Question

Cliff receives a letter from the IRS, informing him that he has severely underestimated his Adjusted Gross Income for the past year. Cliff was oblivious to this fact because XYZ Accounting has filed his taxes for him for the past 15 years. Now, Cliff owes $15,000 in back taxes. He sues XYZ Accounting for this mistake. Which of the following would cover the cost of the lawsuit for XYZ Accounting?

A.XYZ Accounting's failure to inform Cliff about the IRS letter.
B.XYZ Accounting's refusal to correct the tax filing.
C.XYZ Accounting's 15-year negligence in estimating Cliff's income.
D.Changes in IRS regulations.

Answer 1

XYZ Accounting's 15-year negligence in estimating Cliff's income would cover the cost of the lawsuit.

Step-by-step explanation:

The cost of the lawsuit for XYZ Accounting would be covered by option C: XYZ Accounting's 15-year negligence in estimating Cliff's income.

In this scenario, Cliff owes $15,000 in back taxes due to the severe underestimation of his Adjusted Gross Income by XYZ Accounting for the past year. Cliff decides to sue XYZ Accounting for this mistake. XYZ Accounting's negligence in estimating Cliff's income for 15 years would be the primary cause of the error, making them responsible for the consequences.

Therefore, option C, XYZ Accounting's 15-year negligence in estimating Cliff's income, is the most suitable option to cover the cost of the lawsuit.