Weighing In on Professional Liability Coverage for Accountants
Tax preparers often have a rough time of it. A simple mistake, like accidentally entering a number incorrectly, misconstruing a client’s statement, or taking responsibility for a filing being late, can often be a costly one. It may help if the mistake is discovered before an IRS audit, but still some accountants make an error in judgment by deciding not to call their client’s attention to their mistake. This creates mistrust.
Accounting business insurance, in particular, professional liability coverage is a valuable asset to have. You may advise your client to file an amended tax return as a way of acknowledging your mistake, but what you have essentially done is conceded to having committed a form of malpractice. Your professional liability coverage can aid you in this matter, especially if you wind up in a lawsuit.
Mistakes often have a rippling effect
Once your client becomes aware that a mistake has been made, they may become distraught. People are often afraid that the IRS will punish them and that they could wind up financially impacted, or imprisoned. What makes the situation all the more exasperating is that the outcome is not within their direct control.
In most accounting malpractice cases, the practitioner must exhibit a reasonable professional standard of care. Despite your best efforts and dedicated work, it may be easy to prove that you have breached this reasonable professional standard, yet another pitfall leading to your professional financial harm.
There are a large number of accountants in the US today, and so there are many choices when it comes to buying accounting business insurance for your firm in order to address the many exposures being faced. Wading through the various options can be a chore, one that may cause some busy professionals to simply forego obtaining insurance, believing they have minimal risk, or they simply end up buying a low cost solution. This can often result in coverage that under performs when a situation arises.
Insurance policies can be differentiated by key language in the policy form including the definition of professional services, claims, key exclusions and the insuring agreement overall. The difficult part to ascertain is the quality of claims handling, commitment to the industry and any ancillary benefits.