As tax time rolls around Certified Public Accountants (CPAs) find themselves burdened with filing after filing for their clients. With late filings coming in as well, they often have more work than they can handle. This can result in errors occurring in the preparation of documents and this is certainly not good for business.
Providing tax advice is a staple of the job, and tax return preparations done quickly can result in a greater number of claims against accountants. This can be of great concern for anyone who is an accountant and doesn’t have CPA professional liability insurance. Not only is tax work the foundation of most accountants’ practices, but there is also the fact that they produce so large a quantity of tax returns annually that their work can wind up being subjected to intense scrutiny by the Internal Revenue Service (IRS).
Claims of malpractice are quite common
Tax return malpractice is often the result of simple lapses on the part of the CPA. Tax claims can range from any number of missteps, from a missed deadline for filing, to being provided with poor advice. But the majority stems from return errors, and malpractice occurs more as a result of poor communications with clients than from any errors due to the complexities of the tax code. Most of the time these problems are simply the result of poor quality control procedures.
Naturally, CPAs have an obligation to their clients to exercise due professional care. An engagement letter provides the client and other third parties with rights of recovery, which means that, if the CPAs are not performing within the agreement as set forth in the contract, this will be considered a breach of contract. In order to recover any loss from an auditor under common law, the client must prove either breach of duty, losses, or causation.
CPAs may defend against a breach of contract if they can prove that the client’s loss occurred because of factors other than negligence by the auditors. CPAs owe it to themselves to always be thorough and check all work prior to having their client sign any tax documents to be submitted. Having cpa professional liability insurance helps provide assistance when negligence or malpractice does occur. Speak to a knowledgeable agent about questions concerning this important coverage.