Tax Preparer Risk Increases Amid Tax Season

Do you help insure tax preparers and other tax professionals? If so, you may want to discuss the increased risks they may face during tax season. It’s not uncommon for tax preparers to get hit with malpractice suits and other types of lawsuits due to allegations of negligence, breach of contract, or other professional and legal issues. However, these lawsuit risks can be mitigated via a better understanding of the factors that tend to cause them and what steps can be taken to ensure professional due diligence ahead of time. Here are the highlights to review with your tax professional clients amid tax season.

The Seasonal Risk of Malpractice Lawsuits May Increase

One of the primary risks tax preparers face during the busy tax season is the increased risk of malpractice lawsuits. The higher risk is in part due to a larger seasonal clientele, and in part due to higher expectations among clients. Some scenarios that could lead to a justifiable malpractice suit include:

  • If the tax preparer was negligent in their duties to the client (the taxpayer)
  • If the tax preparer committed a breach of contract
  • If the client suffered harm or injuries as a result of the tax preparer’s actions

Other Lawsuits May Arise Depending on the Situation

Unfortunately, malpractice lawsuits are not the only risk tax preparers should watch out for. The high stress and fast pace of tax season can potentially lead to slipping standards, which could get preparers in legal hot water. Even in a time crunch, it’s important to practice due diligence, double-check work and comply with all applicable laws. To begin, make sure your clients avoid the following at all costs.

  • Professional liability problems such as negligence
  • Accusations of willful or reckless conduct
  • Misrepresentation and/or breach of contract
  • Defrauding or financially harming clients

Mitigate Potential Risks By Taking Strategic Prevention Measures and Committing to Professional Responsibility

Despite these increased lawsuit risks, it’s possible for your clients to take preventative steps. Once they understand the situations that can lead to a lawsuit, they should commit to maintaining high professional standards and taking responsibility. For starters, they can:

  • Make amends with clients right away if something unexpected happens while preparing a tax return
  • Follow all Generally Accepted Accounting Principles
  • Follow all laws, regulations and other applicable rules
  • Maintain a high level of professionalism and responsibility at all times

Unfortunately, tax season can bring with it a higher risk of various lawsuits for tax preparers and other accounting professionals. However, this risk can be partly mitigated through early preparation and consistent professional due diligence. If you work with tax preparers and want to help them prevent malpractice suits and similar situations, make sure to review these critical points with them.

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