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emc011075, Tax adviser
Category: Tax
Satisfied Customers: 2995
Experience:  IRS licensed Enrolled Agent and tax instructor
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I am an Enrolled Agent and in 2014 I mistakenly did not

Customer Question

I am an Enrolled Agent and in 2014 I mistakenly did not include a 1099-misc the client brought me. He is seeking legal action on taxes owed, I know if am liable for penalties/interest but am I liable for taxes owed?
JA: The Accountant will know how to help. Is there anything else important you think the Accountant should know?
Customer: no
Submitted: 10 months ago.
Category: Tax
Expert:  emc011075 replied 10 months ago.

Hi. My name is ***** ***** I will be happy to help you.

Did he signed a client service agreement or similar form? Generally such agreement spells out that you are only liable for penalty and interest but not for his tax liability. He can sue you for damages but owed taxes are not considered a damage since the taxpayer would owe the taxes anyway.

I found this on a CPA website: Taxes . In general, the tax that a taxpayer owes does not constitute a recoverable damage component. Thus, if a tax practitioner’s mistake results in an understatement of tax, he or she is generally not liable for the additional tax due, although the practitioner might be held responsible for payment of related interest and penalties'

Expert:  emc011075 replied 10 months ago.

Any questions?

There's no law that would state that he cannot sue you for the taxes owed but in most likelihood the judge will not hold you liable unless the taxpayer can prove your negligence or fraud, which would be difficult to proof if it was a honest mistake.