Thank you for your confidence.
If the shutdown extends, will they extend the deadline to pay the penalty?
A: No one knows the answer to this question. However, based upon the manner in which the IRS deals with filing deadlines, I would imagine that if your ability to pay was impaired by the shutdown, then the deadline would be extended to the day after the shutdown ends.
Yes, you are correct. Though my partner is not completely taking the CPA side, he is certainly blaming and threatening me for filing incorrect tax returns. I am kind of scared if he will sue me for this. What steps should I take? Just wait for the lawsuit or take some proactive action?
A: I would suggest that you and your partner need to meet jointly with a professional malpractice attorney. By trying to holding you liable, your partner is effectively guaranteeing that the penalty will not be reduced. You need to each be able to testify that you reasonably relied upon a competent tax professional in preparing an unambiguously complicated tax return, where you and your partner were engaged in a startup business, and your knowledge of complex business tax matters was practically nil.
All of this, of course, assumes that the CPA made the errors that you allege. But, that's something that would have to be determined by a court, after discovery of all of the relevant facts.
This is for the LLC (partnership ) and so it's not taxed at the LLC level.
A: Not a question, so I have no comment.
Yes, the error (expenses deducted instead of capitalizing) was huge - $40K for 2011 and $160K for 2012. But the amended tax return fixed this with less than $5K for each of the years. My guess is that IRS may have imposed negligence/fraudulent penalty of 25% on the total of $200K. This is just my guess.
A: If true, then that just makes the first CPA's allegedly negligent return preparation an even bigger deal. You need to try to reestablish communication with your partner, and stop fighting with each other.
My question is since we have amended our LLC taxes (and also our personal taxes) why would IRS levy penalty on our original tax returns, which we know are incorrect?
A: The accuracy related penalty will not be imposed, if a taxpayer shows that there was reasonable cause for the underpayment and that the taxpayer acted in good faith (IRC 6662(c)). For a discussion of the legal definition of "reasonable cause," see Treas. Reg. 1.6662-3(b)(3).
Hope this helps.