What shall I do when my accountant failed to file the tax return extension?

From Yahoo we read, "We received the penalty notice from IRS, stating we have a penalty for filing my partnership tax return late(3 months after the deadline). But my accountant was supposed to file the extension. We contacted her and she admitted she forgot to do so. She dropped an email to IRS to ask for a waive then.

About one month later, we receive another notice from IRS about the intent to seize our property becasue we did not pay the penalty.

My accountant said this is two different system from IRS and we can just ignore the 2nd notice. The penalty will be waived. But we just could not wait until they seize our property. Plus we are still applying for the permanet residents, we are afraid this will have negative impact on our status.

What shall we do now? I tried to contact IRS, but nobody answers the phone"
Answer:  Your partnership tax return is an "information tax return." A partnership does not pay tax. Rather. the Form 1065 generates a Schedule K-1P for each partner. It is the Schedule K-1P that each partner uses when preparing their personal tax return. 

As you have learned the penalty for failure to file a partnership tax return on a timely basis results in severe and eye opening consequences. The IRS literature is full of examples of what is an acceptable reason for late filing and the basis for a determination to waive any penalties and fees. That literature is very clear that a "busy accountant" is not an acceptable reason. I would not have used that reason.

When you say that your accountant contacted the IRS I am presuming that your accountant is a CPA (Certified Public Accountant). Under IRS Circular 230 such a person is considered enrolled to practice before the IRS.

The IRS notices that you have received have specific contact telephone numbers. Using those numbers would get you to the correct office and would tend to expedite person-to-person resolution if that is needed. While you are apparently using a CPA I hope that you are receiving a copy of the IRS letters involved with this situation. If you are using a CPA that person may be receiving a copy as well (if you signed a power of attorney).

If you need to contact the IRS try the 1-800-829-1040 number. It is an automated number and not very fast. When a live agent comes on the line simply state that you need referral to the office in Cincinnati, OH concerning partnership tax returns.

My suggestions are:

- pay the filing penalties (unless you can work out a one-time waiver)

- respond in writing to the notice of intent to seize assets (written communications to any government letters of such nature is always well advised) (my philosophy is to document all contact with the government)

- do not be unduly alarmed or concerned about your residency status. Officially, one branch of the government is not supposed to get information from another (specifically tax information). While you may have to prove your worthiness for the next step in your resident status you should have no concern so long as you just get the situation corrected with the IRS. Filed is filed, doesn't matter it was late...

- I would have fired the CPA and taken my business elsewhere. There is no excuse for late filing - period. In life there are always "reasons" but there are no excuses when it comes to being professional and handling the affairs of clients.

- depending on where you reside you may have a local IRS office in your city. Take your situation and all your documents to an agent there for a one-on-one. This would save mountains of paperwork and interminable telephone referrals (these can be very frustrating).

Source(s):

IRS website: www.IRS.gov
IRS Federal Form 1065
IRS Circular 230