If I wanted my taxes to be done wrong, I would've done them myself
September 3, 2014 1:24 PM   Subscribe

My accountant screwed up my taxes. I'm unsure of how I should proceed.

I earned income in three states last year. In the state where I earned the most income, they are saying I underpaid what I owe by several hundred dollars. I paid a CPA to prepare my taxes for me so I wouldn't need to deal with it -- I gave him all my year-end tax documents and paid the amounts he told me I owe. Now I have a very large bill + penalties and interest that is due tomorrow.

When I got the bill a month ago, my CPA told me he had submitted a letter requesting clarification because he disagreed with what they say I owe. I called them today to check the status of when they would respond and they told me they have nothing on file -- no correspondence requesting a reply or record of a dispute with my tax assessment. I told my CPA this and he hasn't responded to my email and he isn't answering his phone. He has kept telling me to wait for a response from the state because if I over pay the money incorrectly, it will be very difficult getting it back. But I don't feel like dealing with more interest, more penalties and, eventually, collections. (The state did tell me I will be billed a few more times before it is turned over to collections.)

Should I just pay what the state is asking me for and then next year, get a new accountant who can go back to this year's taxes and see if I overpaid any of my taxes (three states + federal)? I assume I can still recoup any over-payments in the spring of 2015, right? I have lost faith in this guy and I feel like, if it's an option, a new accountant next tax season can double check what I paid this year. Is that reasonable?

Should I send my current accountant a bill for the penalty + interest ($115)? I have every intention of paying the taxes I owe, but I paid him $150+ to prepare my taxes properly and he didn't and now I have been penalized. I feel the penalty and interest is his responsibility. Or should I see if the state will waive it instead? (To be frank, I'm very angry not just about the penalty and interest, but the fact that I thought I was caught up and now owe a huge additional sum in taxes. I had started to spend money on trips and other extra things that maybe I wouldn't have.)

I am clueless on taxes. I've always just hired a CPA to do it for me. Next year, I will obviously be hiring a different CPA.
posted by peachpie to Work & Money (14 answers total) 2 users marked this as a favorite
While one hopes for accuracy from an accountant, accountant services generally do not come with a guarantee. Do not bill your accountant. Do pay the taxes, penalty and interest. Do get a new accountant next year.
posted by DarlingBri at 1:36 PM on September 3, 2014 [1 favorite]

I am not an accountant, nor am I a tax professional. This is not financial/tax advice.

When you filed your returns, there should have been some documentation of who your CPA was (on a Federal return, this shows as "name of paid preparer" as well as their address and signature). That means he's on the hook if the return was incorrectly prepared. (However, you also sign that you reviewed the returns and they are "true and correct to the best of [your] knowledge." That "to the best of [your] knowledge" phrase lets you off the hook somewhat, but not entirely. This is on your accountant, in my opinion.)

I suggest you contact the state tax office and request that they discuss the return with your CPA. If it was properly prepared, you should have (originally) paid the correct amount. The state thinks there was an error somewhere.

Also, if your CPA isn't responding to e-mails or phone calls, send a letter by certified mail.
posted by tckma at 1:38 PM on September 3, 2014 [2 favorites]

Response by poster: I actually just called the state and they won't waive the penalty just because my CPA is an idiot and I asked for a waiver. They said I'd have to file some sort of amended tax return with reasoning for why it was initially wrong for them to waive it. The state told me that the CPA merely preparing it wrong doesn't qualify because it was my responsibility to review it.

They said I need to sign a power of attorney for them to go directly through my accountant. Otherwise, I am the one who needs to deal with this.
posted by peachpie at 1:43 PM on September 3, 2014

Hire your next-year's CPA now. Start the new relationship and have that CPA help you sort things out. I wouldn't expect the old CPA to pony up any money (at all), but for $115, I'd be inclined to pay the state just so you aren't accumulating more fees and penalties while you're sorting. Or -- your question isn't 100% clear -- if the amount due is several hundred, and there's $115 on top of that, I'd frankly be inclined to pay it all off and then sort things out later.

You're in a much stronger position to demand a proper accounting from the state when they owe you money, than when you owe them. (That's not to say you're in an especially strong position if you pay, but if you owe them, then all they have to do is drag their heels and your bill goes up automatically.) And although they will probably treat your few-hundred-dollar possible overpayment as chump change and not worth their time to get right, IME they're sensitive to escalation, so the agents that you or your new CPA deal with are unlikely to choose your $small-hundreds-overpayment as the hill they want their career to die on.
posted by spacewrench at 1:45 PM on September 3, 2014 [6 favorites]

Response by poster: Sorry, I'm back. I figured out what the CPA did. He switched two states. So now that means I overpaid in another state. Should I have him recoup my overpayment? Or should I just let it go until next year with a new accountant? I'm kind of sick of dealing with this guy now, but if I had the choice, I'd get the money back now rather than wait a year.

My main question is still whether I am within my rights to give him a bill to reimburse me for the penalty and interest. If anyone knows how I may present this to the state I owe money to in order to get the penalty waived, I am all ears. I think I can still request the penalty be waived even after I pay via an amended return/abatement request.
posted by peachpie at 2:00 PM on September 3, 2014

Ok. This is frustrating, but relatively easy.

