Preventing and Avoiding Costly E&O Claims

Certified Public Accountants (CPAs) in the Garden State area may find themselves, at one time or another, faced with a NJ errors & omissions claim. Such claims are rather serious in nature since they bring into question the reputation of the firm. In addition, if a claim does arise, having insurance for NJ errors and omissions (E&O) can be quite beneficial. A policy is necessary to defend against such allegations. Here are a few E&O tips that could be helpful in avoiding an E&O claim in the first place.

Educating your clients can be quite beneficial

Clients can be somewhat ignorant when it comes to dealing with their tax situations and therefore rely on their CPA to do whatever is needed when it comes time to file. This can lead to client dissatisfaction when the outcome is considered unfavorable.

Accountants often use unique terminology and so they should better educate clients before they have an issue with the IRS or state board, which is a better scenario than waiting for the fallout to occur.

By providing clients with reasons why their tax preparation is handled in a particular way, you will be demonstrating your knowledge of the tax system as well as your desire to help them to understand more about the processes involved.

Invite them to your office to address any current issues, such as changes in company policies. Discuss areas of concern that you feel might result in an E&O claim even asking key staff members what he or she may think about the situation and what could be done to avoid a claim from occurring. Meetings present a perfect opportunity to stress key practices in place, such as the importance of thorough and timely documentation in filings.

Disputes can often arise over the accuracy of the information being provided on tax documents. What would certainly aid you in your defense would be the presence of your client’s signature on the forms. Once the client has signed off on their documents they will be responsible for the accuracy of the content within.

Having any unsigned documents in place will not protect you from a claim, so it is highly recommended that you never give a client blank tax papers to sign, advising them that you’ll fill in the information later. This is a recipe for disaster, and a specific reason why a NJ errors and omissions policy in one of the most vital coverages for those in your profession.