Got a notice from the IRS saying I owe $12,000 in penalties and interest from my 2022 taxes (this is for my S-corp). The penalties break down as $8,500 for not filing, $1,100 for not paying, and $2,500 in interest.
I hired a CPA for my taxes, and I have emails showing they filed and applied for an extension before the deadline, or at least that’s what they told me. When they told me the final amount to pay, I paid it right away. My CPA even said this amount covered any late penalties, so I thought everything was settled with the IRS.
Fast forward to now, two years later, and I get a letter saying there are still unpaid penalties and interest, and they’re saying my taxes weren’t even filed.
To make things more confusing, a few months ago, I got a notice from the IRS saying I didn’t file my 2022 taxes. I sent it to my CPA, and they assured me it was a mistake and that they’d fix it. That notice didn’t mention any fees or penalties. My CPA claimed it was a mix-up and they’d handle it with the IRS.
If this all turns out to be an IRS error, fine. But if it’s because of something my CPA didn’t do correctly, could I hold them responsible for the penalties? I have several emails from me urging my CPA to speed things up and avoid any late fees. If this situation turns out to be because my CPA dropped the ball, could I possibly sue them to cover the penalties? Or, even though I hired a CPA, am I still on the hook to double-check everything on my own?
Honestly, I’m thinking of finding a new CPA anyway since my current one is not great at responding, but I need to deal with this mess first.
Did you end up owing a big amount when you filed after the extension? If there was an underpayment, the IRS might consider the extension void, adding penalties and interest.
Remember, the extension only gives extra time to file, not to pay.
If you owed a lot, was it due to a mistake by your CPA, missing info at the time of filing, or just not paying the April amount?
@Quincy
Since it’s for an S-corp, there isn’t supposed to be any tax to pay. Looks like your CPA may have missed e-filing the returns. They might still be able to get the late filing penalty removed if they can prove a valid reason.
Quincy said: @Dawson
That amount of tax sounds like it’s not just the S-corp but includes personal taxes too, probably because of the passthrough income.
I don’t see anything about missing taxes here. The biggest penalty is for failing to file, which doesn’t apply to a 1040 but does apply to an S-corp if the return wasn’t filed.
Bin said: @Dawson
Wait, what? Are you saying there’s no penalty for not filing a 1040?
It’s technically a late filing fee and is often calculated as a percentage. If you have no balance due, you could file five years late and owe nothing. Not the same with an S-corp—you need to file no matter what.
Donna said: @Dawson
Are you serious? You can check the IRS page if you’re not sure about the failure-to-file penalty.
You clearly don’t understand. You won’t get an $8,500 penalty for failing to file a 1040. Late penalties are percentage-based, and if it’s an exact number with zeros, it could be related to an S-corp. Anyway, OP should just ask their CPA for proof of filing.
@Dawson
Please know your stuff before posting. Failure to file is indeed a 5% monthly penalty, up to 25%. OP owed $35k, which would equal $8,750 as a penalty. Weird, right?
Quincy said: @Dawson
Please know your stuff before posting. Failure to file is indeed a 5% monthly penalty, up to 25%. OP owed $35k, which would equal $8,750 as a penalty. Weird, right?
But I just said he doesn’t owe any taxes. It’s different for S-corps where they might assess a flat fee instead. And sorry, but being a tax expert doesn’t come from a cereal box.
@Quincy
I didn’t pay until the extension because my CPA hadn’t finished the taxes, so I didn’t know the final amount. They eventually told me it was $35,000, supposedly including any fees, so I paid it around October 2023.
I usually owe because I’m an S-corp and a 1099 contractor, and I’ve never paid quarterly. I plan to start doing that, though. But my main issue is this IRS notice.
@Dorian
Unfortunately, the IRS doesn’t really care if you didn’t know the exact amount. Not paying by the April deadline adds a penalty, even if you filed an extension. Most preparers don’t include late filing penalties in their calculations but should warn you about them.
@Dorian
You probably need to adjust your withholding to cover these amounts. Try adding $1,500–$3,000 monthly to cover what you owed. Go into payroll and update line 4(c) on your W-4. Some of my clients have 100% of their paycheck withheld to cover taxes. You might want to consider that if you’re consistently short.
Penalties depend on the reason behind them, but the interest is your responsibility. If your CPA didn’t file, that’s on them, but make sure you have proof that you signed the e-file form. Sometimes the IRS misplaces returns, and your CPA should have a confirmation of filing.
You could try writing a letter to the IRS asking for an abatement based on relying on your CPA.
Something like:
"I, [Your Name], request a waiver of the Failure to File and Failure to Pay penalties under the reliance on a tax professional rule. I signed my tax return and Form 8879 on [Date]. I’ve attached a DocuSign confirmation and emails where my accountant claimed it was a mistake and they would fix it.
If this isn’t enough to waive the penalties, I’d also request a first-time penalty abatement."
This could help, but you may still need to pay the interest. I’d also send a letter to your CPA asking for a refund of their fees if they did indeed mess up. I’m not a lawyer, but a judge might see things your way if you ended up in court.
Just because someone’s a CPA doesn’t mean they know everything about taxes. They’re required to study general accounting, not tax-specific work, and often don’t continue learning tax laws after they get certified. You might want to ask any CPA you work with how much tax training they have and if they specialize in taxes.
