You may not be aware of this, but, filing your taxes is your responsibility. In today’s day and age with accountants taking care of e-filing your tax return for you, most people don’t realize they actually need to confirm that their accountant indeed filed their tax return.
As a matter of fact, a recent case in the tax courts has reminded us of this very fact.
Meet Dr. Wayne Lee a Florida surgeon who was earning more than $1 million per year. Lee hired a CPA to prepare his 2014, 2015 and 2016 tax returns. He carefully reviewed the returns and signed Form 8879 authorizing his CPA to e-file his tax returns.
On December 5, 2018 Dr. Lee had a surprise visit from an IRS agent at his office when he found out that his tax returns for 2014, 2015 and 2016 had never been filed. Dr. Lee had moved to a new office and asked his CPA to update the IRS with his new address and this was never done, so he never got any of the mail the IRS sent.
Dr. Lee had 2 significant and costly issues due to his CPA not filing his tax returns. First, he always overpaid his estimated taxes. However, in 2018, it was already past the statute of limitations for his 2014 tax return and therefore he forfeited the $288,409 overpayment for that tax year!
Dr. Lee wanted to get his refund and correct the issue of the unfiled returns, so he promptly filed his 2014, 2015 and 2016 tax returns which then triggered $70,000 in failure to file and failure to pay penalties. He paid these penalties and then sued the IRS in Tax Court for a refund of the penalties. He claimed that the late filing was due to reasonable cause and not due to willful neglect.
The tax court established in 1985 that a failure to file as a result of reliance on your CPA is not an excuse and even made this a “bright line” rule, meaning there are no exceptions.
Dr. Lee argued that today, with e-filing, since a taxpayer cannot e-file their return on their own, relying on his accountant was the only choice he had and therefore it is different than it was in 1985.
The tax court did not buy this argument and held fast that it is the taxpayer’s duty to confirm that the return has indeed been filed.
The National Taxpayer Advocate in her 2024 report to Congress, urged Congress to change this rule and allow for a penalty waiver if the return as late filed as a result of CPA failure to file. We do not know if this rule will change.
So what should you do?
You can confirm on the irs.gov website that your tax return was indeed filed. It takes about 3 months after the e-filed return is submitted for the website to have your tax return transcript. Also, if you are expecting a refund or a payment to automatically occur in your bank account, seeing that payment or refund hit the bank account is probably a good indicator that your return has been filed.
You also have the option of choosing to paper-file your tax return. You must instruct your tax preparer in writing that you would like to paper-file your tax return and the tax prepare needs to attach Form 8948 to your tax return. If you are expecting a refund, this will significantly delay the processing time for that refund.
If you want a reputable tax preparer that has your back, please contact my office and we can discuss how we provide personalized and reputable assistance with your unique tax situation.
