Tax Audit: What Happens When One of Your Accountants Goes Rogue

Despite having had three more additional days to file taxes, 6 million fewer Americans have filed their taxes than at this time last year. That’s a staggering number. Why have millions of people failed to file their taxes?

In some cases, it could be because of tax return preparation mistakes. As the owner of an independent accounting firm, you oversee a handful of accountants who have clients they work with regularly from tax season to tax season. Understanding that numbers are perfect, but people aren’t, you have hopefully signed up for and maintain business insurance for accountants. Does the writer of this article detect a sudden anxiety spell on behalf of the reader?

If you don’t have business insurance for accountants, sign up for a plan today with CoverHound to protect against the headaches of tomorrow. Just because it’s the end of tax season doesn’t mean it’s the end of tax stress.

Taking Care of Business: Here’s the Wrong Way
As you have no doubt encountered during your career as an accountant, things can go wrong preparing tax returns. A number could be entered incorrectly or taxes filed under the wrong name.

Imagine for a moment that one of your accountants was struggling with one of their clients’ tax returns. Somehow, the accountant was able to come in under the wire and file the said client’s returns without incident, or so you thought. As it would happen, the accountant fudged some numbers that they didn’t have time to find. As a result, the IRS is going to perform an audit.

The accountant’s client is enraged. They had been informed that their taxes were in order and all of the information correct. Because of your accountant’s lies, the client is now facing an audit and additional penalties. Without business insurance, the client can sue your firm for every last dime that it’s worth. Why? The client can sue because the service your accountant offered on behalf of your firm was poor and put their livelihood in jeopardy.

Taking Care of Business: The Right Way

Business insurance for accountants, notably professional liability insurance, will help cover the financial burden of a lawsuit. Professional liability insurance includes:

• -Claims and damages
  

• -Court defense costs
  
  

• -Alleged negligence
  
  

• -Business interruption losses
  
  

Should a client come after you in the court system, your accounting firm will remain intact as your small business insurance will cover any monetary costs suffered by your business as a direct result of your accountant’s shoddy work.

Your accounting firm can be sued for multiple reasons, but the two most important are:

• -An accountant did not offer sufficient services
  
  

• -The accountant’s services resulted in client’s financial loss
  

If it’s found that your firm was negligible in any way, you are liable for damages. Your firm could go bankrupt all because of one accountant’s mistake.

Don’t let the negligence of one employee run your business aground. If you invest in small business insurance for accountants with CoverHound, you’ll be safeguarding your firm from destruction. Get your free quote with CoverHound today.