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My accountant messed up my taxes and I was hit with penalties. Her contract calls for abitration of disputes - can sue anyway?
Anonymous3 views2 answers
My accountant made a mistake when processing my 2007 taxes that caused me to be hit with penatlies and interest of around $4000. I took a distribution on my 401k that year. She included the amount on the form, but did not carry it over to be added to my income for the year. She agreed to refund the processing fees of $374, and sent me the check along with a letter stating that by cashing the check I am releasing her from responsibility. Her contract calls for arbitration of any disputes. I am wondering if I can sue her for the amount of the penalties and interest, in spite of the arbitration clause in the contract.
The IRS often will waive the penalties if a taxpayer provides a reasonable explanation for the error and asks that the penalties be waived. That the error was an inadvertent error may be a good reason for the IRS resulting in the waiver of some or all of the penalty.
The IRS generally does not waive the interest.
Since the taxpayer has the use of the money, the tax professional likely would not be liable for the interest.
Arbitration clauses are generally enforceable, and usually save both parties time and money. So, why not arbitrate it? My advice is to use an attorney to arbitrate your dispute.
I hope this helps, and I wish you luck in resolving your legal matter.
