Here a tax preparer was sued for not telling an "innocent spouse" about the danger of filing a joint return, when she could have filed an individual return and avoided a startling amount of liability.  After bankruptcy, wife sued and lost.

"Shortly before Ted’s death, Camille discovered that Ted had failed to pay the taxes. When attempting to sell the marital home, Camille learned that tax liens had been placed on the property to secure Ted’s business liability for federal withholding tax, interest and penalties. Camille ultimately fi led for bankruptcy and settled the federal and state tax liabilities. Camille then sued Crincoli and his fi rm for accounting malpractice, asserting that he had failed to advise her that, by fi ling a joint tax return, she could be exposed to personal liability for taxes, interest and penalties relating to her husband’s business – liabilities that she would not have borne had she fi led separately.

At trial, Camille’s accounting expert testifi ed that Crincoli had deviated from accepted accounting practices by failing to explain the risks of fi ling a joint return to both spouses. The expert conceded, however, that these “accepted practices” did not derive from standards set by the AICPA or the IRS, but rather were based upon his “personal” standards. In contrast, Crincoli’s expert testifi ed that Crincoli had acted properly and should not have been expected to investigate the accuracy of the information provided by the husband or to discover that the marital home was held in the wife’s name. The expert testifi ed further that it was not uncommon for one spouse to act as the agent for the other in communicating with a tax preparer.

After a four-day trial, the trial judge dismissed the complaint and entered judgment in the amount of $6,000 (the outstanding accounting fees) in favor of Crincoli. On appeal, the Appellate Division affi rmed the lower court’s ruling. The appeals court agreed with the trial court’s ruling that Camille’s expert was not credible, and that the standard of care set forth by Crincoli’s expert should govern. The appeals court also noted, that even if Crincoli had been negligent, that his negligence was not the proximate cause of Camille’s damages; she did not present any evidence that, had she been informed of the risks of fi ling jointly, she would have acted differently.

While both the trial and appeals courts ultimately sided with the tax preparer in Daunno, accountants and tax preparers should consider providing a standard written disclosure to their clients making clear that they are relying on the information supplied to them by the clients themselves and that they are undertaking no duty to conduct an independent investigation to confi rm the accuracy or completeness of that information. "