Accountant incompetence, heavy penalty by CRA

If it is the Accountant's fault, you send him the CRA bill for the penalty and demand that they compensate for their failure. If he doesn't pay... you can sue him for his negligence. That's what the malpractice insurance that CPAs are required to have is for. However, you're going to have to have evidence that shows that you engaged them to file the GST return and not just your personal return and they failed to do so.

Was the accountant paid to file the HST return? Did their bill charge you for filing it? Did you specifically talk to them about filing it? Probably some important questions there.

'File my personal tax' doesn't necessarily include an HST return. Some people do their HST returns themselves but pay someone to do their personal tax return.

The argument can still possibly be made that they could go the extra mile and inquire about your HST return. But I wouldn't necessarily be putting all blame on them. Depends on the conversations you had and what you actually paid for. I know that people go to public accountants for the sole purpose of passing on responsibility, but sometimes taking a little bit of responsibility (while passing on most of it) goes a long way, and possibly you didn't do that. I mean, in the end, even if it was their responsibility, you would have been better off mentioning something to them to confirm, even if it was their fault it got missed.

Now, if they charged you for filing it and told you they filed it, but didn't - that's an issue that is likely their fault. In which case, I'd go back to them, show them the bill they gave you where it says 'completed HST return and filed' and stick it to 'em.

Another aspect is that possibly they did the return and handed it back to you to mail in and pay? And maybe you didn't do that? That's something that can happen as well if communication isn't sufficient between the accountant and the customer. If so, again, some of the responsibility may lie with you depending on the conversations you had with them.

You can file a RC4288 (Request for Taxpayer Relief) and select for reason "Other" and explain how your accountant screwed up. Include any documentation; don't just send the form by itself.

In addition, demand the accountant pay you the amount of the penalty or possibly sue them. (Given the relatively small fine, I don't know if suing them is worth it...)

WetCoastGuy wrote: ↑If it is the Accountant's fault, you send him the CRA bill for the penalty and demand that they compensate for their failure. If he doesn't pay... you can sue him for his negligence. That's what the malpractice insurance that CPAs are required to have is for. However, you're going to have to have evidence that shows that you engaged them to file the GST return and not just your personal return and they failed to do so.

unknownone wrote: ↑Was the accountant paid to file the HST return? Did their bill charge you for filing it? Did you specifically talk to them about filing it? Probably some important questions there.

'File my personal tax' doesn't necessarily include an HST return. Some people do their HST returns themselves but pay someone to do their personal tax return.

The argument can still possibly be made that they could go the extra mile and inquire about your HST return. But I wouldn't necessarily be putting all blame on them. Depends on the conversations you had and what you actually paid for. I know that people go to public accountants for the sole purpose of passing on responsibility, but sometimes taking a little bit of responsibility (while passing on most of it) goes a long way, and possibly you didn't do that. I mean, in the end, even if it was their responsibility, you would have been better off mentioning something to them to confirm, even if it was their fault it got missed.

Now, if they charged you for filing it and told you they filed it, but didn't - that's an issue that is likely their fault. In which case, I'd go back to them, show them the bill they gave you where it says 'completed HST return and filed' and stick it to 'em.

Another aspect is that possibly they did the return and handed it back to you to mail in and pay? And maybe you didn't do that? That's something that can happen as well if communication isn't sufficient between the accountant and the customer. If so, again, some of the responsibility may lie with you depending on the conversations you had with them.

FoFai2015 wrote: ↑You can file a RC4288 (Request for Taxpayer Relief) and select for reason "Other" and explain how your accountant screwed up. Include any documentation; don't just send the form by itself.

In addition, demand the accountant pay you the amount of the penalty or possibly sue them. (Given the relatively small fine, I don't know if suing them is worth it...)

Last year he filed both the Personal and the GST/HST portion, this year he did not. The fee I paid him this year was the same as last year and I would have to go through all my emails to see what was understood by the accountant. I will probably file the RC4288 and hope that CRA will lend me a patient ear. Thanks all for your advice.

unknownone wrote: ↑ Was the accountant paid to file the HST return? Did their bill charge you for filing it? Did you specifically talk to them about filing it? Probably some important questions there.

'File my personal tax' doesn't necessarily include an HST return. Some people do their HST returns themselves but pay someone to do their personal tax return.

