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Old 04-05-2014, 09:13 PM
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CPA calculated capitol loss incorrectly in 2008 & 2009

In 2008 and 2009 I had total stock losses of $1.5million. I just discovered my tax preparer (son) working under an accountant (his father) under-reported my losses by about $800,000 because of not understanding the wash sales rules. In 2010 my new tax preparer probably noticed this but instead of filing an amended return, he took the biggest losing trade from 2009 ($600,000 loss) and added it to the 2010 schedule C. It really looks ridiculous with the 2009 trade dates on the 2010 return. I now need to amend all my taxes going back to 2008. Any recommendations. Am I setting myself up for an audit. I am very annoyed and feel like suing but am not sure about the statute of limitations. In Mass. the SOL is three years from date of injury or 3 years from finding out about it. It could be argued that I should have seen the mistakes right away and not 5 years later. Could be a quite the small claims battle for only a thousand dollars. Besides mental anguish my only injury is the additional tax prep fees and the original fees.


Last edited by jim8153 : 04-05-2014 at 10:27 PM. Reason: new info


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Old 04-06-2014, 08:14 PM
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Originally Posted by jim8153 View Post


#1;In 2008 and 2009 I had total stock losses of $1.5million. I just discovered my tax preparer (son) working under an accountant (his father) under-reported my losses by about $800,000 because of not understanding the wash sales rules. In 2010 my new tax preparer probably noticed this but instead of filing an amended return, he took the biggest losing trade from 2009 ($600,000 loss) and added it to the 2010 schedule C. It really looks ridiculous with the 2009 trade dates on the 2010 return. I now need to amend all my taxes going back to 2008. Any recommendations.




#2;Am I setting myself up for an audit. I am very annoyed and feel like suing but am not sure about the statute of limitations. In Mass. the SOL is three years from date of injury or 3 years from finding out about it. It could be argued that I should have seen the mistakes right away and not 5 years later. Could be a quite the small claims battle for only a thousand dollars. Besides mental anguish my only injury is the additional tax prep fees and the original fees.
#1; You may sue them. You might get the preparation fee and damages to help with penalties and interest. However, you are responsible for that return. you need to amend it immediately and start making payment arrangements. when a prior-year understatement/overstatement of your tax liability is discovered, you, as a client, being primarily responsible for the understatement/overstatement, ultimately must file an amended return. Your recalcitrance to do so may exacerbate the mistake, resulting in your incurring perhaps even more interest and a larger penalty. Unfortunately, many of the foregoing error and omission discoveries are all too commonplace.
NOTE; while you have a legal duty within any applicable statute of limitations to pay the correct tax, neither the IRC nor the Treasury Regulations require you to unilaterally correct tax return submission errors or omissions. Instead, the regulations state that upon discovering an error or omission involving an understatement of income or an overstatement of deductions, you should file an amended tax return and pay any tax due as mentioned above. During an audit by a taxing authority, your failure to file an amended return to correct an error or omission can cast a dark shadow. More specifically, tax law provides for sanctions against practitioners who provide false and misleading information to the IRS, which could put the tax preparer in an untenable situation. On the one hand, the tax preparer has an obligation to be forthright to the investigating agent; on the other hand, he or she also has an obligation to maintain the confidentiality of client communications within the limits of the practitioner-client privilege . Under these circumstances, unless the accountant can convince you to disclose the error or omission, the member “should consider whether to withdraw”. If the tax preparer recognizes a mistake he or she has made and calls it to the client’s attention, persuading the client to submit an amended return could help ameliorate the problem. To encourage you to submit an amended return, a practitioner should prepare the amended return, send it to you, and strongly suggestyou file it.

#2; When a tax preparer makes a mistake on the taxes, it invites a host of potential issues. Most people want to know who's responsible for fixing the error and who pays the financial penalties when a preparer makes a mistake;as said, the first step to consider when you get notice of an error on your tax returns is filing an amended return. In many cases, with professional CPA firms that value their reputation, the CPA will reimburse you for errors. Many CPAs carry professional insurance that provides coverage for penalties and omissions, and the CPA firm may pay these penalties for you. However, you're typically expected to pay any difference in the tax liability yourself. Some CPAs may refund you the cost for preparing your taxes, but may not offer any reimbursement for errors. You may want to consult a tax attorney if you believe the CPA is not meeting his obligations’ guess your issue is a legal issue and need professional help form a tax attorney.

NOTE: I guess this is not your case just for reference, the preparer's fraud can, alone, invoke the unlimited statutes of limitations for a fraudulent return in Section 6501(c)(1).As you depended on your accountant to handle your taxes for you, and your accountant breached this trust, you may have an accounting malpractice claim against your accountant. Accounting malpractice claims are handled in much the same way as other professional malpractice claims. You must establish four elements to prevail in court---professional duty, breach of that duty, causation and damages. If you can establish these four elements, you may file a lawsuit in state court against your accountant.



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Old 04-07-2014, 01:10 PM
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Thanks

Thanks so much for your detailed information. I dont think I have any additional taxes due. The main issue is a completely messed up calculation of a large capitol loss carry forward. My plan is to prepare an amended return to correct the schedule d. I may or may not try to get my original prep fees back approx $250 for each year (2008 & 2009) depending on how big a battle it will be.



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