Question: “Would an example of negligence be...taking deductions for Roth (front-loaded) IRA's? I'm not a financial savy guy, but even I know better than that. What kinds of things constitute negligence?”
Answer: That would probably be considered negligence. But here’s the legal definition of negligence:
(1) A duty to use reasonable care; (2) a breach of such duty; (3) damages; and (4) the damages were caused by the breach of duty.
A tax preparer who holds himself out to the public as a tax professional, and who takes money for preparing tax returns certainly has a duty to use reasonable care in preparing such returns. Incorrect preparation of tax returns could be a breach of the duty. You were definitely damaged since you now owe fines/penalties, and your fines/penalties are a direct result of the breach (i.e. if not for the breach, you would not owe such fines/penalties).
The biggest issue is with regard to (2). Did the tax preparer breach the duty of using reasonable care by taking incorrect deductions? Probably, but I can’t say for sure. To determine whether the tax preparer acted unreasonably (and thus, breached the duty), you’ll need to get another tax preparer to take the stand and testify that the defendant should not have made that mistake.
Also, you mentioned that you even knew that the tax preparer was wrong. The tax preparer may argue that you are contributorily negligent since you should have reviewed the tax return yourself, and you apparently did not do so. If that argument is successful, then any award you could win may be reduced.
Have I satisfactorily addressed your concerns? If not, then please feel free to ask for clarification.
DISCLAIMER: Please be aware that only an attorney licensed in your state is authorized to advise you in legal matters, and that the limitations of this setting may prevent your legal issues from being thoroughly addressed. Accordingly, please understand that (1) by answering your question(s) I am not acting as your attorney, (2) my answer(s) should be construed as general information only, and (3) our discussion is not an adequate substitute for an in-person consultation with an attorney.