Errors and Omissions Coverage for CPAs

As most of us know around tax time, Certified Public Accountants (CPAs) perform a valuable service. Their knowledge of laws pertaining to income tax, deductions and other accounting issues helps determine whether an individual owes money to the government or is entitled to a refund.

At one time or another, due to an error in the figures produced or in filling out required documentation, a mistake can result in a client being audited and fined. That client, angered or frustrated by this outcome, may decide to sue the CPA and file an errors & omissions claim. Such claims can be costly, and having accountant insurance for errors and omissions can be quite beneficial.

Educating clients can be quite beneficial

In most cases your clients don’t understand their tax situations and rely on you to do what is needed to provide them with a favorable outcome. Under pressure of deadline, this can lead to mistakes and client dissatisfaction. Educate clients and help them to prepare before the time comes to meet with you. If they have done their part it will make your job easier and can likely help avoid some of the more common mistakes made.

The last thing you want is for them to have an issue with the IRS or state board, and you wind up dealing with the fallout. Also explain the process to clients, giving precise reasons why their tax preparation is handled in a particular way. This will help demonstrate your knowledge, as well as your desire, to help them better understand the process and why they owe, or are receiving money back for over payment.

When meeting with clients address current issues, such as changes in your company’s policies, or new state and government tax laws that affect them. Discuss with your staff members what they should be doing to avoid claims from occurring. Have regular staff meetings to stress key practices, such as the importance of timely documentation in filings.

Most disputes revolve around the accuracy of the information being presented on tax documents. One defense you have as an accountant is the presence (and authenticity) of your client’s signature. Once the client signs off on their documents, they become responsible for the accuracy of the information provided.

We recommend that you never give a client blank tax papers to sign while advising them that you’ll save them some time and fill them in later. This puts the blame for any errors squarely on your shoulders, and puts you in jeopardy. It will likely be a costly mistake, especially without accountant insurance in place.