Lawsuits Against Tax Preparers, Already High, Set to Grow

By:
Chris Gaetano
Published Date:
Jul 6, 2017
Gavel

Tax preparers are already sued more than any other CPA specialty, and analyses from liability insurance firms indicate that several unique conditions in the 2017 season will lead to even more litigation against firms, according to Accounting Today. Tax preparation disputes is the already the source of two-thirds of all claims against accountants, and one-third of all damages paid out, said Accounting Today. However, given the amount of personal information CPA firms have access to, more suits have to do with cybersecurity breaches that resulted in client data being stolen and refunds getting delayed.

Further complicating matters, many states this year introduced a requirement that drivers license numbers be included on the return. However poor implementation resulted in preparers across the country being informed of this only after having sent out organizers to clients, necessitating an extra step and delaying refunds, which insurers believe will be the source of new litigation as the year goes on. In addition, with the deadline for partnership returns being a month earlier this year, many individual returns were placed on extension, which increases the risk of mistakes and, therefore, penalties or even rejections. This, insurers believe, has increased potential legal liabilities for firms. Another potential minefield are clients who, due to being the victim of identity theft, required manually filed returns with forms attached explaining why they're not filing electronically, which adds administrative requirements that introduces additional possibilities for error and, therefore, suits. 

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