Posted on: August 25, 2022 by Huntersure
Accountants are responsible for managing their clients’ money and overseeing their tax liability. A successful accountant will have an eye for accuracy and sharp critical thinking skills, but these skills are still not enough to ensure that an accountant will avoid mistakes. Indeed, many errors can cost accountants’ clients large sums of money, and those mistakes could even compromise an accountant’s professional reputation.
It prompts the question — do accountants need professional liability insurance? Find out why the following four mistakes make accountants’ professional liability coverage necessary.
Nobody wants to feel like anyone is disrespecting their time, but respect isn’t the only issue at stake when an accountant is dealing with their client. Failing to request necessary information promptly could also put a client in a bad situation — especially if the IRS or another financial authority requires the data in question. Accountants need to give clients plenty of time to respond to requests — not just as a courtesy but as a matter of professional responsibility.
Accountants may also face liability stemming from miscalculation mistakes. One of the most common of these is the overestimation of liability. It often happens when estimating quarterly taxes, resulting in massive overpayments to the IRS. When filing a client’s annual return, there might be a refund on excess payments. The process can take weeks or months — and the overpayment will likely place an undue strain on the client’s budget. It’s imperative that an accountant estimate taxes accurately to avoid this outcome.
The only thing worse than overestimating tax liability is underestimating tax liability. It can happen if an accountant fails to anticipate the taxes a client is subject to accurately or if they exaggerate the deductions that their client can claim. Regardless of the cause, it’s a costly error, and the client will likely be penalized with fines for underpayment. These fines apply to clients who pay late or don’t submit any payment.
Thoroughness is perhaps an essential quality of all when it comes to accounting. Every information is vital, and leaving out a crucial detail can be both a legal and financial liability. Unfortunately, omitting important information is one of the most common mistakes an accountant can make. If any information is ever missing from a document, an accountant must reach out to the client for clarification. Failure to do so can easily result in miscalculations or, in a worst-case scenario, an audit that legal repercussions may follow.
Huntersure LLC is a full-service Managing General Agency that has provided insurance program administration for professional liability products to our partners across the United States since 2007. We specialize in providing insurance solutions for businesses of all sizes. Our program features can cover small firms (grossing $2.5 million annually) to large corporations (grossing $25 million annually or more). We make doing business with us easy with our breadth and depth of knowledge of E&O insurance, our proprietary underwriting system that allows for responsive quoting, binding and policy issuance, and tailored products to meet the needs of your insureds. Give us a call at (855) 585-6255 to learn more.