Portrait of a White Elephant

Is account malpractice documented somewhere? I donno, maybe in a CPA code of ethics, some IRS document, or something like that; where it says that negligence is malpractice?

In this example, tax preparer would say something to the effect; "I do dozens of tax returns at the last moment and do the best I can. I don't get enough sleep and am bound to make some mistakes; and everyone knows that. The client signs the return and it ultimately responsible for making sure it is correct. If they failed to note an error, it is THEIR negligence and THEIR liability."

So, is there actual documentation that would establish the tax preparer's culpability and liability? Or is it purely a matter of common sense?

To start with in hundreds if not thousands of court cases around the country. Go to the nearest law library and you'll be able to read about it. It's not likely to be in a specific statute.

First of all, just making a mistake doesn't make it malpractice. It has to be negligent. Whether the accountant or the client in this case (or either of them) was negligent would be up to the jury, based on all the evidence.

Go look at appellate cases in your state concerning accounting malpractice, and you should find out what the standards are.

Stu

The AICPA does issue Standards for Tax Practice. Malpractice may be defined there. While I am not familiar with those Standards, I am certain that misinterpretation is malpractice. And that would be the situation in the Portrait of a White Elephant.

IMRHO the above sentences are an admission of failure to exercise due professional care and would get you sanctions by the AICPA, the NAEA, and every State CPA Board. Those sanctions could be used in a lawsuit to recover damages. But then we get to the issue of how much is worth sueing over?

That is definitely the position of the IRS which is averse to going after third parties. But I strongly advise against using argument with the above mentioned organizations.

The IRS has thresholds for preparer fraud. But this discussion does not rise to that level.

Dick

I did not see that post. I would think that there are some scenarios where someone pays tax he should not have, and it is someone else's fault, so recovery should be available.

Huh? What does financial benefit have to do with anything?

Maybe I _expected_ to receive financial benefit, but since I don't actually own the property, I don't get any.

(It's my hypothetical, so I get to make up the facts. I (think I) inherit a piece of undeveloped property, which I plan to hold on to for a few years and then sell it when times are right. So I pay taxes on it. Then it turns out I didn't actually own it, because the person I thought I inherited it from had sold it.)

But since I didn't own the property, they were _not_ properly paid.

Seth

Both parties made an error. You paid the taxes thinking you owed them, and the town accepted them thinking you owed them. Generally speaking, you would be entitled to get them back. The important word is "generally". There could easily be a specific law in your state that is contrary to the general principle.

There are a bunch of associated questions. Why did you get a tax bill if you don't own the property? Isn't that negligence by the state? Did the real owner pay taxes? If not, is that some sort of fraud?

We're now discussing real estate taxes which do not fall under the IRS closed return rules.

If the property had been sold to someone else, that person was simply remiss in not registering the deed on a timely basis. If you registered first, you may be the owner based on State law.

A better example would be that you paid estate taxes on property that had been sold and the return is closed before you learn you don't own the property. Now you have a case against executor.

Dick