Missed tax deadlines can cost your business thousands of dollars in penalties. If your accountant’s negligence caused you to face penalties that could have been prevented, you may have grounds to pursue a professional malpractice claim and recover losses under California law.
Can an accountant be liable for missed deadlines?
The relationship between you and your accountant creates legal obligations on both sides. Accountants owe clients a duty to perform services with reasonable care and skill, often referred to as the “professional standard of care.” Missing important deadlines may constitute professional negligence, which is a breach of that duty.
In such cases, you can file a malpractice claim if the breach directly caused you financial harm. The penalties you face from the IRS or the California Franchise Tax Board can serve as the basis for calculating damages.
What penalties result from missed deadlines?
Missing tax deadlines can create financial burdens for your business. Failure to file a federal tax return on time can result in fines of up to 25% of the unpaid tax amount. Late payment penalties add another layer of cost. California imposes similar consequences.
Additionally, you may face interest charges on unpaid taxes. Both federal and state tax authorities charge interest that compounds daily, making the total amount owed grow over time. In a malpractice claim, you may recover the extra interest you paid beyond what you would have owed if the filing had been on time.
How can professional malpractice be proven?
When proving malpractice, it is essential to establish a direct link between your accountant’s actions and your financial losses. To do so, you must demonstrate the following:
- The accountant owed you a duty of care
- The accountant breached that duty
- The breach directly caused your damages
- You suffered actual financial losses
Documentation plays a crucial role in supporting your claim. Engagement letters, contracts and correspondence can help establish the relationship and the accountant’s responsibilities. In addition, tax notices and penalty assessments may provide concrete evidence of your financial harm.
Taking action against professional negligence
When professional negligence leads to penalties that harm your business, the law provides a path to recovery. The financial impact of missed deadlines can extend beyond immediate penalties, potentially damaging your business operations. When considering a malpractice claim, having a knowledgeable advocate can help guide you through the process.