Key Steps to Avoiding Litigation Claims

Gina Deveney
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Accountants who provide tax preparation services have one serious potential pitfall to keep in mind. An unhappy client always has the option of accusing you of accounting malpractice and filing a lawsuit. If a judgment goes against you, the court might require you to pay a large damage award. Fortunately, if you take several crucial preventative steps during the tax preparation process, your chances of being on the wrong side of a lawsuit drop significantly.

The first step in reducing any possible charges of accountant malpractice is to compose an engagement letter and review it with the client. The letter needs to spell out what type of services you are providing so no misunderstanding is possible. This prevents the client from exaggerating your areas of responsibility at a later date. Also, list your fees and billing rates in the document. Make certain the client signs the letter so he cannot subsequently claim he did not agree to its terms.

Many lawsuits claiming accountant malpractice on the part of a tax preparer are based on mistakes in calculation. Do not let sloppy math leave you vulnerable to litigation. Check and double-check your work until you are sure no errors are present.

Another common source of accounting malpractice claims are missed deadlines. If the preparer misses a filing deadline, the client is often hit with a hefty penalty. He may decide that suing you is the best way to recover his losses. Stay aware of all filing deadlines throughout your relationship with the client. Consider using a tickler file system, which involves creating a folder for every day of the year, to keep you from forgetting any important dates.

Never let the client rush you into giving an answer on a complicated question. It is always possible for an accountant to overlook something when giving an answer on a complex tax matter off the top of her head. This allows a client to claim you misled him on an important point. Instead, tell the client you need to look into the matter further. Once you do some research and are sure of your facts, contact the client with your answer.

Avoid promising the client more than you can deliver. If the client believes you are going to greatly decrease his tax bill and you only reduce it modestly, he may feel you let him down and did not provide the services he requested. A disappointed client with inflated expectations is more likely to claim accountant malpractice than one who has realistic expectations.

No tax preparer has any guarantees against possible charges of accounting malpractice from a disgruntled client. By following these critical steps, however, you minimize the odds of having to defend your work in court.


Photo courtesy of Stuart Miles at



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