Tax preparers face extraordinary exposure to liability risk. With last year's tax return deadline slowly inching forward, anyone involved in arranging business and individual tax documents for the Internal Revenue Service is bogged down with information and related tasks. All of this can certainly lead to human error - and the liability penalties for clients that unfortunately can become part and parcel of the mishaps.
Accounting firms, accountants and bookkeepers, therefore would do well to invest in a quality Professional Liability insurance policy that protects from negligence while giving them the wonderful peace of mind that is necessary to carry on general operations with ease.
Experienced agents and brokers can help the tax preparer get the necessary commercial coverage. Any agency, in fact, that has a direct relationship with the top companies can sift through offered policies to come up with a tailored plan at a competitively low quote.
Insurance Claims that Tax Preparers have submitted:
• After mistakenly leaving out the Form-1099 from a client's tax return, a tax preparer discovered that the IRS levied a penalty. Fortunately, the $2,015 penalty claim was covered by the tax preparer's insurance.
• A client's tax return was filed late as a result of the accountant's busy schedule. The client was assessed with a $3,500 penalty. Fortunately, the penalty claim was funded by the accountant's professional liability policy.
• Bookkeeping is tedious work. In one case, it resulted in a calculation error in regard to the beginning accounts receivable balance that went over to an understatement of gross receipt that ultimately made its way to the client's official tax return. After the Internal Revenue Service assessed a penalty to the client, the accounting firm's elective bookkeeping policy covered the claim with a settlement of $2,500.
This is what anyone in the tax business should look out for in a related plan:
- An application process that is not long and drawn-out
- Low rates
- Protection for the tax professional and his or her client
- Defense coverage
- Protection for both full, part-time and seasonal tax preparing employees
- Related discounts and special offers
There is no doubt that tax season can be exceptionally stressful. For the tax preparer, avoiding the extra tension translates into purchasing a customized insurance package. For a full discussion about all options, speak to an experienced indemnity professional - someone with referrals that indicate he or she places your best interest above all else.
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