax return, so it's your responsibility.

Even if it was your accountant's tax prep mistake or your tax professional didn't file anything at all, any late fees or fines instituted by the IRS go on your bill, not your accountant's. So you'll have to pay IRS tax penalties, if applicable, before going after your accountant in court.

This is extremely frustrating when using a professional tax company like H&R Block, TurboTax, Intuit, or another tax preparation company. When paying and trusting your enrolled agents to handle taxes on your behalf, you expect it to be done right. It is a whole different matter if you did your online tax preparation and tax forms yourself -- then mistakes feel justified, albeit still frustrating.

Tax Return Issues: The Good News

It may be possible to recoup IRS fines and fees from your tax accountant. If your accountant refuses to fix any errors or reimburse you for IRS penalties, you may be able to sue your accountant for malpractice and claim those penalties as damages.

Accountant malpractice claims are very similar to standard negligence lawsuits. You need to prove that:

1. The accountant owed you a duty of care (that you hired them to handle your tax return)
2. The accountant breached that duty (that he or she negligently or purposefully violated standard accountant procedures)
3. You were injured (that you suffered some financial harm like additional fees, fines, and/or penalties)
4. The accountant's breach is what caused the injury (that you wouldn't have been fined had the accountant not made mistakes)

Winning a Federal Tax Return Case

If your malpractice claim is successful for your income tax or state tax, the accountant may need to reimburse you for any IRS penalties.

If your accountant purposefully misleads you, makes material misrepresentations about your tax obligations or their services, or otherwise misappropriates your funds, you may be able to sue your accountant for fraud.

If you're thinking of suing your accountant, you may want to consult with an experienced tax attorney beforehand. Americans have some protections during tax season, so an attorney is the right person to guide you through those protections.

Related Resources

• When to Hire a Tax Lawyer vs. a CPA (FindLaw's Law and Daily Life)
• Beware New IRS Rules for Paid Tax Preparers (FindLaw's Law and Daily Life)
• How Likely Am I to Be Audited? (FindLaw's Law and Daily Life)