[Anonymous]

Hi Everyone, I wanted to get some opinions on what a CPA is liable for in the event errors are made on tax filings.

I have a friend who’s CPA did not take into account prepaid taxes for the past 6 years even though the had the appropriate paperwork for the prepayments.

The error was caught in this year’s 2014 filing and the CPA quickly re-filed all the tax filings, however 3 years fall outside the statute of limitations and so she has lost about $1,100. The CPA did not charge her for the re-filing, however is he also liable for the $1100 in lost refunds?

[Anonymous]

Most CPAs will have a letter of engagement which your friend would have signed in conjunction with preparing her taxes, and that letter will probably among other things limit the liability in some way – perhaps limit it to the amount of fees lost, so perhaps she could recover from the CPA the fees she paid him/her in those 3 years, or something like that. However, I doubt she can recover taxes that she overpaid.

[Anonymous]

Lilla's right if they CPA drafted a half-decent engagement letter, they probably have little to no liability.

I'd bet that there is no engagement letter, though. Most CPAs are lax or naive enough to let that sort of thing slide for smaller clients. Also, engagement letters, while officially suggested, are not required for tax services.

That all being said, the cost to recoup the $1,100 may exceed any potential recovery. So your friend has to ask his or herself if it's really worth it to go down that road.

[Author]

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