I'm dealing with a situation and need some guidance.
CPA made error on tax return. I've been dealing with this for about 12 weeks now and the situation isn't improving.
I have already done some research online but got conflicting advice.
Am I overthinking this or is this a real legal issue worth pursuing?
I work in this industry and unfortunately this is very common. The good news is that when people actually push back with legal representation, companies usually settle.
I've dealt with this before.
In my case, it took about 4-8 months to resolve. The key was filing with the appropriate government agency.
I've seen this play out several times in my field.
In my case, it took about 2-4 months to resolve. The key was hiring an attorney to send the initial letter.
I specialize in this area of law. Here's my take on the legal issues.
There are several legal theories that could apply here. The strongest is probably the relevant statute, which requires showing actionable.
The practical consideration here is cost vs. potential recovery. For disputes under $10K, small claims court is often the best route.
Following this thread — I'm in a very similar situation. Would love to hear how it turns out.
I've dealt with this before.
What worked for me was having everything documented. It took 3-6 months but was worth it.
Final update on my case: settled for the full amount I demanded, plus they covered my filing costs. Total time from demand letter to settlement: 6 weeks. The key was having a well-documented demand with specific legal citations and a clear deadline. They knew I would follow through.
I hired a CPA who made a significant error on my 2023 business tax return. He failed to include Schedule K-1 income from a partnership I was part of, which resulted in the IRS assessing an additional $14,000 in taxes plus $2,800 in penalties and interest.
To establish professional malpractice against a CPA, you generally need to prove four elements: (1) a duty of care existed through the CPA-client relationship, (2) the CPA breached that duty by failing to meet the standard of care, (3) the breach caused your damages, and (4) you suffered actual financial harm. In my case, all four were clear because he had all the K-1 documents but failed to include them.
What complicated my situation was that the CPA engagement letter included a limitation of liability clause capping his exposure to the amount of fees I paid ($1,200). My attorney told me that these clauses are enforceable in many jurisdictions but may be void as unconscionable if the limitation is grossly disproportionate to the actual damages.
I ultimately resolved the matter by filing a complaint with the New Jersey State Board of Accountancy and simultaneously sending a demand letter threatening a malpractice suit. The CPA professional liability insurance carrier settled for $11,000, which covered most of my additional tax liability and penalties. If you are dealing with CPA malpractice, always check whether the CPA carries professional liability insurance.