Legal Question in Tax Law in New Jersey
Used a tax planning company, now I'm below ground zero
I'm the owner of a small S corp that does consulting. In 2002, I hired a tax planning co. to help me out with finances. We had a good year in 2001, but that's about the time the economy starting hitting everyone hard and we anticipated business going south. I was looking to defer the taxes the S corp had to pay so the company would be able to survive the anticipate upcoming 'depression'. All of my employees are close friends.
The tax planning co. put together a strategy for me that they said they used for other clients. They also claimed other large accounting firms used this strategy as well. I was provided with a third party lawfirm's tax opinion on the plan who declared it legit. I went for it.
Earlier this year, the tax planning co. received an IRS audit whereby they had to provide a list of all of their clients. The tax co. immediately called me and said the IRS 'frowned upon' the strategy they used for me, and asked me to refile taxes and 'true up' (which I did).
Now I'm out close to $90K in fees and getting hit with added penalities and interest. Can any action be taken against the tax planning co? At a minimum, I want to prevent this from happening to someone else. Thanks!
2 Answers from Attorneys
Re: Used a tax planning company, now I'm below ground zero
There may also be ways to reduce the penalties that you have to pay since you relied on the advice of two tax advisors.
Let me know if you have any further questions.
Re: Used a tax planning company, now I'm below ground zero
Without knowing what the strategy was, my advice is limited. If the program was known to be a questionable tactic, or a possible fraudulent scheme, you can sue them for fraud and misrepresentation. You do not say if you have any written agreements with them and what terms they contain. Were there any limitations on liability? More information is needed to provide a proper answer.
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