1. Pay State A.
2. Pursue the refund of overpayment to State B ASAP -- it's YOUR money, and there's no reason that State B should keep it via an interest-free loan from you. You might be able to do it yourself, but, this may be a way to evaluate a new CPA prior to the busy tax season. You'll probably have to file an amended return or a correction form.
3. Don't pursue the penalties with your former CPA. I doubt you'll get anywhere. Just stop using him.
4. In the future, review the returns you get from any CPA before making payments or signing anything. My CPA sends me all the forms at once, and I look them over, and I've called him back with questions.
posted by tckma at 2:22 PM on September 3, 2014 [4 favorites]

Well, in addition to your CPA mixing up the states, he's also giving you bad advice; in my experience, getting refunds for overpayments is no hassle at all. As soon as they have proof you overpaid, they cut a check, like, that day.

Do what tckma says: hire a new CPA to file your amended returns. Pay what State A says you owe, and get the refund from State B. If things go smoothly, then you've found your new CPA. If things don't go smoothly, find yet another one for next tax season. This is seriously not a complex problem to fix.
posted by rabbitrabbit at 2:41 PM on September 3, 2014 [4 favorites]

When we fired our CPA for incompetence the new CPA suggested that he not only refigure the previous years taxes but go back 3 years. The overpayments he found were almost double what it cost us in him doing the extra work. And yes, shop for new CPA now, not next year, since the new CPA will have time on their hands to fix things now.
posted by Runes at 3:43 PM on September 3, 2014 [2 favorites]

New CPA. Pay the underpaid state and file the amended return to see if you can recoup the penalties and interest. Request payment from the overpaid state.

Sue CPA for penalties and interest only as a last resort and only if you can't get state A to cut you a break.
posted by Ruthless Bunny at 4:13 PM on September 3, 2014

You said you paid your CPA $150-some-odd dollars for a federal return and three state returns? That seems like a very low fee. Maybe there is a reason why his rates are so low. When you choose your next tax preparer, don't go for the one who offers rock-bottom prices.
posted by alex1965 at 5:12 PM on September 3, 2014 [5 favorites]

$150 for four returns does seem low. get a new CPA now, pay the state's bill, file to recover overpayments and give the old CPA one opportunity to make you whole on the interest and penalties before you complain to the accountancy board, take him to small claims court and get his errors and omissions carrier involved.
posted by bruce at 7:06 PM on September 3, 2014

FYI, $150 for three state tax returns seems *really* low. I would expect this to be in the $500 range for a decent CPA to handle.
posted by saradarlin at 9:24 PM on September 3, 2014

Boilerplate answers from taxing authorities are 1. Pay the bill, 2. File an appeal (it should be free to file an appeal with a public agency).

You can request it, but you need to start preparing yourself that you most likely will not get the penalty waived. Public agencies have to work within the law as it is written, and there is likely a code that they will cite saying if you filed the incorrect amounts you are liable for that penalty. If they waive the penalty for one they have to waive it for all, and no public agency wants to open that can of worms.

It's true that I have seen sympathetic managers find ways around penalties on behalf of taxpayers, but very very few and very very far between. Like, less than once a year. Your best bet is to submit a copy of the return for the other state that the numbers got switched with, and a copy of the cancelled check that you sent the other state. That might sway a manager in your favor that it was an honest mistake and not an attempt to defraud.

I will go a little bit against the tide and say that I think that you should absolutely complain to your CPA and ask him to reimburse you the penalty. That said, I doubt very much that you will get it, as I agree that his fees seem very very low. But you never know, maybe he has some sort of conscience.

Finally, a little PSA: You Would. Not. Believe. the number of incompetent CPA's I run across every year, who tell us to process returns as filed, "we'll just appeal it later". And I'm thinking, "Sure, and how much are you going to charge your client to file the appeal on their behalf [which is, again, free to file], for a screw-up you caused?" The take-away? When it comes to your own money, trust but verify.
posted by vignettist at 10:32 PM on September 3, 2014 [1 favorite]

Response by poster: OK, I paid the correct amount.

I found an FAQ about penalties on the state website and I believe I would qualify for a waiver based on what the website says. It says if I was incorrectly advised by a tax professional and gave them all the necessary documentation to accurately prepare my taxes and they failed, I should be eligible for a waiver. So I will try that. I think the lady I spoke to on the phone maybe meant it can't be waived over the phone?

And I don't know anything about taxes, my family uses this guy and I was told this is a normal amount to pay for tax preparation in the area. The cost of living here is low and I'm just an individual. Plus, one of the states I don't think really counts because the amount of income was so negligible that I didn't have to file with them. (Or maybe I did file but I didn't owe them money. Can you tell I reviewed my taxes super carefully?)

I told him I want him to take care of amending the returns, at least so I can get some money back in my penalty for state A and refund from state B. But I said he needs to tell me about any correspondence he has on my behalf. I don't want him sending anything in for me. It blows my mind that he said he had written the state asking for clarification and told me not to pay my tax bill until I got a response, and then when I called them, they hadn't gotten anything from him. If I followed his advice, I would've sat waiting for nothing while interest and penalties piled up.

When I get a new CPA, I will have them review the past couple years. I feel like I've missed out on a shit ton of deductions, to be honest. I don't have the time/patience to get a new CPA right now, but I won't wait for tax season next year before starting this process. Thanks!
posted by peachpie at 11:35 AM on September 4, 2014

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