Since it involves a complete understanding of federal, state, and local tax law, preparing taxes can be a complicated job. Regardless of how careful you do your job, if you are a tax preparer, you should have professional liability insurance. Tax preparer insurance is essential for three important reasons.
First, clients expect accountants and other tax preparers to operate professionally. In the tax industry, that means they expect you to take steps to protect them financially should you make a mistake. Professional liability insurance will provide security for your clients for your mistakes or omissions. If you don’t carry this coverage, potential clients will typically look for an accountant that does.
Further, if you are an accountant today, you conduct your practice in a society that is highly litigious. In this environment, even frivolous lawsuits can be extraordinarily expensive to defend. Legal fees are typically expensive, and settlements can range into the millions of dollars. If you want peace of mind that your practice will survive a lawsuit, you must have professional liability insurance.
Finally, depending on the jurisdiction where your practice, you may have a legal responsibility to carry some form of tax preparer insurance. Failing to do so might get you in trouble with your state licensing board.
For three important reasons, every accountant or tax preparer should have professional liability insurance.