If my accountant made a mistake which could cost me thousands, what do I do?

If my accountant made a mistake which could cost me thousands, what do I do?

I sold an investment property for $300,000 as a short sale 2 years ago. Since my debts were far greater than my assets at the time of the sale, I needed to file insolvent on my taxes, since the $300,000 was reported to the IRS. I gave all my information, insolvency worksheet, etc. to my accountant,but he failed to do my taxes correctly (which I did not know at the time). Now I just got a letter from the IRS stating that I owe nearly $119,000 in taxes (including penalties and interest). Where do I go from here? A tax attorney or another CPA? Since I obviously cannot pay this, I need to prove my insolvency at the time of the sale but will I be hit with the penalties and taxes even though it wasn’t my mistake?

Asked on October 1, 2012 under Bankruptcy Law, New York

Answers:

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