The short answer is no - you take responsibility for what's on your tax return.
It’s one of the most common misconceptions in tax: “My CPA told me to do it, so I’m off the hook if it goes wrong.” Unfortunately, that’s not how the IRS sees it—and it’s not how tax law works.
Even if you hire a CPA, EA, or tax attorney to prepare your return, you—the taxpayer—bear ultimate responsibility for what’s filed. That means if something goes sideways, the IRS holds you accountable.
In nearly all cases, blaming your preparer isn’t a valid defense. The courts have made this clear over and over again: You can't delegate your responsibility to understand and approve your tax filings.
Penalty Relief: When Can You Get a Break?
There are a few limited situations where relying on a professional might help reduce penalties (not taxes, not interest, but penalties):
Reasonable Cause: If you relied on a competent tax advisor in good faith and provided full disclosure of relevant facts, the IRS may waive penalties for negligence or understatement.
Reliance on Written Advice: The IRS may grant relief if you relied on a formal written opinion that meets certain standards.
First-Time Penalty Abatement: Available for certain late-filing or late-payment penalties if you're otherwise compliant.
But even these are narrow exceptions. You don’t get a pass just because “my accountant said it was okay.” You need more.
And that brings us to the gold standard of tax protection…
Tax Opinion Letters: When the Stakes Are High
If you're relying on a sophisticated tax strategy—like a conservation easement, UPREIT contribution, or complex estate freeze—you need more than a checkbox on TurboTax or a CPA’s casual email.
You need a formal tax opinion letter.
These letters provide written legal analysis of a proposed transaction, outlining the risks, relevant authorities, and the preparer’s level of confidence that the tax position will be upheld.
Here’s how the levels of assurance are typically defined:
Assurance Level | Confidence Range | Language Used |
Will | “It is our opinion that the IRS will uphold this treatment.” | |
Should | ~70–90% | “It is our opinion that the IRS should uphold this treatment.” |
More Likely Than Not (MLTN) | >50% | “We believe the IRS is more likely than not to uphold this treatment.” |
Reasonable Basis | ~20–30% | “There is a reasonable basis for this position, though significant risk remains.” |
Not Frivolous | ~10% | “This is not a frivolous position, but it lacks substantial authority.” |
The higher the assurance, the stronger your defense. If a position is later challenged by the IRS, a “Will” or “Should” level opinion letter can reduce or even eliminate penalties—especially if it’s issued by a qualified attorney or firm and based on full disclosure.
When You Need a Tax Opinion
If you're pursuing a high-stakes transaction—especially one involving estate tax planning, real estate contributions, charitable structures, or aggressive loss strategies—a tax opinion letter should be part of the process.
For example, our REIT structure offers potential estate planning benefits like:
Fractional shares that can be divided among heirs in flexible, tax-efficient ways.
Liquidity that allows each beneficiary to control their portion independently—no need for consensus.
A REIT structure that’s friendly to not-for-profit and charitable planning.
Options to place shares into §1014 or §1015 trusts to optimize basis and long-term planning.
But here’s the key: these benefits rely on specific interpretations of tax law, and your estate plan must be drafted carefully to capture them. If you're counting on these advantages, you need written support that meets a defensible assurance level.
What Actual Protection Does Each Level of Opinion Provide?
A tax opinion letter offers two layers of potential protection:
Penalty Protection from the IRS
Professional Liability (i.e., can you sue your advisor for losses?)
But these protections vary dramatically based on the assurance level of the opinion—and even more depending on how the opinion was drafted and disclosed.
Here’s a breakdown by level:
“Will” Opinion (95%+ Confidence)
IRS Penalty Protection: Strongest. If you relied on a “Will” opinion issued by a competent advisor after full disclosure, you can often avoid substantial understatement penalties (IRC §6662), especially if the strategy is ultimately upheld.
Professional Liability :If the position fails and results in taxes or penalties, the advisor may be liable if:
They failed to conduct proper due diligence.
They ignored material facts or tax law.
They misrepresented their confidence to you.
Courts often hold professionals accountable for “Will” opinions that don’t meet the high bar of legal certainty.
“Should” Opinion (~70–90% Confidence)
IRS Penalty Protection: Usually protects against negligence and understatement penalties if you:
Disclosed the position properly (on the return).
Relied in good faith on the written advice.
Professional Liability: Some exposure if the advisor overstated confidence or ignored contrary authority. You might have a claim if:
The opinion was marketed as “safe” or “bulletproof.”
The advisor didn’t disclose key risks.
But this level assumes some legal uncertainty, so courts may see it as a reasoned judgment call rather than malpractice.
“More Likely Than Not” (>50% Confidence)
IRS Penalty Protection: May protect against accuracy-related penalties (IRC §6662) only if the position is properly disclosed (usually via Form 8275 or 8275-R).Without disclosure? No penalty protection.
Professional Liability: Harder to recover from the advisor unless:
They failed to disclose the weak nature of the opinion.
They presented it as stronger than it was.
Courts generally treat this level as a coin-flip opinion with informed risk.
“Reasonable Basis” (~20–30% Confidence)
IRS Penalty Protection: Very limited. You may avoid negligence penalties, but not understatement penalties unless the position is fully disclosed.
Professional Liability: Advisors typically insulate themselves by clearly labeling this as a weak or defensive opinion .If they didn’t? You may have a claim for negligent misrepresentation.
These letters are often used for reporting positions that are likely to be challenged.
“Not Frivolous” (~10%)
IRS Penalty Protection: No protection. You may be hit with accuracy-related, negligence, or even preparer penalties.
Professional Liability: Minimal, unless:
The advisor held this out as a legitimate position.
You were not warned of the extremely low likelihood of success.
This opinion level is often used to avoid §6702 frivolous return penalties, not to defend a position on the merits.
Key Rules for Protection
To even have a shot at IRS or malpractice protection, the opinion must:
Be issued by a competent tax professional (CPA, JD, or EA with relevant expertise).
Reflect full disclosure of all material facts.
Include proper citations and a clear explanation of risks.
Be relied on in good faith, not used as a fig leaf for aggressive or fraudulent intent.
Malpractice Claims Aren’t About Being “Wrong”—They’re About Being Negligent
A CPA or attorney can give you a “Should” or “MLTN” opinion that turns out to be incorrect without being on the hook—as long as they acted competently and disclosed the risks.
But if:
They misrepresented the opinion level,
Hid weaknesses,
Or had a conflict of interest (e.g., they were paid to sell the strategy)...
Then you might have a claim under:
Negligence,
Breach of fiduciary duty, or
Professional malpractice.
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