Experienced CPAs and accountants understand the value of helping clients save money. After all, they’re responsible for maximizing deductions and getting the most out of tax returns each year. However, no matter how familiar you are with the tax code, mistakes happen. It’s important to have a comprehensive professional liability policy in place, as it protects you and your business from unexpected suits. There are limits to these policies, though, and one of the easiest ways to get yourself into trouble is recommending illegal tax shelters as valid deductions for clients.

The Limits of Professional Liability Insurance

Liability coverage protects from mistakes made in the course of a professional’s duties to their clients. However, it will not protect against flagrant disregard of the modern tax code or federal law. Tax shelters cannot be used as a deduction at any time. By recommending this type of solution to a client, accountants violate federal law and their oath of practice. If the IRS catches the move, clients will be in trouble and their CPAs will need to answer for the advice.

Ordinary mistakes are covered by liability coverage. For example, if you missed a deduction on a client’s return and cost them money, the policy would cover the expense of the liability suit and settlement. However, if an accountant offers illegal advice, the plan will not protect them; the CPA will be responsible for all damages and settlements due.

Check the Limits of Your Insurance Coverage

Every policy is different, and some professional liability policies have exclusions that others do not. Don’t be surprised by a sudden lack of coverage; when purchasing a product or reviewing the options, take a close look at the plan’s limits and discuss any uncertainties with the provider or an agent. The more you understand the circumstances it spans, the more prepared you’ll be should you ever need to file a claim.

If you’re looking to upgrade your professional liability coverage or want a quote on a new policy, contact the Chanler Agency. Their experienced agents have helped business owners across Geneseo and Livonia, NY, protect their interests since 1973. As a family-owned and operated business, they get to know each client. You’ll receive individualized attention and care whether you’re looking for commercial auto insurance or a new quote on existing business coverage. Learn more about how they can assist online and call (585) 243-5520 for a free quote.