The argument can still possibly be made that they could go the extra mile and inquire about your HST return. But I wouldn't necessarily be putting all blame on them. Depends on the conversations you had and what you actually paid for. I know that people go to public accountants for the sole purpose of passing on responsibility, but sometimes taking a little bit of responsibility (while passing on most of it) goes a long way, and possibly you didn't do that. I mean, in the end, even if it was their responsibility, you would have been better off mentioning something to them to confirm, even if it was their fault it got missed.

Now, if they charged you for filing it and told you they filed it, but didn't - that's an issue that is likely their fault. In which case, I'd go back to them, show them the bill they gave you where it says 'completed HST return and filed' and stick it to 'em.

Another aspect is that possibly they did the return and handed it back to you to mail in and pay? And maybe you didn't do that? That's something that can happen as well if communication isn't sufficient between the accountant and the customer. If so, again, some of the responsibility may lie with you depending on the conversations you had with them.

True.

What if you are completely clueless (some people are) and just need to pay someone to do it. Thats what theyre for!
And you simply just say “i have nooooo idea.. i do this for a living can you help me take care of all my tax stuff so i don’t get in trouble? Just bill me later for whTever!!”

jadoogar wrote: ↑ My accountant failed to file my GST/HST return for 2018 and I was dinged 1200$ in penalties by CRA. How do I recover the penalty I paid to CRA for the accountant's incompetence, are there any legal grounds on which I can claim back those funds? I wish I could disclose his firm's name so no one else falls prey like I did and suffer financial losses. I had already paid him for filing the taxes he only filed the Personal tax but not the GST/HST portion.

Its never accountants fault. He works for you. Is your job to make sure he has done it. Simple. Accountant files based on your data imput.

Billing the accountant and requesting tax relief from the CRA certainly seems like the right way to go for a start.

In my experience accountants put a disclaimer in their contracts saying that they take zero responsibility for your filings with the CRA - they just provide you with the filing forms filled out according to the information you provided to them, and you are responsible for verifying that they are correct and actually filing them. Naturally this is ludicrous, as you wouldn't be paying an accountant to do it if you had the time and ability to verify everything. The accountant who did our corporate tax filing always sent us a letter to sign and return saying that we acknowledged that they had no responsibility. I never signed it and returned it, and they never mentioned it. But I don't know what would happen in the even of a protest to the accounting professional body or a claim pursued in court over an error of omission like this. I presume that the accountant would say that you did not specifically engage them to do the HST/GST return, and that you would have been responsible for filing it in any case. Even if they did it last year, and it was actually an oversight by the accountant, expectation does not create liability on its own.

The CRA's penalties seem out of proportion for unintentional infraction of their complex procedures that the taxpayer fixed as soon as they were notified. After all, in the case of GST/HST they are forcing you to act as an unpaid tax collector on their behalf, so it seems pretty harsh to penalize you for inadvertently doing it incorrectly.

You can ask the accountant to pay the penalty, that's really your only recourse. If he refuses to pay, and you have proof he was supposed to do it but didn't, you could take him to small claims court... It's your call whether that's worth $1200 or not. If you go that route, make sure you have absolute 100% documented proof that he was supposed to do it and didn't, resulting in the fine. A verbal agreement doesn't mean anything.

Also, take it from someone who has filed the RC4288 "taxpayer relief" forms, they will not do anything for your situation. Taxpayer relief is for extreme circumstances, like people so deeply in debt / financial trouble that paying the government would mean not feeding themselves and / or their dependents... They don't care if you / your account screwed up - This happens all the time and is not what taxpayer relief is meant for.

Penalty or Interest? You may get some relief from penalty if you convince CRA that accountant messed up. But not from interest because you've "had the benefit of the money".

You are not going to get any relief from cra based on the circumstances.
Couple of questions:
1) Were you suppose to pay instalments during the year? if yes did you pay them?
2) When your accountant did your taxes did he or she also tell you the balance for your hst return?

$1,200 penalty indicates pretty significant balance owing, and if your return was in line with the 2017 you were likely required to pay the instalments. It is quite possible your accountant screwed up, but before you name him on the forum, sue and so on, please make sure you have all the facts in order. My spouse is an accountant working for a mid size public firm and said recently they have reimbursed the client the penalty cra charged it them because it was their fault, but in majority of cases the clients receive an envelope with instructions and simply don't read them.

You should have something called an engagement letter that you signed. This letter outlines the services that you engaged him to do. If HST returns aren't listed, you're SOL. That just means he did something for free for you last year. In my experience most people don't read the letters other than the hourly rate or fixed rate part of it, but that's on the client being negligent.

