Not a whole lotta bites on this thread. That kinda makes me think that folks have middling experiences at best. Nothing fantastic to share. Nothing cringe-worthy. That's not a good sign. I'm guessing there's some cringe-worthy ones that are being kept private due to embarrassment. (I'm weird. Venting my embarrassment helps me feel less embarrassed. Seems counter-intuitive.)
The miss was by 40% of the tax owed. Ouch.
I had one near miss that could have resulted in a massive fine. That same guy I now use helped us figure out what we had done wrong and had already fixed it, but behind schedule. Then we filed paperwork explaining the problem and that the tax was paid late due to an error by an investment company, and then the waiting for the bureaucracy to bless the situation started. Which had me at a low level of worry for over six months.
They eventually sent some scary letters and I had to call to ask what the hell they even meant and they explained that the way the process works when you fess up is they send you scary letters that say you did naughty things and then follow them up with a letter saying "okay, we forgive you, you moron". Problem was, my letters not only arrived out of order, backward, but the person doing the "investigation" at IRS actually issued them backward about a month apart.
Talk about heart attack central. After I figured out that all was well, I wanted to strangle the bureaucrat who sent those letters out in the wrong order.
I guess the good news of this story is, even mistakes are usually handled reasonably. But I know there's no guarantees and you can hit a grumpy agent.
Realistically though, talking with the senior person after they scared the crap out of me, she said really they just have piles of stuff on their desks and want to clear it off and go home for the day, just like anyone else. There's always a few that make it a mission to make other people miserable, but even those have to back down when and if you show up with a tax attorney who's seen it all... and knows they're being an ass.
And... the wheels grind incredibly slow. It's horrendous waiting on word after you follow the rules and send a letter explaining the mistake after paying either what you can, or all of it, at least a little up front. (We could afford to completely pay the tax due, we just had an investment firm screw up and not do something they should have until the turn of the year. Holidays, they got busy, hell if I know. I had them by the short hairs if I had to take that big fine, but I really didn't want it to turn into a war.)
If the current tax "professional" won't write up the letter and help through that process, definitely find one who will and won't have any trouble saying they found the original "professional's" work to have errors and lacking in knowledge.
That's actually the one thing you really have going for you. You didn't make the mistake without "counsel". A pro helped you dig your hole and weirdly, they seem to take that better than some business owner or individual screwing it all up on their own. Probably because that's by far more common. They can't relate too well to idiots making their own mistakes, but they will acknowledge that if you hire a pro and the pro messes up, you trusted them, and as long as you can get that documented in the process, it will help.
I'm assuming she marked all your returns as prepared by a pro with her info as she was supposed to, even though you sign it saying it's correct. If so, you're in better shape when you send the "awww crap, we missed something" letter. In my case, my pro even wrote that letter. I suspect if you've dumped her, she won't for you, but the next pro probably will. They can easily see her mistakes and document them as something they helped you find and start to correct.
My pro said when we sent the letter it was 50/50 for an audit, but he'd stand there with me and could recommend an attorney if needed and it got out of hand for any reason. He also said that it was very rare to see the entire fine amount levied after a meeting, unless someone was dumb enough to act belligerent to the agent and make them angry.
You'll be fine. The dollar amount sounds higher and the penalty will look even scarier, but in the end, they're not after taxes that weren't owed, and they're not quick to slam people with huge fines. We ended up with taxes paid about three months late, proved that it had actually been overpaid by a small amount because we had to estimate a very difficult calculation, and the final letter pretty much said "that's enough, we'll keep the little bit of extra, don't do it again".
I joked with my tax guy when it was over that they kept the little bit of extra because THEY couldn't do that damned math, either.
(It's one of those multiple year horrible weird sliding scale things that has to be calculated at the exact moment a withdrawal is taken from an account and once you're past that date and don't know the market value to the instant it should have happened, you'll never find a 100% correct number. So the whole calculation is screwed. We just documented our assumptions and the math and guessed a little in favor of IRS.)
You'll get through it. It makes most analytical or business minded folks feel crazy going through the process because you can't control it. You just write up the problem, fix it as best you can, document that, and wait. And wait. And wait. Drives anyone used to running things, a little crazy.
