You hired a CPA. They filed your return. The crypto was reported wrong — or not reported at all. The IRS sends you a notice. You owe $80,000 in additional tax, penalties, and interest. Your first question: is the CPA liable? The answer is nuanced — and the IRS does not care about the nuance. They want the money from you.

You Are Always Liable

Under §6012, the taxpayer is responsible for the accuracy of their return regardless of who prepared it. Hiring a professional does not transfer tax liability. If your CPA missed $200,000 in crypto gains, the IRS assesses the tax against you — not the CPA. This principle is absolute and non-negotiable.

Penalty Protection

Reliance on a qualified tax professional can provide reasonable cause for penalty abatement under §6664(c). If you provided complete and accurate information to your CPA and they made the error, the accuracy-related penalty (20% of the underpayment) may be waived. You must show that: (1) you provided all relevant information, (2) the preparer was qualified, (3) you reasonably relied on their advice, and (4) the reliance was in good faith.

Malpractice Claims

You may have a malpractice claim against the preparer for the additional tax, penalties, and interest caused by their error. This is a state-law civil claim separate from your IRS obligation. You must pay the IRS first (or resolve the debt through an IRS program), then pursue the preparer for damages. Malpractice claims have statutes of limitations that vary by state — do not wait.

Preparer Penalties

The IRS can penalize preparers under §6694 for understating tax liability due to unreasonable positions ($1,000 per return) or willful/reckless conduct ($5,000 per return). You can report preparer misconduct to the IRS Office of Professional Responsibility. However, preparer penalties do not reduce your tax liability.

Resolution Path

When your CPA's crypto error creates an IRS liability you cannot pay, the resolution tools are the same: OIC, installment agreement, penalty abatement, CNC status. Attorney Darrin T. Mish handles the IRS side and can advise on preparer recourse. Thirty-two years of untangling exactly these situations. Free consultation.