We sometimes hear about cases where a lack of application of professional standards by an accountant causes problems. Sometimes things do not go as was hoped, just like any other business. If you believe that your accountant is legally responsible, consider these practical points.
First, there must be substantial actual damage. In many cases, damage means that you paid a substantially higher tax than you would have. A letter from IRS demanding payment of additional tax does not qualify as damage for this purpose.
Second, there must be clear evidence of a link between accountant’s action (or lack of action) and your damage. In most cases, that comes in the form or the actual tax filings, emails relating to it, or the accountant’s social media posts. A surprising number of accountants admit failures in their social media posts.
Third, we must be able to quantify and allocate the damage. In most cases there are multiple contributory causes of the damage; for example, you, your accountant’s action, and the IRS’s action may all have contributed in some way to the damage. We must be able to at least estimate the allocation of a specific amount of damage.
Fourth, we must look at the engagement agreement. This is the contract between you and your accountant that, in many cases, will address how claims for damage will be handled. This post does not get into discussion of the complications created when a written engagement agreement does not exist.
If you have a concern about an accountant, talk about it only privately, not publicly. Do not discuss it on social media. Understand that there are significant risks in accusing an accountant. I am open to an initial exploratory discussion without committment and, if pursued, I am open to the possibility of serving in the role of litigation support.