The first question is whether you simply got scammed, because your post sounds exactly like you did. No reputable or legitimate firm will guarantee that they can get you out of all your taxes - that should have been a HUGE red flag to you. DId you do an internet search at all on the company? Did they send you a solicitation letter or cold call? To answer your question, sure you can sue but if it is what is sounds like, don't expect any money back. You might also try local law enforcement or the state consumer affairs office. The IRS also keeps tabs on some of these groups.
As my colleague states, no reputable firm would actually guarantee a particular result. You should first look at the agreement you have with the firm (you do have one, right?). Does it actually contain a guarantee? If not, it would be difficult for you to prove an actual guarantee exists. Also, have you requested your money back (the fee you paid)? That would be necessary before any lawsuit could be filed.
However, what you describe is how the process works; honestly, I am not convinced they did anything wrong. You don't really give enough information as to whether they attempted the abatement.
1. Tax liens, if you owe over a certain amount in back tax, the IRS is going to place a lien, NO ONE can stop that from happening, short of paying the tax before the lien is placed. Some actions could have been taken to stall the lien, (e.g. filing an appeal when the notice of lien was issued), but it couldn't have been prevented (again, short of paying)
2. In order to abate penalties, the taxpayer must actually either PAY all the tax, interest, and penalties FIRST, or have an accepted installment agreement with the IRS to pay the tax, interest, and penalties. Only then can you submit the abatement request and request a refund of penalties (if you paid it) or have the installment plan recalculated. So the fact that you paid the tax was a necessary step before a request to abate penalties could even be submitted.
If you want real representation for your tax challenges, you may call my office; that is what I do.
As has been mentioned before, you can certainly sue. A good attorney will be able to determine if it's worth it to pursue certain claims such as breach of contract, negligence, fraud, or misrepresentation. Was this guarantee in writing? The will need good evidence in order to pursue the case most effectively.
Were the people you dealt with at the firm properly licensed? In California tax preparers are required to be registered with the California Tax Education Council and bonded unless they are a licensed Attorney, CPA, or enrolled agent. If they were not properly registered or licensed, then this could help bolster your case. If you cannot find an attorney to help, you could sue them in small claims court.
I wish you the best. Going forward, research any tax professional before you hire them and make sure they are properly licensed. Steer clear from any person who guarantees a particular result or outcome.
Leon H. Rountree III
California Attorney at law
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