The end of the year is growing close, which means pretty soon we all have to file our taxes. Many folks have their accountants take care of this chore, often via e-filing. Which means you need to keep an eye on your accountant. What happens if that arrangement goes haywire? Bruce Bell, an attorney at the Chicago office of Schoenberg Finkel Beederman Bell Glazer, tells us how to avoid that fate:
Larry Light: Let’s say your accountant failed to timely file your income tax return through the e-filing system and you were assessed late filing and late payment penalties by the IRS. Can you get these penalties abated?
Bruce Bell: Absent other compelling circumstances, you cannot get penalties abated for the late filing of your income tax returns and the accompanying late payments. Under the circumstances described, you will have to pay these penalties to the IRS. The Internal Revenue Code assesses various penalties on taxpayers who fail to comply with the tax filing system and the payment process—if you don’t timely file and pay income and other tax obligations.
Light: But isn’t it the accountant’s fault?
Bell: That makes no difference. Based on a 1985 United States Supreme Court decision, reliance on a professional or other agent is not a defense to a penalty. While the result in many cases is harsh, taxpayers must nevertheless bear the cost of late filed returns and non-timely payments.
Light: What have the courts said?
Bell: A recent U.S. Court of Appeals case addresses filing failures. Most tax return preparers now are required to file taxpayers’ income tax returns electronically after receiving written direction from the taxpayers to file the returns. Before that, the standard procedure was that tax preparers routinely sent completed paper income tax returns to taxpayers for review and filing. Because of the mandated e-filing required of most tax return preparers, the task of timely filing now rests to a large extent on tax return preparers.
In the recent Court of Appeals case, the taxpayer maintained that he should not be responsible for the failure of his return to be filed electronically, claiming he sent timely authorization to his accountant directing the filing of his income tax return. The Court of Appeals refused to distinguish between returns prepared by taxpayers or by professionals. Regretfully, regardless of who filled out the forms, taxpayers are left with an obligation to pay the assessed penalties for errors they arguably did not commit.
Light: What can you do?
Bell: The Court of Appeals added that taxpayers can follow up with the IRS to ensure that their income tax returns are timely filed. Taxpayers can also inquire as to whether their preparers have the proper software to e-file their returns. Finally, the court stated that taxpayers have the option of taking back the returns prepared by their preparers and personally mailing them to the IRS.
You, of course, likely have legal recourse against your tax return preparer for failing to exercise due care in filing your returns, which may provide you with the relief you are seeking.