PENNSYLVANIA RECORD

A man who lives in Philadelphia but is employed by a school district in New Jersey has filed a lawsuit against his tax preparers, alleging the accountants failed to inform him he had to pay an earnings tax to the City of Philadelphia, an oversight that has caused the plaintiff to rack up more than $20,000 in interest and penalty fees relating to the tax nonpayment.

Philadelphia attorney David N. Rubin filed the civil action May 15 at Philadelphia Common Pleas Court on behalf of city resident Emerson Davis.

The defendants named in the complaint are Upper Darby, Pa. accountants Martin D. Washington and Cynthia A. Moultrie, as well as their firm, The Loyal Group Inc.

According to the complaint, Davis retained the defendants as his accounts in 2005, employing them to prepare his federal, state and local income tax returns.

The defendants were tasked with preparing tax returns for the years 2005 through 2010.

As tax professionals, the defendants, who were aware of Davis’ living situation in Philadelphia and work situation in New Jersey, should have been aware that the City of Philadelphia requires residents to pay an earnings tax on income earned outside of the city, the lawsuit claims.

However, the defendants never informed Davis of his obligation to file and pay the earnings tax, nor did they prepare an earnings tax return for the plaintiff to file, the suit states.

“As Plaintiff’s tax return preparer and accountant, Defendants undertook and/or assumed a duty to Plaintiff to render reasonable, competent, proper, adequate, and appropriate professional services and advice to Plaintiff, and to take appropriate measures to ensure Plaintiff’s compliance with the filing requirements under the City of Philadelphia’s tax code regulations,” the lawsuit states.

The complaint claims that the defendants’ failure to advise Davis of this tax liability fell outside of the commonly accepted “professional standards” and constitutes a breach of professional standard of care owed to the plaintiff.

As a result of the defendants’ alleged negligence and professional malpractice, the lawsuit claims, Davis incurred interest and penalties on the unpaid taxes in the amount of $20,755.

That’s not including the $3,500 in lawyer’s fees Davis racked up to address his tax liability issues with the city, the suit states.

In all, Davis’ penalties, interest, fees and costs have totaled $24,255, according to the lawsuit.

Davis accuses the defendants of failing to provide and render reasonable and proper professional care, giving improper tax advice, failing to advise Davis of his tax liabilities, failing to be aware of the tax code and regulations in Philadelphia, failure to use due care under the circumstances and negligence at law.

Davis demands judgment in the amount of $24,255, together with interest and the cost of the litigation.

An arbitration hearing on the matter has been scheduled for January of next year.

 

The case ID number is 120501382.