Scote64 wrote: ↑ Billing the accountant and requesting tax relief from the CRA certainly seems like the right way to go for a start.

In my experience accountants put a disclaimer in their contracts saying that they take zero responsibility for your filings with the CRA - they just provide you with the filing forms filled out according to the information you provided to them, and you are responsible for verifying that they are correct and actually filing them. Naturally this is ludicrous, as you wouldn't be paying an accountant to do it if you had the time and ability to verify everything. The accountant who did our corporate tax filing always sent us a letter to sign and return saying that we acknowledged that they had no responsibility. I never signed it and returned it, and they never mentioned it. But I don't know what would happen in the even of a protest to the accounting professional body or a claim pursued in court over an error of omission like this. I presume that the accountant would say that you did not specifically engage them to do the HST/GST return, and that you would have been responsible for filing it in any case. Even if they did it last year, and it was actually an oversight by the accountant, expectation does not create liability on its own.

The CRA's penalties seem out of proportion for unintentional infraction of their complex procedures that the taxpayer fixed as soon as they were notified. After all, in the case of GST/HST they are forcing you to act as an unpaid tax collector on their behalf, so it seems pretty harsh to penalize you for inadvertently doing it incorrectly.

If you continued to use their services after you received that letter, you may be deemed to have accepted its terms. Especially if you never mentioned it after receiving it, and if it was part of a package. Unfortunately you won’t find out what the courts have to say on that matter till you have a claim against the firm. If you didn’t agree to the terms, you should have sent them something in writing/email saying you don’t. At that point you may be able to argue that they waived the requirement as they were notified, and they chose to continue the professional relationship.

Update:

My accountant emailed me this morning saying he will file a taxpayer relief request to ask for the waiver, failing which he will reimburse me the penalty I paid to CRA. Thank you all for your guidance.

jadoogar wrote: ↑ My accountant emailed me this morning saying he will file a taxpayer relief request to ask for the waiver, failing which he will reimburse me the penalty I paid to CRA. Thank you all for your guidance.

Good to hear!

@santafe I always assumed that our business tax accountant would not take responsibility for any error based on their disclaimer. However, I always refused to sign and return their letter declaring that I agreed to that, because a) I did not agree, and b) if an actual error of incompetence ever came up which might be actionable, I didn't want to give them any defensive ammunition. I was dealing with a tax firm, not an individual accountant I knew and trusted personally, and while there was a single figurehead accountant nominally responsible for our taxes, I suspect that most of the work each year was actually done by anonymous flunkies at the firm.

jadoogar wrote: ↑ Update:

My accountant emailed me this morning saying he will file a taxpayer relief request to ask for the waiver, failing which he will reimburse me the penalty I paid to CRA. Thank you all for your guidance.

Good for you. I say lucky you as your accountant took the responsibility.

Can you disclose his name and company?

We would like to deal with good and responsible accountant.

Btw, making mistake from time to time is not incompetent. It's just not a perfect human, witch i don't believe exist.

Making mistake is a thing, but being responsible and making the necessary to fix the issue mean they are a really good and respectable business.

I have dealt with alot of human in my life... Did not meet much of those kinds of human, most of them are perfect and never make mistake or error, or when it occur, it's always someone's else fault and they don't care.

callernamet wrote: ↑ Good for you. I say lucky you as your accountant took the responsibility.

Any competent accountant will have malpractice insurance (also known as Errors and Omissions insurance) and is pretty inexpensive insurance ($400 a year for $1,000,000). So, should have been no big deal for taking responsibility since it paid out from their insurance, unless it is a fly by night operation that you shoudn't be using anyways.

WetCoastGuy wrote: ↑ Any competent accountant will have malpractice insurance (also known as Errors and Omissions insurance) and is pretty inexpensive insurance ($400 a year for $1,000,000). So, should have been no big deal for taking responsibility since it paid out from their insurance, unless it is a fly by night operation that you shoudn't be using anyways.

E&O insurance at $400/year? Wow, how do accountants get off so cheap?? Our insurers wanted 20x that amount from our firm just for selling software in the U.S. with a total disclaimer of liability for anything.

Scote64 wrote: ↑ E&O insurance at $400/year? Wow, how do accountants get off so cheap?? Our insurers wanted 20x that amount from our firm just for selling software in the U.S. with a total disclaimer of liability for anything.

« In the U.S. » is your problem.