Taking accounting firm to court over audit may not be practical
The information in this column is intended to provide a general understanding of the law, not as legal advice. Readers with legal problems, including those whose questions are addressed here, should consult attorneys for advice on their particular circumstances.
Q: The accounting firm we hired grossly over-reported the number of miles I drove. It reported I had driven 45,000 miles in a six-month period, thus causing an audit. We were required to pay taxes, fees and penalties due to the error. Do we have any legal recourse against the firm?
A: Accountants can be held liable for malpractice.
However, there are a number of obstacles standing in the way of a recovery if you were to pursue a claim.
One problem with your case is that it may not be practical to sue or otherwise seek compensation from the accounting firm, given the relatively small dollar amounts involved. Even if you were to win, you would not be able to recover the extra taxes you had to pay, as you would have owed these taxes if your return been prepared properly.
Also, you may have a difficult time proving it was the accounting firm’s mistake in determining the number of miles. For instance, it might claim you said 45,000 miles over the phone. Plus, you arguably should have noticed the mistake when you reviewed the return.
It is possible as well that your return may have been audited for another reason unrelated to the excess miles.
It is unclear from your question what extra fees you were required to pay, and it is therefore questionable whether you would be able to recover such amounts.
You should talk to an attorney who handles cases like this to determine whether you should proceed with a claim.
Q: Do my wife and I need to file a federal income tax return this year? I am 94, and my wife is 91. For years we have always filed joint returns out of habit. Over the last 10 years, our income has averaged $10,000.
A: If you do not meet the filing threshold, and you are not due a refund, then you do not need to file a return.
In fact, the instructions on the IRS website state: “Don’t file a federal income tax return if you don’t meet the filing requirements and aren’t due a refund.” It isn’t simply saying you don’t have to file a return. It is affirmatively telling you not to file one.
The filing requirements differ depending on your age and whether you are single, head of household, married filing jointly, married filing separately, or a widower with a dependent child. In your case, it appears that if your gross income was less than $23,200, then no return needs to be filed, and you will owe no tax.
If you want to be completely certain, the IRS site has a tool that lets you determine if a return must be filed. Go to www.irs. gov/uac/do-i-need-to-filea-tax-return, and follow the steps.
Ronald Lipman, of Houston law firm Lipman & Associates, is board certified in estate planning and probate law by the Texas Board of Legal Specialization. Email questions to stateyourcase@ lipmanpc.com